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Yes Bank shares plunge 4% on rating downgrade by India Ratings

The agency kept rating for Basel III Tier 2 bonds to IND A, Additional Basel III Tier 1 bonds to BBB+ and Infrastructure bonds to A, holding all the instruments under 'downgraded' rating option and placed under RWN

twitter-logoBusinessToday.In | December 19, 2019 | Updated 12:15 IST
Yes Bank shares plunge 4% on rating downgrade by India Ratings
The agency said it has simultaneously placed the ratings on Rating Watch Negative (RWN), indicating that either the rating will be affirmed or downgraded from the earlier rating that was 'Negative' outlook.

Yes Bank shares fell nearly 4% on Thursday's early trade after rating firm India Ratings and Research (Ind-Ra) downgraded YES Bank's long-term issuer rating to 'IND A' from 'IND A+' and its short-term issuer rating to 'IND A1' from 'IND A1+'. The share price of YES Bank slipped 3.74% and touched an intraday low of Rs 45 apiece, with 34 lakh and 658 lakh shares trading on BSE and NSE counters today.

Data on the BSE suggested 55% buying against 45% selling on the stock price. Although the share has gained 6% in a week's period, it has declined nearly 30% in a month and 75% year-to-date.

The fall in share price was in line with 'banking sector' that fell 0.41% and broader index Sensex that declined 0.13% in today's trade. Yes Bank stock has reversed trend yesterday and has fallen 4.62% in the last 2 straight sessions of decline. Yes Bank currently trades lower than its 5, 20, 50, 100 and 200-day moving averages.

The agency kept Basel III Tier 2 bonds to IND A, Additional Basel III Tier 1 bonds to BBB+ and Infrastructure bonds to A, placing all the instruments under 'downgraded' rating option and under RWN.

The agency said it has simultaneously placed the ratings on Rating Watch Negative (RWN), indicating that either the rating will be affirmed or downgraded from the earlier rating that was 'Negative' outlook.

The agency added that RWN reflects the dependency of the rating level on the timing and quantum of equity raised by the bank and will be resolved depending on the infusion of the same. Ind-Ra expects to receive clarity on this issue by next month.

Ind-Ra in its report said, "The downgrade reflects the inadequate progress as per Ind-Ra's expectations with respect to the quantum and pace of equity infusions, which is critical for providing sufficient cushion for the credit cost impact of the stressed asset pool."

"Although the liquidity position of the bank seemed adequate at end-September 2019, Ind-Ra believes that, in the absence of improvements on the capital side, the ability of the bank to manage its asset and liability maturities might be tested further," it added.

Besides the delays in capital raising, Ind-Ra pointed out concurrent credit migration in certain exposures as the key driver in the rating downgrade. It said that some of the bank's corporate exposure spread over multiple sectors resulting in rapid credit migration over the last few quarters.

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