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YES Bank shares plunge 57% since mid-August; should you buy the stock ahead of December 13 board meeting?

Till November 30, the large cap stock saw five consecutive sessions of decline amid credit ratings agencies downgrading their outlook for the private sector lender citing poor corporate governance.

Aseem Thapliyal        Last Updated: December 6, 2018  | 09:17 IST
YES Bank shares plunge 57% since mid-August; should you buy the stock?

With private lender YES Bank scheduled to recommend names for the chairman's post to the Reserve Bank of India (RBI) as well as consider appointment of independent directors on December 13, the bank's stock is expected be in focus for the next seven days.

The stock is already down 57.22% from its all-time high of 404 level hit on August 20, 2018 amid worries over non-extension of Rana Kapoor's term as CEO and MD, credit ratings agencies downgrading outlook of the stock after resignation of three independent directors from the board and media reports saying Kapoor's investment firms borrowed money from mutual funds and invested them as equity in a finance company.

Till November 30, the large cap stock saw five consecutive sessions of decline amid credit ratings agencies downgrading their outlook for the private sector lender citing poor corporate governance.

After falling nearly 13% in five sessions preceding November 30, the stock recovered some of its losses and closed 5.73% higher to 169.65 on that day.

After shareholder's nod to extension of Kapoor's tenure in June, the private sector lender waited for RBI's final stance taken on the reappointment of its CEO Rana Kapoor whose term ended on August 31, 2018.

On August 30, the RBI approved reappointment of Rana Kapoor as managing director and CEO till further notice from the central bank. The stock closed over 5% or 18.50 points lower at 343.40 level on August 31, 2018 as the RBI did not approve a full three-year extension of the CEOs tenure.

On September 21, 2018, the YES Bank stock tumbled up to 34.03% after the Reserve Bank of India (RBI) cut the tenure of its founder and CEO Rana Kapoor till January 31, 2019. Kapoor was given three-year extension by the bank's shareholders in June, but the central bank had not specified the exact period of his tenure.

On September 27, the bank denied it had indulged in any window dressing of its corporate accounts to conceal non-performing assets (NPAs).

The bank had reported gross and net NPA of 1.3 per cent and 0.59 per cent, respectively in the first quarter. The bank said the NPA figures were "among the finest in the Indian banking industry".

"The bank has not entered into any transactions with the intent to do any window dressing of corporate accounts to conceal NPA status," YES Bank said in response to a query by the National Stock Exchange if the bank had indulged in window dressing to hide bad loans.

The lender's woes continued in October too with the bank posting second quarter earnings which came below expectations.

Shares of YES Bank closed sharply lower by almost 9 per cent on October 26, 2018 after the company reported a decline of 3.8 per cent in net profit for the second quarter ended September 2018. The stock plummeted 8.97 per cent to close at Rs 180.55 on the BSE. Intra-day, it cracked 14.99 per cent to Rs 168.60. On the NSE, Yes Bank shares slumped 8.64 per cent to end at Rs 181.20.

In November, the lender was hit by a series of resignations from the board. Ashok Chawla, OP Bhatt and R Chandrashekhar quit the bank's board.

Chawla was the first to tender his resignation on November 14. Since then the stock has lost 24% taking into account today's price of 173.30 on the BSE. On November 29, the stock fell to a fresh 52-week low of 147 level amid negative sentiments.

Thankfully, the stock has risen 3.15% after November 30 amid news the lender announced appointment of TS Vijayan as an additional director for five years and its asset management company received approval for launch of two mutual fund schemes on December 4.

The stock is still trading below its 50-day and 200-day moving average of 202.36 and 299.53. It also trades below the key 200 mark.

Traders and investors who have lost money and others who are planning to buy the stock must be wondering is it the right time to buy the stock after minor recovery in losses. Business Today talked to various analysts to find out whether it is the right time to enter the stock. Here what they said about the future prospects of the stock.

Vikas Jain, senior research analyst at Reliance Securities said, "The stock has seen a sharp fall over the past few months on account of various concerns, but bounces are equally sharp on positive news flow. We believe the stock has strong support at sub 150 levels. We remain positive from current levels with a target of 235."

Rahul Agarwal, Director at Wealth Discovery/EZ Wealth said, "Inspite of all the short-term headwinds, the stock is witnessing, YES Bank remains the fifth largest private bank in terms of asset base, with very strong growth numbers. As per the recent quarterly results, advances grew at 61.2 percent, and deposits were up by 41 percent, although the asset quality has deteriorated somewhat but it still remains healthy in comparison to its peers. In the short term, the stock is expected to trade with an upward bias with a lot of uncertainty.

For risk-averse investors, it would be advisable to wait for sometime till the issues around the current management are addressed. For investors who have an appetite for risk, we think YES Bank is an attractive buy at these levels as the risk to the downside are limited."

Vinay Rajani, Technical Analyst at HDFC Securities said, "The technical setup of YES Bank indicates that the stock has formed short-term bottom at 147 odd levels. Indicators are forming positive divergence on the short term chart, suggesting continuation of a pullback.  Longs can be held or taken with a strict stop loss at 165 for the probable target of 200. Time horizon for the call is one 1 month.

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