ANALYSIS: How to study Yes Bank board meet over family feud

Saikat Das
moneycontrol.com

The unbridled public spat between family members over board membership will not dent Yes Bank's performance. However, the private sector lender will not allow the feud to linger while its brand image takes a hit. Market speculations are rife that the bank will try to end the chapter on Thursday (June 27) when its board meet at 3pm in Mumbai to consider Shagun Kapur Gogia's induction as board member.

"The ongoing family feud will not impact the bank's performance," Ravikant Bhat, Research Analyst (BFSI) at SBICAP Securities told moneycontrol.com.

"Though Yes Bank has seats for additional members in its board, the moot question before it is whether they really need an additional member in Shagun Gogia. Inducting her is an easy way out but goes against the bank's stated line so far. An attempt shall be made to find a fast and amicable settlement to the issue," he said.

Also read: Madhu, kin under qualified for Yes Bk board seat: SL Kapur

Who is Shagun?

She is the daughter of Madhu Kapur, who is the wife of late Ashok Kapur, one of the promoters of Yes Bank since its inception. He was unfortunately killed in Mumbai terrorist attack in 2008. Madhu currently holds 12 percent stake in the bank while Rana Kapoor, MD & CEO of the bank holds 13.72 percent. Rana Kapoor's wife Bindu Kapoor and Madhu Kapur are sisters.

The litigation

Both mother and daughter had staked claim for a place in the board room. She was denied by the bank management for the same on the ground of merit. They filed case in the court. Later, their voices found some support.

The Bombay High Court on June 10 asked Yes Bank to consider the appointment of Shagun as the director on the board. The board meet will now decide on her nomination through the process of election.

Her preparedness

In the recent past, Shagun was seen taking every step in seeking a board berth in the bank. Recently, she snapped her association from the board of Tuscan Ventures, a private equity firm. This was done in defense to any possible rejection by the Yes Bank board under the clause of "conflict of interest".

Shagun is an MBA in finance from the Indian School of Business. She was a partner in Tuscan. She also served with ICICI Venture as vice-president.

Say, Yes!

Meanwhile, the bank has managed to garner enough support from its former board members, who has endorsed the bank's view on the issue.
S L Kapur, the former non executive chairman of Yes Bank, said that Shagun Gogia was not qualified enough to be inducted in the Yes Bank board.

"Late Ashok Kapur's wife that is Madhu Kapur and their daughter Shagun were not qualifying in view of the norms set by us and in view of the guidelines provided by the RBI and we had a detailed discussion. We just do not picking up people and are bringing them to board. We had desired at that time also, we took the best. I became a (non-executive) chairman and only after I had completed almost four years as a director," he had told CNBC TV in an interview.

Kapur was a former chief secretary to government of Punjab and was a secretary to the Government of India.

According to a senior LIC executive, promoters should stay away from the board-level position. Rana Kapoor is different, since he has played a significant role in building the bank over the past years.

"This is a management matter. So far as corporate governance is concerned, they are right in insisting on 'fit and proper' guidelines for directors,' he was quoted saying. LIC holds nearly 5 percent stake in the bank.

Stock movement

Under normal circumstances, the induction of Shagun Gogia Kapur is going to be a non-event for Yes Bank shares. While her induction would not bring in any added expertise to the bank board, her rejection will not hamper the bank's daily business, analysts tracking the bank said.

"She is just 37 while most of the directors are veterans, who may be older than even Rana Kapoor," quipped an analyst. He did not wish to be named.

Since last one year, shares of the fourth largest private sector bank by asset size, shot up 31 percent or Rs 107 as against 11 percent rise in the Bank Nifty – the broader index for banking stocks.

No impact, confirm brokerages

"Though there could be near term sentiment impact on the stock, we don't see fundamentals of the company getting affected in anyway and maintain our 'outperform' rating on the stock," the Macquarie report said without changing its earlier target price set at Rs 600 in next 12 months.

saikat.das@network18online.com