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Global brokerage firms, Macquarie and JPMorgan, maintained their positive stance on Yes Bank after the board decided to request the Reserve Bank of India (RBI) for a minimum extension of term for Rana Kapoor. The board plans to seek a minimum extension of three more months, till April 30, 2019 so that the audited results can be finalized.
Macquarie maintained an outperform rating on Yes Bank with a target price of Rs 425. However, the global investment bank feels that the extension request may not be entertained given the nature of the allegations.
The RBI may not approve internal candidates as they may be construed equally responsible for bank operations, it said. It further added that the stock re-rating now hinges on outcomes of stated action plans as well as FY18 divergences.
JPMorgan maintained overweight rating on Yes Bank with a target price of Rs 400. The outcome was widely anticipated. There is lack of visibility on the succession plan.
Further, in the board meeting, the bank also decided to appoint Rajat Monga (currently Senior Group President), and Pralay Mondal (currently Senior Group President) as executive directors to ensure a long-term succession plan. Their appointment will also be subject to RBI approval.
However, not every brokerage firm has a buy or an outperform rating on Yes Bank. IDFC Securities has maintained an underperform rating with a target price of Rs 230.
The global investment bank feels that the RBI is unlikely to review the tenor. The reason for extension goes against RBI’s broad basing principle. “Madhu Kapur and RBI both have to approve Rajat Monga and Pralay Mondal as EDs. The Board meeting has done nothing to address management uncertainty,” it said.
Kapoor’s term as the Chief Executive Officer and Managing Director (CEO and MD) ends on January 31, 2019, after the banking regulator cut short his reappointment from three years to five months.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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