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Last Updated : Oct 04, 2019 11:01 AM IST | Source: Moneycontrol.com

Yes Bank continues to rally after Kapoor family cuts stake significantly; Gill assures about capital

Ravneet Gill, Chief Executive Officer of the bank assured that the lender is on track to complete fund raising plan and again cleared the concerns raised on asset quality while reiterating its commitment towards growth.

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Shares of private sector lender Yes Bank rallied 8 percent intraday on October 4 after promoter entities and Rana Kapoor reduced their stake significantly and assurance from CEO Ravneet Gill about fund raising on track.

The rally is in addition to 33 percent upside seen in previous session. The stock was quoting at Rs 45.65, up Rs 3.10, or 7.29 percent on the BSE at 0922 hours IST.

After the recent stake sale by promoter group companies - Rana Kapoor, Morgan Credits Pvt Ltd (MCPL) and Yes Capital (I) Pvt Ltd (YCPL) and invocation of pledged shares, their total shareholding in the private sector lender reduced to just 0.8 percent from 19.78 percent at the end of June this year.

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"Over the past few days, Yes Bank promoter group companies - MCPL and YCPL had to sell their highly precious promoter shareholdings in Yes Bank at deeply discounted prices," the bank said in its filing.

In addition, CEO Ravneet Gill has assured that the lender is on track to complete fund raising plan and again cleared the concerns raised on asset quality while reiterating its commitment towards growth.

"Yes Bank is in advanced stage of capital raising from investors, including global tech majors, to grow the balance-sheet that has been consciously shrunk in recent months," Gill said, adding the fund infusion will happen much sooner.

The exercise will result in the new investors picking up stakes above the regulatory cap and the RBI will have to take a call on a "non-conventional" investor coming on board.

The stock lost about 80 percent of its value in the last one year as the mid-sized lender has been passing through a barrage of troubles since August 2018, when the RBI refused to give co-founder and chief executive Rana Kapoor a new term and instead asked him to leave the bank by January 31.

Gill, who took over in March, discovered many chinks in the balance-sheet, which had to be provided for, resulting in the bank reporting its maiden loss in the March 2019 quarter. The balance sheet size has been shrunk by around 4 percentage points since then as a result of the same.

According to Gill, the stock is undervalued at present. If anything, the ongoing recovery will help revive the confidence in the potential investors.

Gill has attributed the recent mayhem to the mutual funds selling pledged shares and, also, Kapoor nearly exiting the bank (from close to 13 percent stake his stake is down to under 1 percent now). But, he has reiterated that the stock price does not fully reflects the bank's operational performance.

He said the bank's asset quality had "stabilised" and it did not need capital for provisions for bad loans but refused to part with the exact numbers citing the pre-results announcement silent period.

"I don't need capital for provisioning, what I need is growth capital...as soon as we get capital, growth will come," he signed off.

While explaining its sound and stable financial and liquidity position, the bank in a BSE filing said it had a liquidity coverage ratio in excess of 125 percent as on September 30, which is well above the minimum regulatory requirement of 100 percent.

Gross advances aggregated to around Rs 2.32 lakh crore as in September (compared to Rs 2.42 lakh crore as on June 2019) with a higher share of retail advances as compared to June 2019. The reduction in advances was effected to enhance capital efficiency, it added.

Deposits aggregated to around Rs 2.09 lakh crore as in September while the CASA ratio improved to 30.8 percent as compared to 30.2 percent as on June, the lender said.

But, the global brokerage houses remained bearish on the stock, citing uncertainty over fund raising.

While having an underperform call on the stock with a target at Rs 50 per share, Macquarie said it is not sure how the bank can manage to raise money.

"Over 2-3 years, bank needs money almost equal to its current market capitalisation. Capital raising would happen at well below book value and hurt minority shareholders. We are not confident of management's ability to assess the risk," the brokerage explained.

Citi has sell call on the bank with a target price at Rs 80 per share, saying the capital raise timeline is uncertain and slippages could rise, but bank looks confident of recoveries. "We need further clarity on capital and asset quality."

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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First Published on Oct 4, 2019 11:01 am
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