Yes Bank: Many questions, but few answers

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26 Aug, 2025 12:21

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Yes Bank tanked 15 percent on BSE on December 11, a day after the stock was hammered 10 percent even though the board said it was considering Citax Holdings' $500-million investment offer.

The cash-starved bank has tried to reassure the market by saying it was "favourably" considering the Citax Holdings and Citax Investment Group’s offer and the final decision will be taken at the next board meeting.

The binding $1.2 billion offer submitted by Hong Kong-based SPGP Holdings and the family office of Canadian Erwin Singh Braich were also being discussed.

Money and market

The bank last raised funds in August 2019 and took the QIP route. It raised Rs 1,930 crore at 10 percent dilution, with each share priced at Rs 83.55 per share.

At this juncture, the bank not only has to raise funds but also regain market’s trust, as the delay in funding is fuelling worries about the private lender’s future.

Japanese brokerage firm Nomura has gone to the extent of saying that unavailability of capital raises the question on bank’s “going concern” status.

While risks to the “going concern” will have an implication for the sector, it will also put into question the availability of $800 million bids for the bank, says Nomura.

Nomura has maintained a neutral rating on the stock, with a target of Rs 63. It says the board outcome on bids is negative, adding that the $1.2 billion bid is unlikely to go through given the legal cases.

"Risk to capital raising the risk to both estimates of book value and multiples. There has been very little resolution in the large stressed exposures, while large provisioning without a capital infusion will lead breach of capital limits soon," Nomura said.

Show me the money

Yes Bank's struggle to raise money from quality investors indicates that interest in the stock is very low. What is worrying is that the bank is not finding quality investors.

Brokerage firm Macquarie raised several questions over the possible suitors.

"Why did the board even decide to announce that they have a binding offer from a Canadian individual Erwin Singh Braich, whose background is mysterious and who, as per the article, said that he wanted to invest in Yes Bank because he liked the logo of the bank? He has been involved in several lawsuits," Macquarie said.

If the bank fails to raise money in the next six months, it poses a grave danger to the financial system, Macquarie said.

"Note that when a bank collapses, the clearing system comes to a halt and hence the contagion impact of a bank collapse is far higher than that of the collapse of NBFCs in our view. There are several such instances in the past when private sector scheduled commercial banks have failed and have been bailed out by state-owned banks," Macquarie said.

Two prominent examples of the bailout of the past were the acquisition of Global Trust Bank by state-owned Oriental Bank of Commerce and the acquisition of United Western Bank by IDBI, another government-run lender.

In both cases, the banks were put under moratorium and the Reserve Bank of India and the government came forward and forced a merger, Macquarie said.

Nomura also believes if the bank fails to raise capital, there may be few merger options excluding SBI.

This, however, looks a distant possibility. Many analysts are positive that the bank will be able to raise funds.

"The bank will be able to raise funds by the end of the month as there are enough astute investors who will buy a brand like Yes Bank," said Sanjiv Bhasin, Director at IIFL Securities.

"The delay in fundraising is due to the fact that the bank is evaluating the quality of investors because they don't want any questions from the RBI. It is just to and fro on the management's part while they should perform."

But time is running out and the market will punish the stock in the absence of clarity on fundraising.

CEO and MD Ravneet Gill knows it. He knows he has to think for the bank's short, medium and long-term future.

Gill has time and again reiterated that the fundraising plan is on track and the bank will soon regain the trust.

As of December 10 close, the stock lost 72 percent of its market value in Calendar 2019.

Last week, Moody's Investors Service downgraded the bank's long-term foreign-currency issuer rating to B2 from Ba3.

Moody's has also downgraded the long-term foreign and local currency deposit ratings to B2 from Ba3, foreign currency senior unsecured MTN programme rating to (P)B2 from (P)Ba3, and baseline credit assessment (BCA) and adjusted BCA to B3 from B1.

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