Moneycontrol Bureau
Yes Bank gained more than 2 percent intraday Friday after picking up stake in NSE JV and Macquarie increased target price on the stock by 17 percent.
Recently the private sector lender, which is the top pick of Macquarie, has received approval from its shareholders for raising upto USD 1 billion of equity capital that entails a largest dilution of around 15 percent.
The brokerage says it won't be too worried and will encourage investors to participate in the capital raising which is most likely to be in the form of a qualified institutional placement (QIP).
After building in the capital raising, the brokerage increased its target price by 17 percent to Rs 1,325 driven by increase in book value per share due to the capital raise, though it cut FY17-19 earnings per share estimates by 6-10 percent due to fund raising.
Yes Bank's previous capital raisings have yielded excellent returns. The stock has delivered a return of 290 percent since the January 2010 capital raising and 91 percent since the previous capital raising in May 2014.
Capital is being raised for growth which is positive and the bank has been able to return its return on equity (RoE) to 20 percent post capital raisings in the past.
Among all the large private sector banks, Yes Bank's common equity Tier 1 (CET1) is the lowest at around 10 percent and the bank is growing its loan book at a rapid pace of around 25 percent. Hence, capital is required, says Macquarie.
The brokerage firm's rating is also backed by bank's clean balancesheet, especially after RBI's asset quality review (AQR).
Investors have always had reservations about Yes Bank's squeaky clean balance sheet and its record low levels of non-performing loans (NPLs). However, the bank came out virtually unscathed from the RBI's AQR with minimal levels of NPLs and provisioning.
Therefore, Macquarie says while PSU banks, some corporate oriented private sector banks and some foreign banks are busy resolving their corporate loan issues, Yes Bank can focus more on growth opportunities and grow its loan book, deposit franchise as well as fee income.
It has an excellent opportunity to gain market share and grow ahead of peers and the capital raise should further strengthen its balance sheet, the brokerage believes.
Meanwhile, the bank has purchased 8 percent equity stake in Receivables Exchange of India (RXIL), a joint venture company setup by NSE Strategic Investment Corporation and Small Industries Development Bank of India.
".....has executed a share subscription and shareholders' agreement agreeing to subscribe for 20 lakh equity shares of RXIL," says the bank.
At 12:24 hours IST, the scrip of Yes Bank was quoting at Rs 1,064.70, up Rs 24.40, or 2.35 percent on Bombay Stock Exchange.Posted by Sunil Shankar Matkar
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