Retail investors bought YES Bank shares as institutions exited en masse

As YES Bank’s financial metrics started showing signs of stress over the past year, large institutional shareholders and the promoter of the bank sold their shares. But it was the retail shareholders who were left holding the can with over 50 per cent stake in the bank, statistics collated by Business Standard shows.

While promoter Rana Kapoor’s shares were sold either by him or because lenders exited plegded shares, the other promoter family — the Gogias — remained invested. In November, Kapoor sold his residual shares worth Rs 142 crore and was holding only 900 shares. This was within weeks of Kapoor tweeting that the bank shares are like diamonds and he will never sell his diamonds. His shares stake in the bank fell after institutions invoked the pledge on his stake.

While the foreign institutions reduced their stake from 43 per cent in June 2018 to 18.24 per cent, public shareholding went up from 9.58 per cent to 53.24 per cent. The local institutions also reduced stake from 25 per cent in June 2018 to 14.21 per cent by December quarter last year (see chart). 

“There was a continuous flow of wrong news from unnamed sources that marquee investors are lining up to buy YES Bank shares. This kept retail investors interested in the stock,” said an analyst with a foreign brokerage.

Shriram Subramanian, founder and CEO of proxy advisory firm Ingovern, said several red flags were ignored by the retail investors with rating firms downgrading the bank’s instruments. “Retail investors should have been more careful considering that the promoter himself was exiting,” he said.

For the retail investors, the news is not so good as State Bank of India-led bailout is aimed at the depositors and not towards the equity investors. Soon after the RBI announced the moratorium, global bank JP Morgan pegged YES Bank shares at Rs 1 a share. “We believe forced bailout investors will likely want the bank to be acquired at near zero value to account for risks associated with the stress book and likely loss of deposits. We remain underweight and cut our target price to Rs 1 as we believe net worth is largely impaired,” it said.