The stock of the private sector lender is trading close to its one-month low price of Rs 59.95. In the past three trading days, the stock has fallen 13 per cent after the bank announced, on Friday evening, that its board had agreed to raise $2 billion from an assortment of investors.
Of this, $1.2 billion will come from Canada-based businessman Erwin Singh Braich and SPGP Holdings. The second big investment was coming from CITAX Holdings.
YES Bank’s equity-raising raises three questions, background of potential investors, the amount they intend to commit, and whether the proposed equity investments will receive the approval of the Reserve Bank of India (RBI).
According to a Business Standard report, the lack of marquee investors and fear that the RBI will not clear the investments by the new investors hit the share price of YES Bank. CLICK HERE TO READ FULL REPORT.
“In our view, RBI’s decision will be the most important factor if the equity-raising plan moves forward as intended. It is unlikely the RBI will approve a business house (domestic and/or overseas) equity shareholding in excess of 24 per cent. In a nutshell, RBI approval could provide much-needed clarity regarding the deal. Even if YES succeeds in getting equity capital, it would merely serve as a shock-absorber to unrecognized stressed loan pool,” analysts at Elara Capital said in a company update.
Uncertainty regarding equity capital fund infusion, doubts over asset quality, and sustained decline in market share from profitable assets lead us to retain our view that YES has a long way to go when it comes to rationalizing operations, resulting in sustained credit cost at lower levels, the brokerage firm said.
At 11:49 am, YES Bank was trading 4 per cent lower at Rs 61.25 on the BSE, as compared to 0.45 per cent decline in the S&P BSE Sensex. The counter has seen huge trading volumes with a combined 167 million shares changing hands on the NSE and BSE so far.