Shares of YES Bank collapsed 34 per cent in the early trade on Friday after the RBI curtailed the term of lender's founding CEO Rana Kapoor and asked the bank to look for his replacement by January 2019.
The private sector lender said on Wednesday that the Reserve Bank of India (RBI) had allowed Kapoor to continue only till January 31. “The board of directors of the bank is scheduled to meet on September 25 to decide on the course of action,” YES Bank said in a filing to the stock exchanges.
According to sources, the RBI has cited corporate governance and regulatory issues for not extending Kapoor’s term. Further, the lender has been directed to search for a successor, said a Business Standard report. READ MORE
In June, YES Bank’s shareholders had cleared the reappointment of Kapoor for three years. This was then sent to the RBI for final approval. Experts said the RBI’s latest move might not put an end to the uncertainty, and investors would take time to regain confidence in the bank.
Many brokergaes have downgraded the stock after the development. IDFC Securities, for instance, has downgraded it to 'Underperformer' from Neutral and slashed the target price to Rs 230 from Rs 350, earlier. Cut in Rana’s tenor is a very big negative for YES Bank and his absence will slow down loan and fee growth, it said. The brokerage noted that Rana's exit could also impact bank’s ability to raise high net worth deposits. READ ABOUT IT HERE
Citi has downgraded the stock to Sell from Buy and cut the target price to Rs 270 from Rs 440, earlier.
However, Macquarie has maintained Outperform rating on the stock with the target price of Rs 425. But, it said Kapoor's rejection is a major negative development. "Absence of any communication from YES or RBI will be an overhang on stock," it said.
At 09:29 am, the stock was trading at Rs 252.85 apiece on BSE, down 21 per cent.