Yes, the bank’s three-year exposure to State Bank of India (SBI) will expire today. The market is abuzz with speculation that SBI will book at least a partial profit, if not a full profit, after the three-year lock-in ends, which could lead to a further fall in Yes Bank’s share price. The Supreme Court stayed the Bombay High Court’s order in January that stayed Yes Bank’s write-off of AT-1 bonds worth over Rs 8,300 crore.
Similarly, Axis Bank, ICICI Bank, IDFC First Bank, HDFC Bank etc. The three-year lock-up period for banks’ shareholdings also expires this month.
So, according to market analysts, there is some selling pressure for Yes Bank shares to continue in the next few sessions.
SBI Ltd, which initially acquired 49 percent stake in YES Bank, has a 26.14 percent stake in the private bank as on December 31, 2022. SBI was mandated to hold at least 26 per cent stake in YES Bank for three years.
To recall, the rapid deterioration of YES Bank’s financial position in terms of liquidity, capital and other critical parameters and the absence of a robust capital injection plan forced the RBI to take urgent action. SBI was allotted Rs 725 crore equity shares of Rs 10 each. PSU was obliged not to reduce its share from 26 percent until the end of three years.
Seven other lenders were allotted a total of 395 million shares of Rs 10 each. A total of 75 percent of such equity shares allotted to each such investor shall be subject to lock-up for a period of three years from March 13, 2020. The remaining 25 percent of the shares allocated to each investor were freely transferable.
Mortgage lender HDFC and private lender ICICI Bank bought shares of YES Bank worth Rs 1,000 each. Axis Bank invested Rs 600 crore in YES Bank, while Kotak Mahindra Bank bought shares worth Rs 500 crore. Federal Bank and Bandhan Bank have invested Rs 300 crore each, while IDFC Bank has invested Rs 2,500 crore in the bank.
What should investors do now?
YES Bank stocks are late for higher volatility as the three-year lock-in period for several private banks expires in March 2023, said Amar Deo Singh, principal advisor at Angel One. Since the beginning of the year, the scrip has fallen by 20 percent.
“Given the bank’s Q4 numbers, investors may decide to hold the stock as the bank’s position has improved somewhat since SBI’s management took over the reins. Besides, the Finance Ministry’s bad loan processing mechanism may also help YES Bank in the medium term. Technically, the stock seems to be consolidating in a range between Rs 15 and Rs 25. Investors can consider the reservation at a premium,” Singh said.
Girish Sodani, Head of Equity Markets, Swastika Investmart said, “Yes the Bank’s financial position has improved and the bank has a long way to go to become a profitable bank. So SBI, ICICI Bank, HDFC Bank, IDFC First Bank may not drop all their shares by accident. In fact, the rally was fueled by improved asset quality and record growth in advances. Yes, Bank shares have returned 24 percent in the last 1 year. After rescuing the bank in 2020, YES Bank’s earnings have improved significantly, it shared in its Q23 business update, where its advances grew by around 12% (YoY) and 2% (QoQ). On December 22, the Bank said it had transferred stressed assets worth Rs 48,000 crore to JC Flowers Asset Reconstruction Pvt Ltd, which will clear the bank’s book of non-performing assets to help in its restructuring model. Especially in terms of asset quality. Funding of Rs 9,000 crore by PE firms has further strengthened the capital.”
Sodani further said, “Thus, the stock may see some profit taking or partial booking from retail investor holdings due to this news, but as we expect, investors should wait for Yes Bank’s Q23 results. Only after that they can take any decision regarding profit booking. Because keeping their stake intact after the ban period ends could trigger a fresh buyback of Yes Bank shares. Other analysts have argued that Yes Bank’s share price could witness a strong rebound and rise to 20 to 25 in the medium term.
Speaking on the Yes Bank share price outlook, Avinash Gorakshkar, Head of Research, Profitmart Securities said, “Yes Bank shares are showing strength despite the three-year lock-in of SBI ending today and the lock-in of several more banks in the coming week. . This is an indication that banks have influenced Yes Bank to bail out of the bad credit crisis. Just because Yes Bank shares rose more than 60 percent after SBI and others took risks, it doesn’t mean booking profits immediately after the three-year lock-in period ends. I think these banks can wait till Yes Bank’s 4Q23 results and only then they can take any decision on booking profit.”
Advising Yes Bank shareholders to monitor developments in the AT-1 bond write-off case in the Supreme Court, Ravi Singhal, CEO, GCL Broking said, “The major hurdle for Yes Bank shares has been the Mumbai High Court’s reversal. write-off of AT-1 bond worth about Rs 8,300 crore. The Supreme Court stayed the order of the Mumbai High Court which had asked both the RBI and Yes Bank to specify the provision that would allow them to write off the At-1 bond. The recent collapse of Yes Bank should be viewed from this angle instead of the three-year lockout of SBI or other banks.”
Advising positional investors on a buy strategy, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi said, “Yes, the Bank’s share price has strong support at Rs 15 per rupee. Hence, those who have this stock in their portfolio are advised to keep a stop loss at Rs 15 and continue to accumulate on every big dip as the stock looks for an uptrend in the chart pattern. For those looking to enter Yes Bank, a drop in the share price from around Rs 15.50 to Rs 16 would be a huge opportunity for such new investors. If the stock falls below Rs 15 level, my recommendation is to accumulate Rs 13 to Rs 13.50 level, keeping a stop loss at Rs 12, as in case of any speculative fall, we may see Yes Bank share price rise sharply. will take place in the banking scenario in the coming sessions.”
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