How the Yes Bank crisis has caused a domino effect

Masses were only reviving and starting to gain their faith in the financial system of the country when we witnessed yet another setback, this time to the banking segment of the nation. Private banking player Yes Bank, which once had a dominant position in the country saw its NPAs climbing fast with the bank’s primary lenders currently undergoing steep valuation declines or started undergoing an investigation itself.

The resultant cash crunch was responsible for the trickle-down effect that not only affected the direct account holders but had an impact on various other fronts as well.

The first and foremost effect of the Yes Bank crisis was on Life Insurance Corporation of India. The insurer has usually seen a high amount of revenue collection coming in the month of March every year. The premiums usually flow in these days as online payments. With the automation of processes, the bank for NACH debit and cheque clearances for LIC was Yes Bank which is expected to affect the collections for the corporation for the month of March for Q4 ‘20.

LIC had also earlier sent a message stating there would be a delay in premium debit for policies. This would add to the distress that the crisis has already been causing.

Another impact is on the account holders as the bank is under a moratorium restricting the monthly withdrawal to Rs 50,000, subject to certain exceptions and prior approvals from RBI. This is not only bound to hinder the day to day activities for people whose, primary bank accounts were in yes Bank, but may also hamper small businesses.

Not only would this affect the daily lifestyle, but it may also demotivate the people who wanted to apply for the SBI Card IPO. Out of all the applications for allotments received for the IPO, applications worth Rs 1,500 crore were through people with their accounts in Yes Bank.

Even though the company said that if the applicants are able to pay the amount through an alternative bank account the allotment would still be done, this may not be a practically feasible option for many in such a short notice. Thus, the crisis is expected to have its effects on the IPO too, affecting the listing price and number of participants to a huge extent.

On the other side however, one should also keep in mind that a good participation even if after the effects of the crisis, may help Yes Bank in the long run. This can be said based on the fact that SBI would be infusing capital in the beleaguered bank soon, taking a 49 percent stake as a part of restructuring scheme that has been proposed. The collections of the IPO would thus help SBI fund this move too. However, whether each process would be executed successfully is based upon the IPO’s performance in the current bearish markets.

YES Bank calls shareholders meet on February 7 for nod on fundraising

YES Bank has, it told the stock exchanges, convened an extraordinary general meeting of its shareholders on February 7 on fund raising for Rs 10,000 crore, and to authorise an expansion in its authorised capital from Rs 800 crore now to Rs 1,100 crore.

Last week, it notified the exchanges that its board of directors had approved the raising of funds up to Rs 10,000 crore in one or more tranches, through Qualified Institutional Placement, Global Depository Receipts, American Depository Receipts, Foreign Currency Convertible Bonds or any other method on a private placement basis.

Earlier, it was in talks with several investors in this regard but after months of uncertainty, scaled down the fund raising plan substantially. There had been offers from Erwin Singh Braich, Citax Holdings and Citax Investment Group. Braich updated its offer but the bank decided not to proceed with this. Citax’s offer will be taken up later, as “relevant conditions precedent could not be completed”. The bank’s core equity capital is 8.7 per cent of the total, against the minimum regulatory requirement of 8 per cent.

Its shares closed 8.4 per cent down on Tuesday, at Rs 38.55 on the BSE exchange.

YES Bank acquires 30% in Reliance Power arm

Yes Bank on Tuesday said it had acquired around 30 per cent stake in a wholly-owned subsidiary of Reliance Power pursuant to invocation of pledged shares.

The bank has acquired 12,73,21,500 equity shares having nominal value of Rs 10 each per share constituting around 29.97 per cent of the post-issue paid-up share capital of Rosa Power Supply Company (RPSCL), a wholly-owned subsidiary of Reliance Power, YES Bank said in a regulatory filing.

“Shares have been acquired pursuant to invocation of pledge of shares to RPSCL subsequent to default/breach of terms of credit facilities sanctioned by YES Bank to Reliance Power,” it added. Incorporated in 1994, RPSCL is engaged in the business of power generation. The plant (1,200 Mw) in Uttar Pradesh, owned by the RPSCL generated 4,341 million units for the year ended March 31. (With PTI inputs)

Glenmark, Indiabulls Housing, Yes Bank to be removed from MSCI India Index

Global index provider Morgan Stanley Capital International (MSCI) will remove Glenmark, Indiabulls Housing Finance, Vodafone Idea and Yes Bank from the index. MSCI announced that it will include Berger Paints, Colgate, DLF, HDFC AMC, ICICI Prudential Life, SBI Life, and Siemens.

The following are changes in constituents for the MSCI India Domestic Index, which will take place as of the close of November 26, 2019.

The research firm has added eight stocks and deleted four from its Global Standard Index. A total of 78 stocks have witnessed changes in the latest rejig, where SBI Life is amongst the largest additions to its emerging markets index. It has reduced the weightage of Reliance Industries in the Asia ex-Japan IMI Index by 0.04%, MSCI said.

Further, India Domestic Index MSCI has added eight stocks while removed six, while they have added 13 and deleted 21 stocks from the MSCI Global Small Cap Index, said the MSCI release.

1. MSCI India Index Additions: Berger Paints, DLF, HDFC AMC, ICICI Prudential, IGL, Info Edge, SBI Life, Siemens.
2. MSCI India Index Deletions: BHEL, Glenmark Pharma, Indiabulls Housing Finance, L&T Finance Vodafone Idea, and Yes Bank.
3. Small-Cap Additions: Brigade Ent, Deepak Nitrite, Galaxy Surfactants, Glenmark Pharma, Indiabulls Housing, Metropolis, Navin Fluorine, Orient Electric, Polycab, Spandana Sphoorty, Sterling & Wilson, Vodafone Idea, and Yes Bank
4. Small-Cap Deletions: Arvind, Care Ratings, CG Power, Cox & Kings, DHFL, Gayatri Projects, GFL, IFCI, IIFL Sec, Info Edge, Jagran Prakashan, Jain Irrigation, Magma Finance, Muthoot Finance, PC Jeweller, Reliance Capital, Reliance Infra, Sharda Crop, Suzlon, Time Technoplast, and Whirlpool.

The MSCI index serves as an important parameter for foreign investor’s decision. Morgan Stanley Capital International (MSCI) has set up MSCI India index wherein many prominent companies across sectors are included in this index.

Yes Bank is on the roll; what should you do?

Market participants say a volatile stock price is a challenge to fundraising, even though the bank has been claimed that it is on track to raise funds.
The shares of YES Bank are seeing a sharp rise. Any idea why?
Could it be media reports of industrialists showing interest in the bank or the fundraising plans of the private lender or promoters paring their stakes?
Or, is it because the time of YES Bank has finally come?It may be too early to say—the bank is yet to come out with its September quarter earnings and its fundraising plans are also facing hurdles.
Experts, however, say the fundamentals of the bank are showing signs of improvement.
"Fundamentals are definitely looking improved as the cost of money is low and the bank is looking to raise capital. The weakness of the leverage players is out and the ownership of some of the FIIs is reduced," said Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs at IIFL.
"Since the broader market is looking to outperform, there will be more risk-on trade. If you are in the stock, stay put because the worst may be in the price. We don't rule out the target price of Rs 75 for the stock for the coming six months
."In the recent past, the rally in the broader market was underpinned by 20-odd stocks such as HDFC Bank and Bajaj Finance. With signs of better fundamentals, investors want to bet on beaten-down stocks that can outperform the market.
"People want to bet on stocks that are underperforming the broader market such as RBL Bank and YES Bank who have seen drubbings of late. YES Bank will have some truth, some false," Bhasin said.
A day after logging a strong gain of 15 percent, shares of YES Bank continued their ascent on October 18, rising as much as 9 percent in intraday trade on BSE.
The stock has been in the green since October 14 and looked on course to extend its winning spree into the fifth consecutive session on October 18.
The gain has come after sharp losses in September, driven by one of the bank’s promoters selling his stake.
Market participants say a volatile stock price is a challenge to fundraising, even though the bank has been claiming it is on track to raise funds.
Analysts point out that the bank needs money almost equal to its current market capitalisation over the next two-three years and such a raising would happen at well below book value that will hurt minority shareholders.
Uncertainty on this front still surrounds the bank.
Media reports are suggesting industrialists Sunil Mittal and Sunil Munjal have envisaged interest in acquiring a stake in the private lender.
The bank, however, denied any such development, refusing to comment on it, but at first glance, it appears that the market is happy with this speculation as the stock has been witnessing healthy gains after the reports surfaced.
Promoter Rana Kapoor’s holding in the bank declined to 3.92 percent in the September quarter against 4.31 percent in the June quarter.
Is it good for the bank?
"It is positive as the overhang of selling is done. However, now there are two important triggers to be watched—Q2 results and progress on fundraising," said Sameer Kalra, Founder, Target Investing, who has a buy call on the stock.
In the long run, what plays in favour of a company is the faith of its investors. YES Bank has managed to keep the faith of retail investors in the quarter gone by.
The latest data shows, mutual fund houses increased their holding to 9.26 percent in the September quarter from 6.59 percent.
Moreover, with promoters selling their stake, retail investors have bought about 7.6 lakh shares of the company over the past year.
While there are some bright spots, a clear picture will emerge after the September quarter results are announced.
"The September quarter result is important to see the stress on the company's book. That will tell us whether the fundamentals are improving or deteriorating further," said Jaikishan Parmar, Equity Analyst at Angel Broking.
The stock is the high beta one. There is a larger pattern that has completed around Rs 40 which makes it attractive at lower levels at present.
"The kind of pullback after that drop to Rs 30 level has completely trapped the short-sellers at lower levels. This is a good momentum building up in the stock and as well it is fuelled by short-covering. We may see this momentum further moving up with the next level of resistance around Rs 58 and Rs 72," said Mustafa Nadeem, CEO, Epic Research.

Yes Bank seeks to arrest further decline in stock prices, affirms strong financials

The private sector lender's share price had plunged by nearly 30 percent during intra-day trade on October 1, before closing the session down by 22.8 percent at Rs 32.
A day after a sharp fall in its stock price, Yes Bank on October 2 said the decline was mainly due to forced sale of 10 crore equity shares on the back of invocation of pledged shares by a large stakeholder.

Yes Bank also said its financials are strong, with the liquidity position well in excess of regulatory requirements.

The private sector lender's share price had plunged by nearly 30 percent during intra-day trade on October 1, before closing the session down by 22.8 percent at Rs 32.

"This fall was primarily on account of the forced sale of 10 crores equity shares (3.92 percent of the bank's equity share capital) triggered by an invocation of pledge on the equity shares of a large stakeholder," it said in a filing to the stock exchanges.

With this sale, the entire pledge stands extinguished and all sale under the same duly completed, it added.

Stock markets were closed on October 2 on account of 'Gandhi Jayanti'.
Meanwhile, Reliance Nippon Asset Management Company (RNAM) had on October 1 directed its trustees to sell the remaining shares pledged by Rana Kapoor, co-founder of Yes Bank, as a collateral with the mutual fund house, sources said.

Kapoor, who is also a promoter of Yes Bank, has less than 5 percent stake left in the private lender, and the same has been pledged with RNAM.

"RNAM has given instruction to its trustees to sell entire holding of Kapoor in Yes Bank," a source had said on October 1.

In its filing on October 2, Yes Bank also asserted that its financial and operating metrics remain intrinsically stable.

"Over the past few days, unfounded speculations regarding the bank's deposits/liquidity have been brought to its notice. In this regard, kindly note that the bank had a Liquidity Coverage Ratio in excess of 125 percent as on September 30, 2019, which is well above the minimum regulatory requirement of 100 percent," it said.

The bank's gross advances as on September 30, 2019 stood at Rs 2.32 lakh crore, as against Rs 2.42 lakh crore by June-end 2019, with a higher share of retail advances compared to June, it added.
The reduction in advances was effected to enhance capital efficiency, Yes Bank said.

"Further, deposits aggregated to Rs 2.09 lakh crore as on September 30, 2019. CASA Ratio improved to nearly 30.8 percent as compared to 30.2 percent as on June 30, 2019," it said.

Kapoor and his group entities had sold 2.16 percent of their stake in the bank worth Rs 510 crore through open market transaction on September 26-27.

After this, Kapoor and his group entities' stake in the bank came down to 4.72 percent.
Earlier last week, Yes Capital, one of the promoter entities of Yes Bank, sold 1.8 percent stake in the private sector lender.

The stake sale helped the promoter group entity mop up around Rs 240 crore.
Last month, another promoter Morgan Credits had sold 2.3 percent stake in Yes Bank for Rs 337 crore to prepay a certain part of its outstanding dues to Reliance Nippon Life AMC.

Yes Bank falls over 5% on concerns over CG Power; stock hits 52-week low

The lender held 12.79 percent stake in CG Power and Industrial Solutions as of June 2019.

Shares of Yes Bank fell over 5 percent intraday on August 21, hitting their fresh 52-week low of Rs 67.55, following worries over the valuation of stake in Gautam Thapar's CG Power, which has been hit by allegations of financial irregularities.

The lender held 12.79 percent stake in CG Power and Industrial Solutions as of June 2019.

Shares of CG Power and Industrial Solutions remained on the course of free fall, plunging as much as 20 percent, to hit their fresh all-time low of Rs 11.80 on BSE on August 21.

As per media reports, the Ministry of Corporate Affairs (MCA) has ordered an inspection into the affairs of the company after reports of financial wrongdoings came into the light.

CG Power in a BSE filing on August 20 said, "While working on one of its priority tasks of seeking refinancing of certain facilities and as a part of conducting financial analysis in this regard, the operations committee was made aware of some unauthorised transactions by certain employees of the company."

The operations committee was also made aware of a letter received by the company from a financing company regarding a certain interest payment failure which the committee was unable to trace or ascertain from the financials of the company, the filing added.

The board also found that the total liabilities of the company and the group may have been potentially understated.

"The total liabilities of the company and the group may have been potentially understated by approximately Rs 1,053.54 crore and Rs 1,608.17 crore respectively as at 31 March 2018; and by Rs 601.83 crore and Rs 401.83 crore respectively as at 1 April 2017," the filing added.

Around 1040 hours, hares of Yes bank traded at Rs 69.45 on BSE, down Rs 1.80 or 2.53 percent.