The fall and fall of YES Bank share prices

Just a year back Rana Kapoor, then managing director and CEO of YES Bank, had equated his shareholding in the private bank with “diamonds”.

“I will eventually bequeath my @YESBANK promoter shares to my three daughters and subsequently to their children, with a request in my will stating not to sell a single share as Diamonds are Forever!” Kapoor tweeted on September 28 last year. Earlier, he had tweeted that even after demitting office as MD&CEO of YES Bank, he would never ever sell his shares.

But then he would not have foreseen the sharp fall in share prices of India’s 13th largest bank, which ranked 61 on the Fortune India 500 list of 2018.

The bank’s share prices fell from its 52-week high of ₹285.9 to 52-week low of ₹29.05 between April 3, 2019, and October 1, 2019. In just 120 trading sessions, the YES Bank stock lost nearly 90% of its value.

On October 1, apart from breaching the lower circuit of ₹31.1, the 52-week low price of ₹29.05 was the fourth consecutive instance of hitting the low point. The stock hit 52-week lows of ₹50.6, ₹48.4, and ₹40.95 on September 26, September 27, and September 30, respectively.

On October 1, YES Bank provided regulatory disclosure from Yes Capital (India) Private Limited, a (promoter) shareholding entity controlled by Rana Kapoor. The disclosure revealed that the firm controlled by Kapoor sold 2.16% in YES Bank in the open market over September 26 and 27.

Earlier in the month (on September 19), another Kapoor-controlled promoter shareholding entity, Morgan Credits Private Limited (MCPL), had sold 2.3% in YES Bank to prepay a substantial portion of outstanding non-convertible debentures (NCDs) of MCPL subscribed by various schemes of Reliance Nippon Life Asset Management Company.

While the total prepayment (including interest) to the NCD holders was to the tune of ₹722 crore, which was settled ahead of the maturity in April 2021, the reduction in promoter holding helped meet the regulatory shareholding level of 15%, prescribed by the Reserve Bank of India (RBI). The September 19 share sale brought the promoter holding down to 15.7%, according to a release.

In the same release, Rana Kapoor said; “YES Bank is a terrific homegrown, large Indian banking institution, which has an outstanding leadership team, proven asset quality and resolution/recovery management skills, diversified income streams, and an efficient cost structure ensuring sustainability in earnings.”

On September 26, Yes Capital (India) Private Limited had revealed that is had sold 1.8% stake in YES Bank to prepay debentures subscribed by various schemes of Franklin Templeton Asset Management (India) Pvt. Ltd, which brought the promoter shareholding down to 13.4%.

However, the back-to-back fall in share prices is detrimental to YES Bank’s capital raising plans, which recently got a go-ahead from the RBI.

Alongside the financial woes at Mumbai-based NBFC Altico Capital, the RBI action on Punjab and Maharashtra Co-operative Bank (PMC Bank) and its reported exposure to financially strained Housing Development & Improvement (HDIL) have been making headlines in recent days. And there were rumours of YES Bank’s troubled exposure to the real estate sector.

The steep fall in share prices forced YES Bank managing director and CEO Ravneet Gill to issue a statement on September 30 where he refuted market rumours as being speculative, unsubstantiated, and appeared to have generated a lot of speculation.

“While this has impacted the share price adversely, the bank would like to state that its capital and liquidity position are comfortably above the regulatory threshold and the asset quality is in line with the guidance provided post-Q1 FY20 results,” Gill said in the release. “The bank’s outstanding exposure to the housing finance/real estate conglomerate [Indiabulls Housing Finance], which is in the news today, is totally secured and over the last six months there has been a reduction of approximately 30% in this exposure.”

At ₹29.05—the day’s low on October 1—YES Bank’s share declined over 29.9% compared to the previous close of ₹41.45. And the stock closed the day 22.8% lower at ₹32 a share on the BSE, while the benchmark S&P BSE Sensex closed 361 points lower at 38,305.41, compared to its previous day close of 38,667.33.