YES Bank Ltd, a retail investor-heavy stock, is in news these days amid reports its largest shareholder State Bank of India (SBI) was looking to sell stake in the private lender as soon as its 3-year lock-in period expires next week. Where the stock headed is a Rs 11,000-cr question for its 47.28 lakh retail investors, who owned 642.31 crore YES Bank shares, as on December 31, 2022.
Retail investors owned Rs 13,232 crore worth shares at the end of December quarter compared with Rs 10,052 crore as of September 30, 2022. A last count, the 22.34 per cent stake they held in the private lender amounted to Rs 10,863 crore.
ICICIdirect said YES Bank has witnessed a gradual improvement in business growth as well as asset quality in last six quarters. Recently, the bank concluded sale of stressed assets to JC Flower, which has led to substantial reduction in GNPA to 2 per cent.
“Going ahead, the bank is poised to pedal higher advance growth (driven by granular retail assets) as it concluded Rs 8,900 crore of capital raise from Carlyle and Advent. Focus on growth along with margin improvement may enable the bank to improve its RoA to guidance of 0.9-1 per cent in FY25. However, given Security Receipt (SR) of Rs 3,770 crore (from sale of stressed assets of face value of Rs 6,800 crore) and ageing on the same, earnings could remain volatile on quarterly basis,” said ICICIdirect.
At present, the stock trades at 1.3 times its expected FY23 adjusted book value, which seems to factor in recent development along with guidance of improvement in RoA, ICICIdirect said.
Girish Sodani, Head of Equity Market at Swastika Investmart noted that the 33 per cent return that the stock delivered in the past one year was led by improvements in asset quality and record growth in advances. After the bailout of the bank in 2020, YES Bank’s earnings have improved significantly, it said, adding that advances for the lender were up 12 per cent (YoY) in the December quarter.
If the lenders kept their stakes unchanged after the end of the lock-in period, it may spark fresh buying in YES Bank shares. The stock may go to Rs 20 to Rs 25 levels in the medium term, Sodani said.
“We expect YES Bank share prices to remain volatile as the lock-in (prohibiting shares sale) ends tentatively in a week’s time by 13th March 2023 as cash transfer happened on 14th March 2020,” ICICIdirect said. The domestic brokerage said the decision to write-down AT-1 bonds being challenged in court and the supply overhang post expiry of stock lock-in are the near term risks for YES Bank. A consistent with controlled asset quality holds key for the stock, ICICIdirect said.
YES Bank shares have been witnessing increased volatility off late, as the holding lock-in period of three-year for few private banks comes to an end in March 2023, said Amar Deo Singh, Head Advisory at Angel One. The scrip is down 20 per cent year-to-date.
“Given the bank’s approaching Q4 numbers, investors might decide on holding onto the stocks, as post the SBI management taking over the reins, the bank’s fortunes have improved marginally. Further, the Finance Ministry’s mechanism to handle bad loans, is also likely to 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 look at booking profits at higher levels,” Singh said.
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