InvestorQ : Is Yes Bank a worth buy after the recent bounce in prices?
Ria Jain made post

Is Yes Bank a worth buy after the recent bounce in prices?

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Neelam Naik answered.
10 months ago

The stock has gained nearly 100% in the last few days since it bottomed out around the Rs.29 levels. There has been a mix of short covering on the stock but there has also been some buying after Yes Bank got a binding offer from an international investor to infuse $1.2 billion or Rs.8400 crore into the company. That is likely to be in the form of fresh equity infusion and that has kept the bank stock buoyant.

However, that is easier said than done because it goes against the RBI norms for single investor ownership limited to 10%. RBI rules do not permit a single investor to hold more than 10% stake in an Indian bank. The significance of the capital infusion by the investor is the massive size. Yes Bank had a market capitalisation of around $2 billion prior to the news and it accounted for nearly 60% of the market cap of Yes Bank. That is where question of limited ownership arises.

Stock prices are rising for two reasons. Firstly, If all goes according to plan, the infusion will go a long way in filling the gaping hole that bad loans have made in the bank balance sheet. That would be Yes Bank’s best bet to revive its fortunes and build all over again. Secondly, the proposed issue placement price is Rs.100, which could mean that the investor will end up with around 25% stake in the expanded equity. That will still need RBI permission and if the stock crosses 26% it will entail other complications such as making open offer to minority shareholders. For now the bet is on placement price and it is a big risk.