YES Bank

Govt of India Authorizes a Plan for SBI-led consortium to buy a stake in YES Bank

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Hike in YES Bank Shares, While SBI Shares see a Downfall

According to reports, the government of India has approved a plan for State Bank of India-led consortium to buy a stake in YES Bank. SBI has also been authorized to pick other members of the consortium.  Following the development, the shares of YES Bank jumped 9.56 per cent to hit a high rate of Rs.32.10 on BSE. While the shares of SBI fell 3.01 per cent to Rs. 276.70. Earlier this year, SBI scaled down its fundraising plan substantially to Rs. 10000 crore, from nearly $2 billion approved by the board in November.

“As per reports, SBI has been told to invest as a lead in a consortium in YES Bank. Though we may see a big spike in the price of YES Bank and a negative reaction in the price of SBI, we recommend caution to retail investors. The critical thing to watch will be the percentage dilution of equity taking into consideration the conversion of existing bonds issued by YES Bank into equity,” said Abhimanyu Sophat, Head of Research, IIFL Securities.

The ‘YES Bank’ Crisis

Last year, when the Reserve Bank of India cut short the founding promoter Rana Kapoor’s new three-year term as CEO of the bank till January 31, 2019, the crisis of YES Bank started.  The bank’s shares tanked 30% on the next day and the downward spiral continued. Later that year, Rana Kapoor said he had the interest of the shareholders in his mind and would never sell his promoter shares. Instead, he would pass on them to his daughter. However, the RBI refused Rana Kapoor and asked the promoters of the bank to find a new CEO. This subsequently led to poor quarterly results and the asset quality deteriorated.

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