This bank's shares could have made you a crorepati, if you had bought it just days ago; should you buy?
While everything is tumbling including Sensex as well as the banking index, the share price of Yes Bank is seen mending its massive losses as investors continue to buy.
Yes Bank share suffered massive losses in the recent past because of RBI telling its chief Rana Kapoor to quit his post. Chary investors were quite disheartened and refused to touch the share. Now, they would surely be wishing that they had shown some courage and bought the Yes Bank share at its nadir! Crores of profit has gone abegging for these people, but that mind-set has changed now and investors have started flocking to the stock again. No rewards for guessing, but Yes Bank share has skyrocketted! Of such stuff are fortunes, and legends, made!
Amidst the search for the new CEO & MD, while preparing to say goodbye to the existing one, looks like investors are quite happy with Yes Bank shares. The bank has taken such heavy beating last week, so much so, that it gave away a massive 73% gains. Surprisingly, it has become the new favorite on the benchmark indices. While everything is tumbling even including Sensex and banking index, the share price of Yes Bank is seen mending its losses as investors continue to favor the bank. Yes Bank today gained by nearly 11% by touching intraday high of Rs 213.40 per piece. However, at around 14:28 hours, the bank was trading at Rs 213.95 per piece up by Rs 12.75 or 6.34%. Guess what! In two days time, Yes Bank has surged by 21%.
Seemingly, Yes Bank has restored the faith of investors by showing confidence that it will expedite the search for the new CEO & MD who will be taking over from founder Rana Kapoor.
Yes Bank was once Rana Kapoor’s success story, but a few controversies involving the management provoked the RBI into taking this shocking action.
On Monday, Yes Bank said, “Search & Selection Committee', assisted by a Global Leadership Advisory Firm, will evaluate both internal and external candidates and make suitable recommendations to the Board of Directors for onward submission to RBI.”
It added, “The 'Search & Selection Committee' and the Board of Directors are fully committed to expeditiously completing the said process within the current stipulated timelines of RBI.”
Last week, Yes Bank had said, “The board also decided that given the role of Rana Kapoor as MD&CEO since inception of the bank in 2004, and the time consuming challenges of finding a suitable successor, that the incumbent MD&CEO be given further time in his current position beyond January 31, 2019.”
Yes finding a CEO on the place Kapoor, is some difficult job for Yes Bank.
However, looks like Yes Bank has decided to follow what RBI has asked and a new CEO can be expected in coming months before the specified timeline of the central bank.
Should you invest?
Analysts at Geojit said, “Yes bank witnessed a steep correction when RBI denied the three year extension of Mr.Rana Kapoor as CEO of the bank and asked him to step down due to regulatory and governance issue.”
They added, “The exit of Kapoor, who co-founded the bank in 2004 could impact the loan growth and may potentially affect the capital raising plans.”
Following this, Geojit said, “We downgrade our valuation of Yes bank to 1.6x FY20E book value of Rs158. However, we expect the recent steep fall largely factored in price and the legacy of growth story recommend Buy rating with a revised target price of Rs 253.”
Another to give Buy rating would be HSBC.
In HSBC’s views, current valuation (1.7x FY19e BVPS) appears inexpensive though there is a lack of near-term positive catalysts. However, looking at episodes affecting ICICI Bank (ICICIBC IN, INR317.10, Buy) and Axis Bank (AXSB IN, INR599.20, Hold) (regulatory intervention at CEO level followed by the board coming up with an alternative succession plan) suggest a decisive step taken by the board to ensure a relatively orderly succession could alleviate currently heightened concerns
HSBC says, “We maintain our Buy rating with a lowered TP of Rs 378 (Rs 434) due to our earnings cuts.”