Does Yes Bank Have The Potential To Become A Multi-bagger Stock?

Does Yes Bank Have The Potential To Become A Multi-bagger Stock?

On the day of Wednesday, the Yes Bank stock price jumped by around 4.3% till 11.30 am and it was trading at Rs 14.30, also the stock has added approximately 4% in a week, and within the span of a month, the stock price has scaled up by more than 11%, it is a private sector bank which is engaged in providing banking services, including corporate and institutional banking, financial markets, investment banking, corporate finance, branch banking, business and transaction banking, and wealth management, from 2004 to 2015 it was considered one of India’s most Buzziest banks, and this was mainly because of the easy accessibility of loans from the bank, therefore soon it became the fifth-largest private sector lender, and also the problems began to arose when the sectors to which yes bank extended credit, which included Non-Banking Financial Companies, real estate firms, and the construction sector, all went under a crisis, while the debtors failed to repay the amount which in case resulted in an increase in the Non-Performing Assets (NPAs) of the bank, and that is when things started going downhill for the bank, and due to this the stock price plummeted from Rs 275 in April 2019 to Rs 47 by the end of December which was a drop of more than 95%, but now there seems to be a ray of hope for the bank after all, because in the past year the bank has made a significant reconstruction in their operations, and in addition, a term sheet has now been signed for the sale of an identified pool of stressed assets to the ARC, also the financials of the company are also now improving, and in the first quarter of FY22, the total revenue earned by the lender was Rs 5134 Crores which is an increase of 14% year on year, and it also reported a 50% increase in its net profit to Rs 311 Crores which was up from Rs 207 Crores in the year-ago period, therefore their asset quality has saw an improvement in the first quarter as their Gross NPA ratio of Yes Bank is at 13.40 per cent in Q1FY23 which stood at 15.6 per cent in Q1FY22, therefore with all the improvements in its financials, and the bank seems to be coming back on track which might have the potential to become a multibagger and climb back to the price levels in which it used to trade around a few years ago.

Company Profile This company has got a script that fits the bill for a super-hit Hollywood movie with a small difference that it all end towards a bad ending due to its disbursement in loans, this story began in 1999 when three successful bankers came together to float a non-banking financial company, and those were Ashok Kapur, who was the the former country head of the ABN Amro Bank, Harkirat Singh, who was the former country-head of the Deutsche Bank, and third partner Rana Kapoor, who was the former corporate finance head of the ANZ Grindlays Bank, and in an interview to the Economic Times, Harkirat Singh said he has accepted Rana Kapoor as the third partner only after the strong recommendation of Ashok Kapur, and the three Indian promoters had 25 per cent share in the non-banking financial corporation while the rest of the 75 per cent were with the Rabo Bank of the Netherlands, then it became the Yes Bank in 2003, and it was also the same year when Harkirat Singh quit the Yes Bank over issues pertaining to influence exerted by the Rabo Bank in appointment of CEO and executive chairman, the firm acquired license in 2004 and went to stock exchange with the IPO (initial public offer) in 2005, after which the firm started making slow and steady progress in the initial years, but it then received a big shock in 2008, in which Ashok Kapur, the then chairman who was at the Trident Hotel on the 26 November 2008 when 10 Pakistani terrorists attacked Mumbai, and the hotel was one of the targets of the 26/11 terror attack, and he died in the terrorist attack that Thursday night, this changed the way Yes Bank would go about its business under the new leader who was now Rana Kapoor, while Ashok Kapur seemed to have fancied Rana Kapoor, and this stems from the fact that he is said to have got his wife, Madhu Kapur’s sister Bindu get married to Rana Kapoor, therefore this marriage made Ashok Kapur and Rana Kapoor not only business partners but also relatives, but these ties came under scrutiny soon, when the battle for supremacy in the Yes Bank ensued, also this propped up from the failed attempts by Madhu Kapur in 2009 and again in 2011 to get her daughter Shagun on the board of directors, and these moves were scuttled apparently by Rana Kapoo who had then had full control of the Yes Bank, therefore during this period, Madhu Kapur’s name from major promoters was also removed in the Yes Bank’s communiqués, and in 2012, Rana Kapoor published a history of the Yes Bank but it had no reference towards Ashok Kapur, while this dispute was settled finally in 2015 with Kapurs getting the seats on the board of directors, while the period of internal fight was also the phase when the Yes Bank went aggressive with lending, during which a Business Today report says that of around Rs 35,000 crore of stressed loans, and most of the lendings were done in post-2008 period, it gave loans to companies which were struggling in their businesses, and these companies included the Anil Ambani Group of Companies, the Essel Group, the Dewan Housing Finance Corporation Ltd (DHFL) and Infrastructure Leasing and Financial Services (IL&FS), and in all of these DHFL and (IL&FS) have collapsed and taken over by the government for the restructuring, but by the time dispute between Kapoor and Kapurs settled, the steel frame of the firm had begun to creak, while Global major financial services firm, the UBS in a report dated 7 July 2015, said thar the Yes Bank had the strongest growth in loans to potentially towards stressed companies, while the report read, We believe Yes Bank is most vulnerable to be a prolonged weak credit cycle and consensus may not be ready for a sharp increase in the company’s credit costs, therefore the UBS downgraded Yes Bank’s stock to a sell meaning it advised the investors to sell their stocks as the company was heading to doom, but instead of plugging the loopholes, Rana Kapoor-headed bank moved the Securities and Exchange Board of India (SEBI) against the UBS, and following the collapse of IL&FS in 2018, the Yes Bank practically had no means to recover, but the main issue with the bank was that it was not ready to admit its problems and underreported its stressed loans instead, therefore with the intervention of the Reserve Bank of India, it was then known, that the Yes Bank had been passing through a tumultuous period for long, and in August 2018, the RBI asked the then chief executive Rana Kapoor to quit the bank by January 31, 2019 when it emerged that he could be the real problem of banking governance and source of bad loan practices, whereas after a brief intermediary period, the RBI appointed Ravneet Gill as the chief executive of the Yes Bank, which was the fourth largest private sector bank before its collapse. Ravneet Gill later then disclosed that there had been large under-reported stressed assets in the Yes Bank, and as a result, the Yes Bank reported its maiden loss in March 2019 quarter, the Bank had been trying to raise capital to infuse a fresh lease of life in the bank, as it initially planned to attract $2 billion (approximately Rs 15,000 cr) in the current fiscal, but later its board rejected a $1.2 billion (approximately Rs 9,000 cr) investment in the bank by Canadian investor SPGP Group/ Erwin Singh Braich, currently the bank’s asset size stood at Rs 3.71 lakh crore at the end of June 2019, and the promoters of Yes Bank — Madhu Kapur, Yes Capital (India) Pvt Ltd, and Mags Finvest — hold 8.33 percent stake in the crisis-ridden bank, as per data available on the stock exchanges.

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