Share price of private lender Yes Bank cracked 15 percent in the early trade on March 6 after RBI superseded YES Bank board and capped per day deposit withdrawal limit at Rs 50,000.
The Central Government has imposed a moratorium on Yes Bank, restricting the withdrawal of deposits to Rs 50,000. However, any withdrawal over the amount will require the permission of the Reserve Bank of India (RBI).
There were pending sell orders of 14,276,728 shares, with no buyers available.
In another related development, RBI on March 5 said it is superseding the board of the bank with an immediate effect. The former State Bank of India CFO Prashant Kumar has been appointed as the administrator.
“This has been done to quickly restore depositors’ confidence in the bank, including by putting in place a scheme for reconstruction or amalgamation,” the RBI said in a statement.
According to CNBC-TV18 sources, SBI and LIC are likely to each pick up 24.5% in the Yes Bank and likely to appoint a new MD for Yes Bank to get the board control.
Also Read – YES Bank rescue plan: Govt may nudge LIC to play white knight along with SBI
National Stock Exchange (NSE) in its circular said that no Future and Options contracts shall be available in the Yes Bank for trading in the equity derivative segment from May 29, 2020 onwards.
The existing Future and Options contracts, across all expiries shall expire on May 28, 2020.
On March 5, JP Morgan slashed the target price on shares of the bank to Re 1 (from Rs 55 earlier) and retained its underweight call as the brokerage believes the networth is largely impaired.
According to JP Morgan, the sovereign bailout is a bondholder/depositor bailout and not an equity one. It believes that the net worth is largely impaired and rally in the stock is unjustified.
The new capital will likely to come in at a steep discount to current share price.
SBI being called for ‘national service’ is incrementally negative for its valuations and it sets a precedent for nationalisation of any future private losses, JP Morgan added.
UBS | Rating: Sell | Target: Rs 20 per share
According to UBS the bank is facing two possibilities going ahead, 1) possibility is that the government or SOEs keep infusing capital into the bank in coming years and 2) possibility is after initial investments, bank succeeds in raising capital from markets or PEs.
Macquarie | Rating: Underperform | Target: Rs 25 per share
The main challenge is who will want to buy Yes Bank. The biggest risk was a sudden collapse of Yes Bank & freezing of liquidity & payments market.
However, the sudden collapse has been averted now by the RBI & government and specifically for Yes Bank & SBI, expect a sharp downward move in the stocks.
At 09:19 hrs Yes Bank was quoting at Rs 31.35, down Rs 5.50, or 14.93 percent on the BSE.
News Source:- moneycontrol