INSUBCONTINENT EXCLUSIVE:
Mumbai: Investec Securities has reiterated its bullishness on YES Bank despite the adverse news flow that has led to the stock tumbling to
Investec said YES Bank is in a situation similar to ICICI Bank on two occasions in the past two years and could see a sharp improvement in
returns once events stabilise
If the current scenario worsens, the bank could either see its entire capital base getting eroded or there could be a possible takeover by
a peer bank such as Kotak Mahindra Bank at distressed valuations, helping the Uday Kotak-led bank to overcome its promoter shareholding
Investec has maintained buy rating on YES Bank, but cut target price on the stock to Rs 320 from Rs 430 as it reduced growth assumptions
YES Bank's series of troubles started in September after the Reserve Bank of India trimmed CEO Rana Kapoor's term till January next year
Ratings agencies such as Moody's, CARE Ratings and ICRA have downgraded YES Bank citing poor corporate governance
YES Bank's shares have fallen 50% since September, but Investec's target price implies that the stock could nearly double from current
The lender's stock ended up 5.7 per cent at Rs 169.65 on Friday
"We look to when ICICIBC (ICICI Bank) was in similar predicaments in April 2018 and February 2016, being put to the test as negative
newsflow on corporate governance issues, risks of kitchen sinking post management changes and
negative investor sentiment led to derating,"
"However, with the benefit of hindsight, these proved to be the best times to buy, as in both instances the stock delivered high returns in
a short time as results were strong," the brokerage added
Investec said the biggest risk to its thesis would be where the worst case scenario on every aspect plays out, be it asset quality,
minority shareholders will be fully diluted or (b) a possible takeover by a peer bank like Kotak Mahindra Bank at distressed valuations
which would prove beneficial for Kotak as it would solve the promoter shareholding issue once for all," said Investec.
The brokerage said
any positive developments with regard to settlement between promoters Rana Kapoor and Madhu Kapur could be seen positively
