Yes Bank plummets 29% in a day; Is it a value buy now?

MUMBAI: Shares of Yes Bank plunged 29% on Tuesday after reporting its first ever quarterly loss, leading to an erosion of Rs 16,000 crore in market capitalisation. Institutional investors lost nearly Rs 10,000 crore in value of their holdings. The fall in the stock was its biggest-ever one-day decline.

On a closing basis, the stock ended at the lowest level since December 10 last year. Mutual funds saw Rs 1,500 crore worth of value erosion due to Tuesday’s fall while FIIs lost Rs 6,500 crore. The stock ended at Rs 168 after falling as much as 30.4% to a low of Rs 165.30 during the session as the bank’s quarterly loss, its exposure to the Reliance group companies, which have seen debt rating downgrades, and the slew of rating downgrades by brokerage on its own stock, led to panic selling.


“The huge loss in Q4, clouded nearterm outlook, subsequent downgrades by sell-side analysts, and rating downgrades for Anil Ambani-run Reliance Capital, all this coming together led to the stock falling. It will take a long time to resolve,” said Digant Haria, AVP, research, Antique Stock Broking. The stock had gained 50% in the first three months of the year in anticipation that the worst is over after the RBI cleared the lender of any divergences in bad loan reporting practices. Foreign portfolio investors raised stake in the company by 4.2%.

Yes Bank on Friday posted a loss of Rs 1,507 crore for the March quarter compared to profit of Rs 1,180 crore a year earlier as provisions soared over nine-times as the lender's first non-founder CEO Ravneet Gill began a clean-up act.

Analysts are also divided over whether the Yes Bank stock is a value buy at these levels.

“I will look at the stock when it is sub-Rs 150. At Rs 10-20 lower they will be able to do a QIP,” said a institutional equities head at a domestic brokerage. He believes the stock is not a good value buy at current levels.

The stock is looking weak on technical charts as well. Chandan Taparia, derivative analyst at Motilal Oswal sees support for the stock at Rs 150 but said one should avoid the stock. “We have seen build-up of short positions and many are waiting to exit. We have also seen margin pressure in the counter,” said Taparia.

Independent market expert Ambareesh Baliga believes the stock is a good value buy.

“What we saw in Yes Bank shares on Tuesday was panic. The way it has fallen, it can fall to Rs 145-Rs 150 but it seems to be a value buy even at current levels,” said independent market expert Baliga. “We had seen a similar situation in ICICI Bank and that turned out to be an opportunity,” said Baliga.

The stock is down more than 50% over the last one year, despite the recovery seen in the stock price in the first three months of the year.

Brokerages such as Macquarie, Emkay Global, Edelweiss, Citi and BOB Capital downgraded the stock post results. Target prices were slashed as much as 40%.

"As Yes shifts from its historic focus on structured credit, there are multiple pressures — lower NIMs, fees, growth; weaker asset quality and capital. We expect a gradual turnaround under the new CEO,” said Morgan Stanley, which has a target price of Rs 125 on the stock — the lowest on the Street. Morgan Stanley has cut EPS estimate for FY20 by 41% and for FY21 by 47%.