Yes Bank Ltd shares crashed as much as 40% on Friday after the Reserve Bank of India (RBI) placed a moratorium on the private lender and restricted withdrawals at Rs 50,000 per customer till 3 April 2020.
At 10:40 am, Yes Bank shares were trading at Rs 22.10, down 40%. The stock had rallied nearly 26% to Rs 36.85 in the previous session after reports started surfacing that the government has asked the country’s largest lender State Bank of India (SBI) to bail out the private lender by forming a consortium of banks and picking up stake.
However, things took a turn for a worse later in the day. On Thursday evening, another media report said that SBI and the Life Insurance Corporation of India (LIC) are set to pick up a total of 49% stake in Yes Bank by acquiring preferential shares in the lender at just Rs 2 apiece.
SBI, in a statement to exchanges on Thursday evening, confirmed that an in-principle approval has been granted by the board to explore investment opportunity in Yes Bank. SBI shares dropped as much as 12% in early trade on Friday.
Meanwhile, both BSE and NSE said that no futures and options contracts shall be available in Yes Bank for trading in the equity derivatives segment from 29 May 2020.
Interestingly, JP Morgan on Thursday had slashed the target price on Yes Bank shares to just Re 1 from Rs 55 earlier while retaining its ‘underweight’ call, as the brokerage believed the networth of the lender is largely impaired.
“The new capital will likely come in at a steep discount to current share price, as forced ‘bailout’ investors will likely want a large cut for equity holders,” the brokerage had said.
It added that the forced bailout investors would likely want Yes Bank to be acquired at near zero value to account for risks associated with the stress book and likely loss of deposits.
With regards to SBI, JP Morgan had said implications for the biggest lender being called for national service are incrementally negative for the bank’s valuations as it sets a precedent for nationalisation of any future private losses.
Yes Bank, India’s fifth largest private bank, has been struggling for months to find an investor willing to pump capital. The lender had informed exchanges last month that it would postpone the announcement of its December quarter results till around 14 March 2020 as talks were on with potential investors for raising capital.
The bank said it had received non-binding expressions of interest from several investors, including J C Flowers and Tilden Park Capital Management, OHA (UK) LLP and Silver Point Capital.
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