NEW DELHI: In a tale of two scrips, the market voted to raise the price of Yes Bank, while giving a thumbs down to its white knight SBI, whose shares fell to its lowest level in a year.
SBI is taking over the troubled Yes Bank as part of an RBI mandated rescue attempt.
Yes Bank's equity rose to Rs 29.05 a share on NSE at the end of Wednesday's trading, up 80 per cent from Rs 16.15 a share on March 6, when news of Yes Bank's troubles hogged headlines.
Analysts say there are two reasons why the bank's shares have risen so sharply despite reports by several top financial analysts including Macquarie Capital that the real value of the scrip was equal or less than Rs 1.
One is SBI's decision to pay a price of Rs 10 for Yes Bank shares with a face value of Rs 2. The other is the hope that the state-run banker will pour in at least Rs 10,000 crore into reviving Yes Bank.
"The same reason (SBI's purchase of Yes Bank shares) has seen SBI's share value erode massively - from Rs 339.30 per share on January 2 to Rs 244.25 per share on Wednesday - an erosion of Rs 84,828 crore in market cap. It's mainly a thumbs down by the market to the (rescue) scheme," pointed out Amit Banerjee, an independent merchant banker specialising in East Asian Funds.
As part of the scheme to revive Yes Bank, new shares are being issued and bought by SBI, which would make it the owner of 49 per cent of the private sector lender founded by banker Rana Kapoor.
The main concern is on the burden imposed on SBI shareholders in turning around Yes Bank and the high price imposed on State Bank in doing so.
Top bankers say ideally the share capital of Yes Bank should have been extinguished and then the bank should have been handed over to SBI for a token amount. “Failure to do so is a reward to promoters and other shareholders who should be the first ones to take a hit when a bank gets into troubled waters and needs a rescue,” said the director of Delhi-based state-run bank.
Notably, IAS officer Ashok Khemka has in a letter written to the Prime Minister and RBI Governor said, "It defies reason why SBI should subscribe to common equity tier 1 capital of Yes Bank at five times its face value when the true networth of Yes Bank is negative. This is an unfair public subsidy to existing owners of Yes Bank using the wealth of SBI shareholders."