HYDERABAD: On Monday when markets open, retail investors of Yes Bank Ltd will be in a tizzy.
Those having 100 or more shares of the troubled bank will find themselves in a forced locked-down, which was unheard of before. The lock-in is effective as of March 13.In an unprecedented move, the government late on Friday notified the Yes Bank Reconstruction Scheme, 2020, effectively barring all investors — institutional and retail — from disposing more than 25 per cent of their holding in the bank. In other words, individual shareholders’ 75 per cent stake will remain vested with the bank until three years. The move caught investors by surprise and market watchers expect frantic trading activity on Monday. Investors holding less than 100 shares are exempted.
The reason for a such lock-down isn’t clear, particularly when the government didn’t impose any restrictions when it mounted a similar rescue act to bailout scam-hit Satyam Computer Services in 2009.
Moreover, investors will be watching out for clarity on the roadmap for futures and options trading, which currently are allowed only till May end.
Besides retail investors, bondholders too got a rude shock with the bank on Saturday confirming their worst fears of a total write down of Additional Tier 1 (AT-1) bonds. “In light of the above provisions of the Basel-III circular, the Perpetual Subordinated Basel-III Compliant Additional Tier-1 Bonds issued by the bank for an amount of Rs 3,000 crore on December 23, 2016, and the Perpetual Subordinated Basel-III Compliant Additional Tier-1 Bonds issued by the Bank for an amount of Rs 5,415 crore on October 18, 2017, have been fully written down and stand extinguished with immediate effect,” Yes Bank’s administrator Prashant Kumar informed.
It is unclear if bondholders, who already moved court challenging the decision first announced about 10 days ago, will continue their legal fight. Meanwhile, the good news for shareholders is the clean-up of Yes Bank’s balance sheet. It appears that much of the bad loans have been provided for, putting aside Rs 24,766 crore in the December quarter as against Rs 1,336 crore in the September quarter. The higher provisioning saw a steep net loss of Rs 18,560 crore during Q3. Its capital adequacy ratios fell below the regulatory norms, but the fresh capital infusion announced last week should allay investor concerns. The bank’s authorised capital has been altered to Rs 6,200 crore as against the previous Rs 1,100 crore.
Incoming investors led by SBI and private lenders ICICI, HDFC, Axis, Kotak and others are investing as much as Rs 11,000 crore so that revival of the bank becomes smooth. That said, investors will be mindful of a key element that could put the bank’s scrip under pressure. On Thursday, when the moratorium is finally lifted, analysts aren’t ruling out a bank run. As it is, deposits saw sharp erosion, from Rs 2.2 lakh crore in September 2019 to Rs 1.37 lakh crore in March 2020. Yes Bank shares rallied above 300 per cent after hitting a low of Rs 5.55 on March 6. Similar life-time lows aren’t ruled out in the next trading sessions.
75% stake of individual share holders will remain vested with Yes Bank for 3 years
Rs 18,560 crore was Yes Bank’s Q3 net loss
NPA trouble to continue in FY21, but CEO hopeful
Mumbai: Yes Bank expects pressures from bad loans, which led it to declare the highest loss for any private lender at I18,654 crore for the December quarter, to continue even in FY21, but CEO-designate Prashant Kumar is confident of its survival after a I10,000-crore capital infusion. In last six months, over I72,000 crore of deposits were pulled out from the bank.