Yes Bank shares surge over 12% in 2 sessions ahead of board meet

Mumbai: Yes Bank shares advanced over 12% in the last two consecutive sessions, hitting a two-week high ahead of its board meeting on Thursday. Today, the Yes Bank stock closed at Rs 186.80 on BSE, up 5.3% from its previous close while India’s benchmark Sensex Index rose 1.8% to 35,779.07 points.

On 21 November, Yes Bank had informed to exchanges that its board meeting will be held on 13 December to consider appointment of a new chairman, two independent directors to replace departing directors, and the CEO search panel’s recommendation to appoint a successor to the current MD and CEO Rana Kapoor. The bank also said that its promoters are seeking a mutual resolution to ensure better support and coordination for outstanding issues.

The board was originally scheduled to meet on 16 January 2019 to consider financial results and make the board level changes cited above.

Yes Bank’s board has witnessed departure of its three board members, including its chairman in November. Separately, O P Bhatt, an external expert on the bank’s CEO search panel, also resigned mid of November.“It remains puzzling the need for three of the board members resigning in such a hurry. It could be because they were not on the same page on selection of the new CEO”, IDBI Capital report said in a 29 November note.

These resignations following the Reserve Bank of India’s (RBI) direction on 17 September to restrict the term of Yes Bank’s MD &CEO Rana Kapoor to 31 January 2019 have resulted in a correction of the bank’s stock.

“While we have assigned ‘Under Review ‘ rating on the bank, stock after the recent correction is available at attractive valuation of 1.1x P/ABV FY20E. We will be closely watching credibility of new CEO as well as outcome of RBI divergence report on FY18 before taking a view on the stock”, said IDBI Capital report added.

As per media reports, promoter through two of its entities (Yes Capital (India) Private Limited and Morgan Credits Private Limited) have pledged their shares for borrowing debt on personal count. As such transactions were never reported, it has a bearing on the corporate governance of the bank.

On 8 October, Mint first reported that Yes Bank promoters have initiated moves to reach an out-of-court settlement. Both sides have begun preliminary talks to withdraw a long-drawn and bitter legal case against each other and put an end to their decade-old feud.

Analysts belive if this happens the appointment of directors on the Yes Bank board will be hassle-free in future.

In last two weeks, Yes Bank has lost nearly 60% of its market value on the back of uncertainty around leadership succession, lack of capital adequate growth capital and potential overhang from asset quality divergences.