On Wednesday, RBI announced that incumbent Rana Kapoor will have to step down from his position as Yes Bank's CEO and MD from February 1, 2019. In a stock exchange filing, the private-sector lender late Wednesday said, "RBI has intimated that Shri Rana Kapoor may continue as the MD & CEO till 31 January 2019".
Why RBI ordered early exit for Yes Bank's promoter?
In June 2018, shareholders of the promoter-run Yes Bank approved Rana Kapoor's re-appointment for three years subject to final call by the central Bank. Post which on August 31, Yes Bank said that it received RBI's approval for continuance of Kapoor as the Bank's MD and CEO until further orders by the RBI.
Primarily the full three-year term has been denied to Kapoor by the banking regulator after its asset quality reviews hinted at wrong classification of loans by the promoter, which otherwise should fall in the non-performing assets (NPAs) category. Similar cases have been observed at other lenders too namely Axis Bank, and on a similar stance its CEO Shikha Sharma is also denied term extension.
Yes Bank scrip performance so far since its inception in 2004
Yes Bank was co-founded in the year 2004 by Rana Kapoor and Late Ashok Kapur who met tragic death in Mumbai's terrorist attack. The bank part of the broader industry index, BSE Bankex, has scaled higher from Rs. 12.5 in June 2005 to Rs. 318.50, closing price in Wednesday's trading session. Data from Bloomberg underlines that the stock has generated CAGR of 28% by climbing 25.5 times in as many as 13 years.
What this RBI's move means for other lenders?
It is a wake up call for other new-age lenders as they might find it difficult to retain their promoters who have controlling stake at the bank in due course of time.
Kapoor's early exit: What it means for Yes bank shareholders?
On Friday, the news of denial of full three-year term extension by the RBI for Rana Kapoor could result in the scrip of Yes Bank falling as investors might offload their positions in the stock due to uncertain management. Indian stock, currency and debt markets are closed on Thursday on the occasion of Muharram.
Also, as per a leading business channel, capital raising plan of the bank will be deferrred which will put a question mark on the growth story of the bank.
Meanwhile, the news of Rana Kapoor's limited term has made several brokerages to change their rating from 'neutral' to 'sell' and also its target price has been lowered substantially.
As per the bank's exchange notification, board of the bank is slated to meet on Tuesday, September 25, 2018, to discuss further course of action.