Yes Bank shares have been all over the place in the last few months. Volatility has increased even more in the last 2-days, with the stock falling 7% per cent on Tuesday and there is fresh selling on Wednesday as well, dragging the stock 13% lower. In 2-days the stock has lost over 20 percent
What's hitting the stock?
First, there were reports that ace investor Rakesh Jhunjhunwala is unlikely to invest in the private sector lender. This saw a solid selling in the shares of Yes Bank on Tuesday.
Secondly, the board of directors met on Tuesday to consider the binding offer of US$1.2 Billion submitted by Erwin Singh Braich/SPGP Holdings. It has not yet accepted the offer and the same continues to be under discussion.
Investors were expecting some very high profile set of investors and the quality of investors that are willing to invest in Yes Bank has left investors worried.
Unless there is investment in the bank by some marquee set of investors, the shares of Yes Bank would continue to come under pressure. Another big overhang for the stock is whether the RBI would approve the investment. There are some worries on this count as well for investors.
Also, each time the stock price crashes, new investors are likely to invest at lower levels, which means a further dilution of equity.
Urgent need of fresh capital
Given the non performing woes at Yes Bank, it is in need to capital to fund growth. There is no doubt that the intention of the management led by CEO Ravneet Gill has been genuine to get growth at the bank, back again, the same is likely to take many quarters. The bank is looking at raising upto $2 billion and at the moment it is looking a very painstaking process.
In the meantime, we never know if a large size private sector bank, may just go ahead and takeover Yes Bank. Remember, Yes Bank has a solid retail franchisee and also a good brand name.