The stock of Yes Bank has seen a collapse from levels of Rs 380 just a few days ago, to the current levels of Rs 324. This is despite reports on the re-appointment by RBI of Yes Bank MD and CEO Rana Kapoor till further notice.

The bank had sought a nod for a 3-year extension for Rana Kapoor, but the present nod was "re-appointment till further notice".

This has led a huge sell-off in the stock, as leadership worries weighed on sentiments.

Another hangover for the stock has been the divergences in the books. Gross NPAs in the past between those shown by Yes Bank and those measured by RBI have been varying.

However, our own belief is that the bank would be able to put both these issues behind. At some stage, Rana Kapoor will have to make way, just like Aditya Puri would for HDFC Bank next year. In fact, even recently HDFC Bank's Deputy Managing Director, Paresh Suthankar resigned.

On the other hand, the divergences are not a real cause for concern, at a time when some other larger private sector lenders are grappling with NPAs of as high as 5 and 6 per cent.

Cheap on the valuations front

Yes Bank is a stock that trades at 2.9 times, price to anticipated book value. Apart from this the stock is trading well under 15 times, expected EPS for 2018-19. This is cheap for a bank that is growing at 20 per cent, and has its NPAs under control.

If we value the bank at a p/e of 20 times, there is no reason why the bank's stock should not trade at Rs 440. The stock of Yes Bank is almost 15 per cent off from recent highs.

This is one of the major reasons to be recommending the stock, as valuations have turned attractive at the current price of Rs 323. If one can hold the stock for a period of 2-3 years, it should be able to deliver decent returns.

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