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Good News for Yes Bank Shareholders | Yadnya Investment Academy

Good News for Yes Bank Shareholders | Yadnya Investment Academy

Published on 16 June 2021

A piece of good news has come out for the old investors of Yes Bank Limited. Let’s find out what is the good news as we go ahead with the article.

Introduction:

This news is specifically for those shareholders of Yes Bank whose 75% of the capital is blocked in the stock during the restructuring done in the stock before the announcement of Follow on Public Offer (FPO) and not for new investors. The board of the Yes Bank has approved raising Rs. 10,000 Crore through debt (bonds/debentures) from the market on June 10, 2021.

Why does Yes Bank need to raise money through debt?

  • If we talk about last quarter, i.e., March 2021, new slippages worth Rs. 11,800 Crore has been created in the bank and for that, the bank has to do provisioning from the operating profits in the books.
  • And if the operating profit is not adequate to cover provisions, then the bank has to allocate the bank’s capital and if you don’t want to use capital, the bank has to raise funds from the market.
  • The current Capital Adequacy Ratio (CET-1) of the bank stands at 11.2% and according to BASEL III norms, Yes Bank has a Capital Adequacy Ratio of over 17%.
  • The Gross NPA ratio of the bank accounts to 15.41% and Net NPA accounts to 5.88%, which is not a good sign to go and invest in the bank.
  • The risk to reward ratio is still not looking favorable to the company because this time the bank is fighting for its survival.

Conclusion:

The two important factors: earnings visibility and growth in earnings are still not visible in the books of Yes Bank. The risk to reward ratio is also not looking favorable. But this announcement is positive for the old investors as it provides some hope for the survival of the company out of the bad times it is going through.

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