Yes Bank, India's 4th largest lender in 2018 faced its most turbulent times in 2019 when a big question was raised on its loan book.
Facts
March 31, 2018: Net Profit of 1179.44 crore.
March 31, 2019: Net Loss of 1506.60 crore.
When 2018-19 Annual report was out, the stock price fell drastically.
The figures left everyone startled. What went wrong ? How did things turn upside down within a year ? Was it an impact of a single wrong decision or an outcome of wrong doings piling up since long ?
Analysis
There was a sudden rise of 35% in loan portfolio when the industry average was 9%.
Since 2014, Yes Bank was financing corporates who failed miserably that led to rise in NPAs. Stressed corporates like Anil Ambani Group, Essel Group, DHFL, IL&FS, and Vodafone formed the major proportion of the NPA portfolio.
These figures led to downfall in investor trust, thereby leading to fall in stock price from 266.85 on Apr 6, 2019 to 12.50 on Oct 29, 2020.
Revival strategy
1. Yes Bank's new Festive Campaign ‘KHUSHIYON KI KAREIN ZIMMEDARI SE TAYYARI’
YES Bank is offering MSME Business Loans, Digital Auto Loans and Digital Personal Loans. This move has been targeted for retail and small scale consumers, while keeping in mind the existing challenges during pandemic. It offers hassle-free documentation process while taking a car loan or a personal loan.
2. Partnership with PayTag to provide FastTag for State Transport Corporations
This move by YES Bank had made sure customers can pay toll charges in a touchless fashion without slowing their vehicles. A separate virtual account is setup for ease of calculations.
Clearly the bank is completely focussing on retail consumers and MSME sectors as compared to large corporates. The good part is that most of the bank initiatives are backed by strong collaterals.
3. SBI bought stakes of YES Bank
India's largest bank, SBI invested in YES Bank for enabling its revival journey.
Generating profit is the biggest challenge YES bank has to solve in coming times.
To solve that, YES bank needs to use its biggest tool, i.e. technology. The question is, "How effectively will that phase be ?"
Will YES Bank's stock price revive any time sooner ?
Stock prices movement depends on the trust of investors. Investors trust when the actions and decisions taken by the company are in the right direction. At present, the loan book and the balance sheet do not showcase values that can be turned upside down in a short span. Having said that, trust has a peculiar way of coming when some good news is seemingly possible in a certain timeframe.
So the revival is certain considering the current leadership and the moves that are being taken by YES Bank. But the timeframe is all dependent on the response. So as an investor, if you are planning for a long term bet, YES Bank can certainly be a good bet.
Should an investor buy now or not ?
Let us see the recent movement of price in past 6 months.
Trends suggest price is dipping, and it might dip further below. Considering the price coming down to single digit bracket, the best option for a patient investor is to buy and wait till the change starts reflecting.
The best date for this check would be March 31st, 2021.
The beauty of low price stocks is that there is a possibility of profit being less, but there is a definite certainty of losses being less as well.
Hence, if you haven't yet, buy your 1st YES Bank share and see how the curves are moving. May be then you can better plan the next steps.
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