Yes Bank’s investors lose ₹43,000 cr in 5 weeks on performance, CEO woes

MUMBAI: Investors in Yes Bank Ltd have lost ₹44,000 crore in five weeks as the bank’s shares fell following uncertainty around its performance and the appointment of its next chief executive officer (CEO), after the banking regulator rejected a board proposal to extend CEO Rana Kapoor’s tenure for three years.

The bank’s stock has plunged by 50%, eroding the country’s third-largest private lender’s market value by half from ₹91,000 crore on August 20. Shares of Yes Bank plunged 9.14% on Thursday to ₹203.20 on BSE. Year to date, the shares are down 34%.

“We await more clarity around the strategy after the new CEO appointment and capital-raising. As of now, we see divergent potential outcomes and hence prefer to stay on the sidelines,” Morgan Stanley analysts said in a September 25 note to clients.

Following the regulator’s rejection, Yes Bank, on September 25, requested the Reserve Bank of India (RBI) to extend Kapoor’s tenure till September 2019, but analysts say RBI is unlikely to agree. The board at its meeting on September 25 decided to set up a search committee to identify a successor to Kapoor. The committee will include three existing nomination and remuneration committee board members, along with two external experts.

“The board has not been able to give a clear picture on the succes- sion and further course for the bank. The timelines and uncertainty on approvals from RBI for both MD (managing director) & CEO (should be difficult) and EDS (executive directors) will keep near-term stock performance muted,” Prabhudas Lilladher analysts said in a September 26 note.

The board also decided to promote Rajat Monga and Pralay Mondal as executive directors, subject to approval from the central bank.

“We believe the dissent with other promoter group, may prevent this,” analysts from Deutsche Bank said in a September 26 note to its investors. “As per its Articles of association, both promoters have to jointly appoint any new directors on the board. In the past as well, the appointments of new EDS could not materialize due to differences in opinion between the promoter groups.”