Yes Bank shares closed 5% lower on Tuesday at Rs 103.95 apiece, hitting a 5-year low, on investor concerns over the bank’s exposure to debt-laden companies. In intraday trade, the Yes Bank stock touched a low of Rs 101.40, a level last seen in May 2014.
The stock has lost over 70% of its value in the last one year, with major portion of the correction happening after former chairman Rana Kapoor was asked to step down by the Reserve Bank of India (RBI) earlier this year.
IIFL, in its report dated 18 June, said the Indian banking system is now facing an influx of several individual exposures, such as Dewan Houding Finance Corp. Ltd (DHFL), the Reliance ADAG Group, IL&FS, Jet Airways and the Essel Group, which may require material haircuts. According to the report, Yes Bank has debt exposure of Rs 7,590 crore to debt-laden companies including Rs 3,700 crore in DHFL as of March 2019 and Rs 550 crore in Jet Airways.
Yes Bank had reported gross non-performing assets (NPAs) at 3.22% during the March 2019 quarter against 2.11% in the preceding quarter. Its CEO Ravneet Gill assured investors last week that the worst is over for the bank and there are unlikely to be any further nasty surprises due to higher bad loans or slippages from its watchlist.
In interviews given to various media houses, Gill said the bank has already come clean on potential bad loans and provided for contingent liabilities. Along with Yes Bank, shares of firms that have high debt on their books also witnessed major selloff by investors.
“Signs of capitulation in the Indian markets are visible today with across the board selling in high debt balance sheets. Today's case is similar to traders in derivative segments wherein huge leverage hampers trading profits. Similarly, leveraged corporates are facing the same reality. No one makes money under a mountain of debt,” Umesh Mehta, Head of Research, Samco Securities told Moneycontrol.
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