FII stake of Yes Bank surges around 11% in Q3: Buy, sell or hold?

A large cap private firm with a market valuation of Rs. 47,876.07 Cr. is Yes Bank. The bank recorded incredible foreign institutional investor (FII) holdings in Q3, in addition to being ranked 5th among 90 retail & specialised banks in emerging markets by Moody's ESG Solutions in the quarter ended December 2022.

Shareholding pattern of Yes Bank

The overall FII holding at Yes Bank grew by 11.09% to 23.24% at the end of December 2022 from 12.15% as of September, according to data from Trendlyne. If compared to the FII holding of 23.24% in Q3FY23, this is the highest when compared to the same quarter of FY22 and FY21 with stakes of 8.17% and 15.01% respectively. In the financial year ended March 2022, FII stake of Yes Bank was 10.97%. According to Trendlyne, the number of FII/FPI investors climbed from 615 to 629 in the December 2022 quarter, while institutional investors lifted their holdings from 56.32% to 61.66%.

Foreign Direct Investments by Ca Basque Investments acquiring a stake of 6.43% or with a shareholding of 1,848,077,851 and Verventa Holdings Ltd with a stake of 6.43% or a holding of 1,848,077,851 shares, made up Yes Bank's total FIIs stake count go up to 23.24% in Q3. However, the shareholding of Domestic Institutional Investors (DIIs) and the public have fallen in Q3, the DII stake reached 38.19% in Q3FY23 compared to 43.91% in Q2FY23, whereas public stake of Yes Bank stood at 38.54% in December 2022 compared to 43.94% in the quarter ended September.

Q3FY23 highlights

The S&P Global Corporate Sustainability Assessment (CSA) 2022 granted YES Bank the highest grade among Indian banks, and the bank powered virtually every third digital transaction carried out in India in Q3FY23. The bank was also chosen as one of the first four pilot banks for Digital Rupee (e), the Central Bank Digital Currency (CBDC) introduced by RBI, and given an "A-" rating by the Carbon Disclosure Project (CDP) for 2022 Climate Change Disclosures. This makes the bank the highest-rated Indian Bank for Climate Disclosure. 

At the 2022 Global Transaction Banking Awards, which were organised by The Digital Banker, Yes Bank received awards in the categories of CMS, Payments & Collections, Trade Finance, and Transaction Banking. Yes Bank reported NII at INR 1,971 Crs for Q3FY23, growing 11.7% year on year, and NIM at 2.5%, growing approximately 10 bps. Operating expenses for the bank were INR 2,200 Cr during the third quarter of FY23, up 24.5% YoY, while non-interest income was INR 1,143 Cr, up 55.8% YoY. 

Yes Bank said that its operating profit for Q3FY23 was INR 914 Crs, rising 25.0% year on year and that its cost-to-income ratio increased to 70.7% from 72.8% in Q2FY23. For Q3FY23, Yes Bank posted a net profit of INR 52 Crs. Yes Bank said its net advances stood at INR 194,573 Crs, up 10.4% Y-o-Y and the total balance sheet grew 12.9% Y-o-Y. Total deposits reached INR 213,608 Crs, a growth of 15.9% YoY, while the CASA ratio was 29.9%, up from 31.0% in Q2FY23 and 30.4% in Q3FY22. The bank's NNPA ratio was 1.0%, down from 3.6% in Q2FY23 and 5.3% in Q3FY22, while its GNPA ratio reached 2.0% in Q3FY23, up from 12.9% in Q2FY23 and 14.7% in Q3FY22.

What should investors do?

A non-binding agreement for a strategic collaboration regarding the sale of identified bad loans of up to Rs480 billion as of FY22 has been signed between the bank and JC Flowers ARC on July 13, 22. Not only that, but YES Bank also completed an ₹89 billion capital raise in Q3 FY23 from Carlyle and Advent, receiving ₹50.93 billion in equity and ₹9.5 billion in warrants. 

The research analysts of ICICI Securities said in a note that “Post the sale of stressed pool to JC Flowers ARC, GNPAs contracted to 2% and net NPAs to 1% (as guided). Bank now carries net SRs of Rs37.7bn and valuation/ageing provisions on the same, if not offset by recoveries and resolutions, may keep earnings volatile. It has concluded capital raise of Rs89bn in Q3FY23 from Carlyle and Advent and has received Rs50.93bn towards equity and Rs9.5bn towards warrants.”

They further claimed that “Nonetheless, we remain cognisant of the risks arising from the delay in resolution of stressed pool, incremental ageing-related provisions, modest RoE profile during transition, decision to write-down AT-1 bonds being challenged in Court and stock supply overhang post the expiry of lock-in shares in Mar’23. Maintain HOLD with a revised target price of ₹19.3 (earlier Rs15.7).”

The shares of Yes Bank closed today on the NSE at ₹16.60 apiece, up by 0.91% from the previous close of ₹16.45.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.