Shares of YES Bank plunged 28.71 per cent on Friday as investors and brokerages reacted to the RBI asking the private sector lender’s Managing Director and CEO Rana Kapoor to step down on January 31, 2019. Amidst domestic markets plunging, the YES Bank scrip fell to a 52-week low of ₹ 210.1 intraday before closing at ₹227.05 apiece on the BSE.
Most brokerages said that Kapoor’s exit could be a big challenge for YES Bank.
Macquarie called the rejection of a full-term to Kapoor a negative development for the private sector lender, while Citi had said it may have to defer its capital-raising plans.
“... the development clearly is a big setback for YES Bank. Since inception, Rana Kapoor has led the bank to become the fourth-largest private bank with an impressive growth and profitability performance. His unexpected departure as MD & CEO will raise concerns on the continuity of the strong past performance,” said a note by Motilal Oswal.
Similarly, JM Financial in a research note said the phase of leadership transition will result in a slowdown in the bank’s industry-leading growth, especially given that capital levels are low.
Edelweiss’ contrarian view
Edelweiss was more optimistic, though it noted that the development creates uncertainty with respect to the rationale for the RBI’s reluctance, new leadership and capital-raising plan. “We believe the bank has a strong foundation (with second line of business leaders in place), which the new leader would build on,” it said.
YES Bank shareholders had in June this year cleared a three-year term effective September 1, 2018, for Kapoor, who has been the lender’s chief since inception in 2004. However, just a day before his term was to end, the RBI gave approval for his re-appointment “till further order” creating uncertainty about the bank’s future leadership.
The board of directors of YES Bank is now meeting on Tuesday to discuss the future course of action.