As the three-year shareholder lock-in ends on Monday, YES Bank will be in focus as it faces the final test of whether its reconstruction scheme has lived up to expectations.
A consortium of 10 institutional investors, led by State Bank of India, had infused ₹10,000 crore in the private sector lender in March 2020 as part of the YES Bank Reconstruction Scheme 2020, undertaken to bail out the lender.
As part of the scheme, Reserve Bank of India had mandated a three-year lock-in on 75 per cent of the shares acquired, whereas shares held by individual investors and mutual funds were also put under the lock-in.
As of December 2022, SBI held the highest stake at 26.1 per cent, followed by Life Insurance Corporation of India at 4.3 per cent. Housing Development Finance Corporation (HDFC) holds 3.5 per cent stake, ICICI Bank holds 2.6 per cent, Axis Bank 1.6 per cent, Kotak Mahindra Bank 1.3 per cent and IDFC First Bank another 1.0 per cent. The equity has grown by over 60 per cent in value since acquired in March 2020.
While most banks have offloaded the shares that were not under lock-in, SBI was required to hold 26 per cent stake till March 2023. In the earnings call post the Q3 FY23 results, SBI Chairman Dinesh Kumar Khara had said that the SBI board has considered its strategy in terms of paring its stake in YES Bank below 26 per cent.
On the other hand, individual investors are estimated to hold up to 135 crore shares and exchange-traded funds (ETFs) another 6.7 crore.
Despite a sustained improvement in the bank’s financials since the 2020 rescue plan, these investors might look to partly or entirely off-load their shareholding on Monday, once the lock-in period ends, according to market participants.
Even as the free float of YES Bank shares is expected to increase, the extent and intensity of the sell-off will be the true gauge of investor and shareholder faith in the institution since the reconstruction was undertaken.
Some selling pressure is expected in the coming weeks as the stock seems to be overvalued, especially given the ongoing legal battle with respect to writing-off the bank’s additional tier-1 (AT-1) bonds at the time of reconstruction, they added.
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