Homefinance News

    SBI’s fund infusion in YES Bank positive for investors, will lift overhang from markets, say analysts

    SBI’s fund infusion in YES Bank positive for investors, will lift overhang from markets, say analysts

    SBI’s fund infusion in YES Bank positive for investors, will lift overhang from markets, say analysts
    Profile image

    By Ankit Gohel   IST (Updated)

    Mini

    Country’s largest lender State Bank of India’s fund infusion in YES Bank will be a much-needed and positive development for the small investors and lift overhang from the markets that was caused by the private lender's inability to raise funds, said analysts.

    Country’s largest lender State Bank of India’s fund infusion in YES Bank will be a much-needed and positive development for the small investors and lift overhang from the markets that was caused by the private lender's inability to raise funds, said analysts.
    According to a Bloomberg report, the government is set to approve a plan for SBI to buy stakes in YES Bank. SBI will, most probably, be asked to form a consortium for this purpose.
    Though the analysts were positive on the stake purchase by SBI, they have maintained reservations on a total consolidation or merger between the two banks.
    “The stake purchase by SBI will be a good step for YES Bank, as the private lender needs capital. It is important for a critical player to step in that will bring systemic stability into YES Bank,” said Sudip Bandyopadhyay, director at Inditrade Capital.
    At the current market price, 10 percent stake will be valued at Rs 800 crore, which is very small amount for SBI, just 0.3 percent of its marketcap.
    Hence, a strategic stake acquisition will not impact much on the existing shareholders of the SBI, Bandyopadhyay explained.
    Vouching similar views, Lalitabh Shrivastawa, AVP - Research, Sharekhan, said: “If there is a consortium-based financial investment in YES Bank then the overall quantum of exposure for SBI would be much smaller and it will actually not be so much of a concern for an investor.”
    SBI and other PSU banks will not need to pay more than Re 1 for YES Bank share as the private lender's net worth is zero and there is lack of clarity on the bank's deposit franchise due to the solvency issues, Macquarie Capital Securities said in a note.
    “YES Bank has a net worth of nearly Rs 25,000 crore. Its below investment grade book (BB&Below) is at around Rs 30,000 crore and BBB book is at around Rs 50,000 crore. If we assume the substantial proportion of BB&below book is wiped off and say 10-15 percent of BBB book is to be written off, it implies the current net worth of the bank is zero (after factoring in 25 percent tax benefits). So ideally and theoretically speaking, SBI and other PSU banks need to buy the bank at Re 1,” Macquarie said in a note.
    Further, the global brokerage said that it is unsure of YES Bank’s quality of liabilities franchise, which perhaps could further have got affected due to current solvency issues.
    Consolidation would have brought a lot of integration challenges as well as legal challenges, Macquarie added.
    Abhimanyu Sofat, head of research, IIFL Securities, said: "We recommend caution to retail investors. The critical thing to watch would be percentage dilution of equity taking into consideration the conversion of existing bonds issued by Yes Bank into equity.”
    However, YES Bank clarified to the exchanges that it had not received any such communication from the RBI or any other the government or regulatory authorities or from the SBI on any such decision.
    Meanwhile, SBI has also issued a statement saying that it will abide by timelines in disclosing the developments, if any.
    Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
    arrow down

      Most Read

      Market Movers

      View All
      CompanyPriceChng%Chng