Shares of Yes Bank fell by nearly 30 percent in Friday's trade after the Reserve Bank of India cut short the lender's managing director and chief executive officer Rana Kapoor's tenure to January 31, 2019.
At 9.31 am, Yes Bank shares traded at Rs 251.70, recovering from the day's low, but still down by 21.1 percent. More than 78 million shares changed hands in early trade, over 3.5 times the 30-day average of 22.3 million shares a day.
Most brokerage houses cut the target price for the stock after the announcement on Wednesday. Here's what they have to say:
Macquarie's current call on the stock is 'outperform', with a target price of Rs 425 per share.
According to the brokerage, Yes Bank shares will be under selling pressure on account of the uncertainty on who his replacement will be, whether the RBI will allow Kapoor to be a part of the bank board, among others.
The broker said that Rajat Monga, currently the senior group president of financial markets at Yes Bank, is expected to be the frontrunner for Kapoor's replacement. Pralay Mondal, business head - retail and business banking at Yes Bank, may also be considered for the post, according to Macquarie.
Edelweiss Securities cut the stock's price target to Rs 375 per share from Rs 423 but maintained a 'buy' rating on the stock. The brokerage remains positive that the bank board has a solid management but finding a leader who will be able to maintain the reputation of the bank will be the bank's key challenges ahead.
Jefferies cut the stock's target from Rs 445 to Rs 365 per share and maintained a 'buy' on the stock.The broker said that questions on the RBI decision remain. Since the central bank did not mention whether Kapoor can be a part of the board or not, the broker said that this will be one of the crucial decisions for the stock.
Morgan Stanley maintained an 'equal weight' rating on the stock with a target price of Rs 372 per share. The brokerage pointed there will not be challenges for the stock on Kapoor's development, but the bank may face potential challenges in its profitability due to the rising policy rates.
Deutsche Bank maintained a 'buy' rating on the stock and cut the stock's target price to Rs 350 per share from Rs 440.
The brokerage said that the decision of the central bank is a disappointment in the near-term and reasoned that Kapoor may not have got the extension in his term due to bank's large divergences in the last few years. The broker expects the stock to move in a prolonged uncertain phase in the market on Friday.
Nomura maintained a 'neutral' stance on the stock and cut the target price to Rs 345 per share from Rs 500.
The unknown reason for not allowing Kapoor's term extension remains a worry for the investors, the broker said, adding that this development is likely to affect the earnings and growth trajectory of the bank.
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