NEW DELHI: The 29% drop in
Yes Bank's stock price on Friday, among other things, shows how much investors were betting on its managing director and CEO
Rana Kapoor to continue at the helm for at least three more years.
The bank on Wednesday evening had informed the stock exchanges that RBI had approved Kapoor's extension only until January 31, 2019, and not till August 31, 2022 as sought by the bank's board.
The bank's stock closed at its two-year low price of Rs 227 on Friday. "Rana Kapoor was credited with building up the bank from the beginning and his presence was felt essential to raise further capital for growth," said Suresh Ganapathy, head of financial services research at Macquarie. He added that the "bank's fundamentals are unlikely to change due to an individual".
Part of the surprise over Kapoor's removal comes from the fact that prima facie the bank's performance had improved substantially in the past three years. Profits were up 66% and gross non-performing asset ratiohad fallen from 5.04% to 1.28%.
An August 8 report of the RBI had noted Yes Bank's performance was better than most private sector banks. The division had recommended re-appointment of Kapoor as MD & CEO for three years starting September 1, 2019. Industry insiders believe vested interests could have played a role in Kapoor not getting an extension.
In an earlier report on Yes Bank, Macquarie had said: "Markets hate uncertainty... There will be lot of speculation about why the (RBI) rejection happened."
RBI is believed to have asked the bank for names for Kapoor's successor.
Sources in the banking industry say that the Yes Bank board, while suggesting successor's names, may also ask the banking regulator to reconsider Kapoor's re-appointment for a three-year term. The bank's board meeting is scheduled for September 25.
