Yes Bank shares climb on fundraising announcement. What should investors do?
Premium- ICICI Securities has a hold rating on Yes Bank shares and has raised its target price
Shares of Yes Bank climbed nearly 6% on the BSE in Monday's early trade after the announcement that the lender will sell up to 10% stake to US private equity (PE) firms Carlyle Group Inc and Advent International for $1.1 billion.
“Positivity is setting in for YES Bank with the proposed equity capital raise. This confidence as well as growth capital will boost CET-1 by 3.84% to almost 15.7%. Also, since it is being raised close to the book value, it will not be book value dilutive," said brokerage ICICI Securities.
“With benefits of likely credit rating upgrade and optimal capital utilisation with improved growth profile, it is unlikely to be earnings or RoE dilutive. An incremental trigger will be transfer of bulk of the bank’s stress pool to ARC having signed a binding term sheet with JC Flowers ARC. Management expects GNPAs to reduce by ₹260 bn and net NPAs by ₹83 bn as and when the deal is executed (anticipated by Q3FY23)," the note stated.
ICICI Securities has a hold rating on Yes Bank shares with a target price revised upwards to ₹15.7 from ₹14 apiece as the brokerage sees a turnaround in relevant operating metrics and improved confidence in the stability of the franchise.
After trials and tribulations on fundraising that lasted well over three years, Yes Bank on Friday announced that Carlyle and Advent International will be investing $1.115 billion (around ₹8,900 crore). Both the global PE funds will be acquiring a 10% stake each in the private sector lender, which had to be bailed out in a RBI and government-led reconstruction scheme for want of capital buffers and after the then management failed to sell the bank's story to investors.
"Yes Bank share is rallying since the bank announced its plan of fundraising through rights issue, preferential allotment etc. The bank has also posted better-than-expected earnings figures. However, limited upside is suggestive on technical setup with a target of ₹17 to ₹18 apiece levels in near term," said Ravi Singh, Vice President and Head of Research at Share India.
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