Delay in raising capital to hit Yes Bank growth: Siddharth Purohit, SMC Global
Appointment of RBI nominee on Yes Bank board may have been taken negatively by market, says Purohit
How are you absorbing the news on Yes Bank top level exits and R Gandhi coming on the board?
When there was a change in management at Yes Bank, the market reacted positively and subsequently there were also expectations that there will be no major divergence and market had rewarded this stock positively and we had seen a sharp up move.
But the current quarter result was certainly unexpected and the management had given a watch which is on a very high side. The appointment of Mr Gandhi on the board may be has been taken negatively by the market because it seems the regulator wants to have a close watch on the books. Probably that is what the market is reading.
Even if there is any lapse in terms of compliance or reporting, the new management has clearly signalled that they will try to clean up the balance sheet at the earliest but probably today the market has taken it as a kind of a knee-jerk reaction. The performance of the stock henceforth will be more driven by the operating performance rather than news.
When you talk about the operating performance, the watch list or the troubled account itself is something close to Rs 10,000 crore and the management has indicated it will take a while to clean that up, I believe the stock performance will reflect more of an operating performance rather than news going ahead and in the coming quarters, there could be some more trouble as far as provisioning is concerned.
If there is further delay in raising capital, then growth will be a big concern. Today, the market has reacted a little negatively to the appointment because there might be more scrutiny, but I do not think it would be the case, it would be more of an operating performance.
Brokerages are flagging off a lot of concerns, You are saying that today is a knee-jerk reaction but going forward, valuations will take a bit of a knock, the fundraising plans will be impacted, deposit inflows will be impacted going forward and basically this news of an additional director is a negative for Yes Bank. You do not believe any of these concerns are warranted?
Yes, these are certainly warranted, but what I am saying is that if you of talk growth slowing down, it already has happened in the Q4 results. Earlier, the bank was growing somewhere close to 40-50% and now that has come down substantially and they do not have much capital to grow at that rate.
So, certainly growth will take a hit. There is no doubt about it now. Now coming to troubled accounts, which might come because of the appointment of the RBI nominee, and those concerns are valid. Initially, whenever there was a watch list, that can go up subsequently and let us not forget that the dynamics of the credit industry has changed.
Every now and then, we are seeing more sectors coming into trouble and one cannot deny that fact. Your concerns are rightly valid and there is also a reason that much better balance sheet banks right now are available. So probably, investors would not be willing to wait for a long period and hold on to the stock.
Even large banks like SBI are reporting much better balance sheet right now; even ICICI for that matter. So, money could flow more from this bank to more stronger balance-sheet banks and that is what could be happening. So, the repairment of balance sheet could get further delayed if more accounts faced trouble.
The market is trying to read between the lines that the appointment of additional director by the regulator might bring in more scrutiny or more reading into the books and if at all there is more trouble, than accordingly the market is taking it negatively.
I also do not have a very positive view on the stock despite the correction, but my view is that may be investors would try to shift to much better balance sheet banks than holding on to Yes Bank.