YES Bank share price falls over 17% after CARE Ratings downgrades NCDs of promoter Morgan Credits

YES Bank share price plunged to a fresh 52-week low today after CARE Ratings downgraded ratings of non-convertible debentures (NCDs) of Rana Kapoor-owned Morgan Credits Private Limited, which is also a promoter entity of the private sector lender. YES Bank share price lost 17% intra day to Rs 53.05 compared to the previous close of Rs 64.10 on BSE. YES  Bank stock has been losing for the last 4 days and fallen 19.24% during the period. 

YES Bank is trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The large cap stock was the top loser on both Sensex and Nifty.  On Nifty, the stock fell 17.31% to Rs 53. The stock closed 15.52% lower at Rs 54.15 on BSE and 15.76% lower at Rs 54 on BSE.

CARE Ratings has lowered the rating of non-convertible debentures (NCDs) issued by the lender worth Rs 800 crore to BBB- from A-.

CARE said the revision in rating takes into account the fall in the stock price of the underlying shares of YES Bank which are held by Morgan Credit Private Limited (MCPL) or promoters and their relatives. The revised rating considers the moderation in cover due to fall in the stock price of the underlying shares of YES Bank, it added.

Also read: YES Bank close to secure a deal to sell minority stake to global tech firm: Ravneet Gill

"The rating is based on the internal credit enhancement in the form of pledge of unencumbered listed shares of YES Bank held by MCPL or its promoters and their relatives in favour of the Debenture Trustee," CARE Ratings said.

Also read: Rana Kapoor, other promoters stare at losing YES Bank control post equity dilution

As of March 31, 2019, MCPL held 3.03 per cent stake in YES Bank. MCPL with its associate entities held 10.62 per cent stake in YES Bank. In August, the equity stake of Rana Kapoor and his late brother-in-law Ashok Kapur, who founded YES Bank, and that of two affiliates - YES Capital and Morgan Credit - had gone below the threshold of 10 per cent, which guaranteed them directorship rights.

Former MD & CEO Rana Kapoor and his affiliates held 9.64 per cent stake in the bank by August this year. According to the rating firm, the rating is constrained by limited income since MCPL is an investment company with primary source of income being dividend from YES Bank. Currently, the dividend from YES Bank is MCPL's primary source of income.

Hence, income could fluctuate in case of any deterioration in the performance of YES Bank, it said. In the past four years, MCPL has received Rs 54.80 crore ( Rs 16.86 crore in FY18, Rs 14.05 crore in FY17, Rs 12.65 crore in FY16 and Rs 11.24 crore in FY15) as dividend income and in the current FY19, MCPL has received Rs 18.96 crore as dividend from YES Bank.

 Edited by Aseem Thapliyal