Why YES Bank share price rose nearly 9% in early trade today

YES  Bank share price rose in early trade today after the lender said that its board would meet on November 29 to discuss and consider raising of funds by issue of equity or equity linked securities through permissible modes. YES Bank share was the top Sensex gainer with the mid cap stock rising up to 8.85% to Rs 68.85 compared to the previous close of Rs 63.40 on BSE. 

On Nifty, the stock was trading 5.30% higher at Rs 66.50. It rose up to 9.26% to Rs 69 in early trade.

Share price of YES  Bank  opened 7.73% higher at Rs 68.30 on BSE. It has gained after two days of fall. However, the stock has lost 63.77% during last one year and fallen 63.49% since the beginning of this year. It has gained 21% in last one month.

At the current market price, YES Bank stock is the least expensive when compared with its private peers.  Its price to book value (PB)  ratio stands at 0.61 against 4.51 for HDFC Bank, 6.72 for Kotak Mahindra Bank and 2.96 for ICICI Bank. A PB ratio of less than 1 indicates the stock trades at less than the value of its assets.

The lender on Tuesday said, "Notice is hereby given that a meeting of the Board of Directors of YES Bank Limited ('the Bank') will be held on Friday, November 29, 2019 at Mumbai, inter alia, to discuss and consider raising of funds by issue of equity/ equity linked securities through permissible modes, subject to necessary shareholders/ regulatory approvals, as applicable."

The private sector bank has been scouting for funds to improve its asset quality.

Also read: Yes Bank stock rises 6% in intraday trade; Nifty Bank hits record high

On November 1, the bank said a global entity has made a binding offer to invest $1.2 billion (about Rs 8,462 crore)  through an issue of new shares.

In the past, the bank has disclosed several other options from which it can raise capital. The bank has claimed that it was in discussions with potential suitors who are willing to pump in up to $3 billion (around Rs 21,156 crore) collectively.

The lender said it may raise the money either through the North American family office, which has made a binding offer to pump $1.2 billion, or through a combination of investors.

The other investors include private equity funds, domestic mutual funds, domestic financial investors and also domestic family offices.

On November 29, the board committee would consider both the binding proposal and also other fund raising options.

Also read: YES Bank shares fall over 1% on Sensex exclusion

The panel will disclose the names of the chosen investors after discussions with the RBI, YES Bank MD and CEO Ravneet Gill said, stressing that the investment is "financial" alone and not strategic in nature.

A $1.2 billion equity infusion will lead to an expansion of the common equity tier-I reserves by 2.60 per cent and give the new shareholder(s) a 33 per cent stake in the bank, Gill said, adding that correspondingly, the existing investors' holding will get diluted by one-third.

Gill said the voting rights of the investor(s) will be capped at 15 per cent, and it will not be difficult to convince the RBI to allow an investor with such a big holding in the bank.

By Aseem Thapliyal