Yes Bank’s shares have been under selling pressure, after they reached their 52-week high of ₹ 24.75 apiece on the National Stock Exchange (NSE) in December 2022. After ascending to their high, the shares of Yes Bank declined by 33.94% to their current level of ₹ 16.35 apiece.
Meanwhile, Foreign Institutional Investors (FIIs) have increased their stake in the company from 12.15% in the quarter ended September 30, 2022 to 23.24% in the quarter ended December 31, 2022. Many shareholders are waiting for the bank’s share price to increase in the near term, however, they have a looming fear next month.
After the State Bank of India (SBI) took over the management of Yes Bank, private banks like Axis Bank, HDFC Bank, ICICI Bank and IDFC First Bank bought shares in it. These shares were bought at ₹ 10 apiece and despite the dip in Yes Bank’s price, these banks are sitting at a profit of 63.5%.
Under certain circumstances, shareholders have a lock in period during which they cannot sell their shares. The three year lock-in period of these private investors in Yes Bank is about to come to an end next-month. There is a high probability that these banks might sell their stake in Yes Bank.
According to market experts, they might wait for the quarterly results of Yes Bank (Q4FY23), as the bank’s margins have been improving after SBI’s takeover. Moreover, the Finance Ministry’s new mechanism to handle bad loans is also going to help the private lender in the medium to long term.
When we see the shareholding pattern of Yes Bank, Domestic Institutional Investors (DIIs) other than the above-mentioned banks have reduced their stake from 45.56% to 38.42% in the past five quarters. If the above banks follow the same pattern after the lock-in period for their shares comes to an end, there might be significant selling in the stock, pushing its price downward.
Yes Bank is a mid-cap company with a market capitalization of ₹ 46,439 crores. It has a low return on equity of 3.18%. The bank’s shares were trading at a price-to-earnings ratio of 45.61, which is significantly higher than the industry P/E of 9.06, indicating that its shares might be overvalued as compared to its peers.
Written by Simran Bafna
Disclaimer
The content in this news article is not investment advice. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
