YES Bank shares jump 21% in 5 days. What investors need to know
YES Bank shares have seen a strong rally over the past few days, rising more than 21% in just five trading sessions. On Thursday, the stock extended its gains after global rating agency Moody's called the proposed 20% stake acquisition by Japan's Sumitomo Mitsui Banking Corporation (SMBC) a "credit positive" move.WHY THIS DEAL MATTERSAccording to Moody's, the entry of SMBC brings YES Bank a long-term partner with solid financial strength and deep pockets. This can help support the bank's growth in the future.advertisementSMBC, a part of the Sumitomo Mitsui Financial Group (SMFG), plans to buy the 20% stake from State Bank of India (SBI) and seven private banks, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank. These banks had invested in YES Bank during its crisis period in March 2020.
SMBC will buy the shares at Rs 21.50 each, paying a total of Rs 13,482 crore.BOARDROOM CHANGES AND APPROVALSAs part of the agreement, SMBC can nominate two non-executive directors to YES Bank's board to help guide its strategy and governance. Also, SBI, will now be able to appoint just one non-executive, non-independent director, though the organisation presently has the right for two.The deal still needs the green light from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI). Although foreign ownership in Indian banks is usually capped at 15%, the RBI has made exceptions in special cases like this.WHAT'S HAPPENING WITH YES BANK 'S SHARE PRICE?advertisementOn Wednesday, YES Bank's share price rose by 2.65% to Rs 21.52, taking its market value close to Rs 68,000 crore. The stock had closed at Rs 20.96 the previous day and has been on a steady rise since the SMBC deal was announced.Further, a report by MoneyControl said that YES Bank has started the search for a new CEO. The board has hired global recruitment firm Egon Zehnder to help with the process.Meanwhile, despite the upbeat mood in the market, not all analysts are impressed. Some believe the stake sale is a positive sign, but it doesn't fix the deeper issues YES Bank is facing.A report by Kotak Institutional Equities said that while the buyer is strong, there's no clear change in the bank's business model. The brokerage kept a 'sell' rating on the stock and gave it a target price of Rs 17.Must Watch
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