Yes Bank Ltd may be staring at a crisis of both trust and capital. While the bank’s stock price has been losing value every day, it has now emerged that some of its employees, including several senior management officials, have been rushing to sell their holdings in the private lender in bulk.
Over the past few weeks, employees have sold Yes Bank shares worth at least ₹38.45 crore, even as the bank’s top management has been attempting to quell investor concerns over its immediate capital needs.
Between 25 July and 27 September, Yes Bank’s co-founder Rana Kapoor’s promoter group companies, Morgan Credits Pvt. Ltd and Yes Capital (India) Pvt. Ltd, along with employees, including 10 senior Yes Bank officials, have off-loaded shares worth at least ₹730.97 crore in the market, according to regulatory filings.
Yes Bank employees who have sold shares since 25 July include Rajat Monga (group president and chief financial officer), Manish Vora (senior president), Amit Sureka (group president), Amit Kumar (group president), Ashish Agarwal (senior group president), Arun Agrawal (senior group president), Sumit Gupta (senior group president), Subramanian Ayyar (national head of rural and inclusive banking), Puneet Nagpal (national credit manager), Gopinath Koneti (vice president and head, south India).
Paras Desai, Swati Dakalia and Shabeena Chandiwala also sold their holdings.
During 18-20 September, Monga, whose name was once pitched by the board as the chief executive officer candidate to succeed Rana Kapoor, divested his entire stake for ₹8.22 crore. Ashish Agarwal sold almost his entire Yes Bank stake for ₹5.64 crore.
While the employees have been getting rid of their shareholdings, the bank has been busy raising capital to remain compliant with the Reserve Bank of India’s capital adequacy requirements.
Yes Bank had raised ₹1,930 crore in August through a qualified institutional placement, which effectively made the bank sell almost a 10% stake to a clutch of asset management companies.
The bank is in a desperate need to raise fresh capital to improve its common equity tier-1 (CET-1) ratio adequately above the statutory requirement of 7.375%. The bank had earlier announced a plan to raise up to $1 billion this fiscal year.
But, with the dramatic fall in the stock prices, raising such an amount will mean a significant stake sale to new potential shareholders, if any. Since 25 July, the bank’s stock has plunged more than 63% from ₹87.65 to ₹32 apiece on BSE.
The unrelenting fall in the stock price, and share sales by both promoters and employees, may worsen investor sentiment. On Tuesday, Yes Bank closed 22.8% lower at ₹32 on the BSE, eroding investor wealth by at least ₹2,500 crore.
On Monday, following a 34% fall in Indiabulls Housing Finance Ltd stock, Yes Bank shares tumbled 15%, even though the lender said in a statement, without naming Indiabulls, that its exposure to a large mortgage lender was fully secured. Documents from the Registrar of Companies showed that as of 31 December 2018, IndusInd Bank had a ₹500-crore term loan exposure to Indiabulls Housing, and Yes Bank had ₹250 crore cash credit exposure to the mortgage lender.
“Recent market rumours and reports appear to have generated a lot of speculation around Yes Bank…While this has impacted the share price adversely, the bank would like to state that its capital and liquidity positions are comfortably above the regulatory threshold…The Bank’s outstanding exposure to the housing finance/real estate conglomerate, which is in the news today, is totally secured and over the last six months there has been a reduction of approximately 30% in this exposure. The account is standard and current," said Yes Bank in a statement on Monday.