YES BANK – SELLING TRUST AT A DISCOUNT

Gordon Gekko says very famously in the iconic film Wall Street, “ It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.”

Isn’t that what we are seeing in Yes Bank? By getting the likes of SBI, ICICI, HDFC and Kotak to invest, the perception being created is that the Govt is there like LIC – Zindagi ke saath bhi, zindagi ke baad bhi. And yes, even LIC is likely to be take a swig at Yes Bank.

The rescue plan is killing so many birds with one stone – firstly, the perception that banks will not go down as long as the Govt exists. Then the perception that your money is safe. At this of time, more than the rescue act, RBI and the Govt need to work on assuring the people that their money will not be eaten away by greedy and ambitious people like Rana Kapoor. We have forgotten Chanda Kocchar too. We are so eager to just move on, we forget and forgive and move on – and the same fraud, in different form and versions comes to bite us. Years and years, we are still clearing up NPAs. Banks are being recapitalized to be used to bailout greedy people like these and it is we, the tax payer who is paying for all this isn’t it? So, we first lose our money and faith in the bank and then we ourselves pay to restore confidence and get our own money back? Gekko is right – money is transferred from one perception to the other.

RBI is playing the big knight in the shinning armour now. Why this need for rescue itself if it had acted earlier? There were more than enough warning bells going off but RBI was busy dealing with its own politics then.

And seriously, what is the role of these so-called Board of Directors? When Rana Kapoor was siphoning off funds, sanctioning loans like there was no tomorrow, treating Yes Bank like his own piggy bank, what were they doing? And forget the auditors – they time and again fail and we keep on asking the same questions. It’s become so tiresome; this entire questioning and gall of the spineless promoters is routine and that is the scary part.

The market is unconcerned about these perceptions – today the stock is attractive and so it’s the top gainer.

As per the rescue plan, SBI is taking 49% stake and will be putting in a total of Rs. 6050 crore – it is getting shares of Yes Bank at Rs.10 per share. ICICI Bank and HDFC are investing Rs.1000 crore each. Axis Bank is putting in Rs.600 crore and Kotak Bank Rs.500 crore. Even the relatively smaller banks are pooling in – Bandhan Bank Rs.300 crore and Federal Bank also Rs.300 crore.

So all these banks come together to correct the mess which Rana Kapoor and his Board made. Someone rightly said, “Robbing banks is for amateurs; owning a bank is how you make real money!”

The Govt has got in these banks for bailout but will the depositors stcok around?

Insight into rescue plan by Mr.SP Tulsian:

Frontline banks got the Yes Bank at Rs.10 as against ruling price now of Rs.36. Technically, they can free their entire investment  by selling 25% free shares, which will happen in next six months.

Scheme is very good for banking sector and Yes Bank but not for shareholders. It is another NCLT kind of investment. Share should fall to Rs.15. Real gainers will be investing banks having got shares at Rs.10/share at pre money valuation of Rs.2500 crore for Yes Bank.

There is no lock-in for existing shareholders, if they hold less than 100 shares.

As per Clause 3, para 8 of the scheme, lock-in of 3 years will apply to all existing shareholders, if they hold more than 100 shares. So, an existing shareholder holding 1000 shares, will have a lock-in for 750 shares for 3 years.