How far can Yes Bank Stock go from here? (2024)

Many people believe that Yes Bank (NS:YESB) stock can easily reach Rs 50 or 100 from here.In recent past, YES BANK stock has traded around Rs 400. Business size of the bank is still big and a Big bank is trading in a penny price. Therefore, it is extremely cheap at current levels!

So, let's try to discover how much it is cheap and whether it can reach Rs 50 or more in near term or not?

Rapid Dilution of Ownership of Existing Shareholders in Yes BankIn 2020, Yes Bank executed 2 times fund raising activity. The scale of fundraising was not small! During 2020, Bank issued more than 2,000 crore new shares to the investors between range of Rs 10-13.

After all this fundraising at lower levels, Outstanding quantity of shares of Yes Bank now stood around 2500 crore in numer. Due to this, Market Capital of the bank has already reached Rs 30,000 crore mark when the share price is trading around just Rs 12! If it trades around Rs 100 per share, then bank would have nearly Rs 2,50,000 crore (2,500×100) as the market capital!

Comparison of Yes Bank Stock with Other BanksAs of now, Yes Bank has still not a consistent profitable business and is on the path of recovery. So many ratios might not indicate a clear picture during comparison. Therefore, Price to Sales ratio has been taken to compare Yes Bank with other Banks.Kotak Mahindra Bank (NS:KTKM) has among the best CASA ratios in the Industry and balance sheet is also quite strong. It trades at a very rich valuations in the stock market. When we compare Income (Topline) Multiple ratio of Kotak Bank and Yes Bank, Kotak Bank has an Price to Sales ratio of nearly 11. Same ratio of the Yes Bank lies around 1.6 . It indicates that if NPA ratios, CASA ratio, NIM and other important ratios of Yes Bank can reach to similar levels of Kotak Bank, its Price to Sales ratio might reach 11. On the back of this kind of Price to Sales ratio, share price of Yes Bank might reach around Rs 70 per share.

However, the profitability and efficiency differences between Kotak Mahindra Bank and Yes Bank are much higher. Yes Bank is far behind of Kotak Bank’s Balance sheet strength.

In Banks like Federal, Price to Sales ratio is around 1.26. Yes Bank has same ratio around 1.6. That is even higher from the Federal bank when the Balance sheet strength and financial ratios of Federal Bank (NS:FED) are much better than Yes Bank. In banks like IndusInd (NS:INBK), this ratio is around 2.7 .

No Promoter holding in YES BANK StockThere is no promoter left in the Yes Bank who could care about its ownership in bank, continuous dilution of existing shareholders ownership and steep rise in outstanding shares on the Balance Sheet. As of now, above things are not the main concerns for the Bank's current management. Currently, main aim of the management is to stabilise the operations and lower the risks in business.

Most of the New Shares were Issued between 10-13 range!Having a high pile of equity shares doesn’t affect only Market Capital, it also affects Supply of shares in the market! If Yes Bankstock starts trading around Rs 25-30 range, those who have been alloted shares between 10-13 range will be earning more than 100 percent return on their investment.

Though, it completely depends upon the strategy of investors. But basic rules says that when the share price would reach higher levels and there is no significant growth or improvement in the business, more investors may want to take exit as they would be earning good amount of money. So, at higher levels, stock is expected to see a huge level of supply if it moves right now. In second round of fund raising, shares worth more than Rs 10,000 crore were issued around Rs 12!

What these things tells?Depending upon the improvement in earnings and interest among investors, there is no doubt that Yes Bank stock has a potential to rise from here. But that potential is not high, atleast for the near term!

When we look at the charts and see where the Yes Bank stock has traded earlier in time (around 400 levels), stock may definitely seem a good option for turnaround bet in long term. But that is something need to be analysed along with other important facts.

Interestingly, when Yes Bank was trading around Rs 400 levels in 2018 and the business was going good, even at that time, Market Capital of the Bank was nearly Rs 80,000 crore. Now, if Yes Bank rises and hits Rs 32 levels, Market Capital would again become Rs 80,000 crore!

This interesting fact gives us an indication of quantity of new shares that have been issued rapidly after 2019 year to meet the necessary capital requirements and the type of equity dilution that has taken place in the Bank.

It was trading with Rs 80k Market Cap when there was no major issue in the bank and the NPA percentage was also not high. Today, Yes Bank is not in that condition! A lot of damage has caused in the Advances of Bank. Many Big advances have turned NPA. In last several quarters, bank has also witnessed a considerable decline in Income (Topline).

So, How Far Can Yes Bank Stock Reach?

Considering all above things, upside in Yes Bank seems quite limited. For the stock, to reach around Rs 50 or crossing this mark is very difficult now. With current financial position, if the Yes Bank is able to trade and sustain around Rs 20/25 range in the near future, then it will be a milestone for the stock.

If Yes Bank can achieve some solid growth in the business and important ratios sees a Big improvement from here, then the situation for the stock might improve by some percentage. Otherwise, investors who are holding Yes Bank shares of lower levels would make it difficult to let the share price rise BIG from here.