Shares of private sector lender Yes Bank plunged on Wednesday afternoon, after global firm Morgan Stanley slashed its share price target.
Shares of private sector lender Yes Bank plunged on Wednesday afternoon, after global firm Morgan Stanley slashed its share price target. Yes Bank shares lost more than 2.5% to hit the day’s low at Rs 57.30 on BSE. Morgan Stanley said that the volatility in the stock price reflects asset quality concerns, lack of clarity on timing and price of further fund raising. Morgan Stanley has a stock price target of Rs 55 on the shares. Previously, the firm had a share price target of Rs 95 on the stock. Despite the recent plunge in the stock, the global firm finds that the risk-reward is still unfavourable. The stock has remained under pressure in recent times, especially after rating Moody’s Investors Service downgraded the lender’s long-term foreign-currency issuer rating, terming the bank’s outlook as negative.
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“The downgrade of Yes Bank’s ratings takes into account lower than-expected amount of capital raised by the bank, and the risk that the substantial decline in the bank’s share price will challenge its ability to raise sufficient capital to maintain the rating at its previous level,” Moody’s said in a statement last week.
Apart from Moody’s downgrade, Yes Bank’s 12% stake in fraud-hit CG Power has also weighed on the stock. “The total liabilities of company and the group may have been potentially understated by about Rs 1,053.54 crore and Rs 1,608.17 crore, respectively, as on 31 March 2018,” CG Power said in a statement to the exchanges. As at the end of June 2019, Yes Bank had a 12.8% stake in CG Power. CG Power shares are trading 5% higher at Rs 11.46 on BSE.
Among other irregularities, CG Power said that certain assets of the firm were purportedly provided as collateral without due authority; and the Company was made a co-borrower and/or guarantor for enabling ostensibly unrelated third parties to obtain loans without due authorisation. “The moneys so obtained were immediately and without due authorisation routed out of the Company, either by itself or from its subsidiaries or ostensibly unrelated parties to certain related parties,” CG Power had said earlier.
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