Many believe that Yes Bank (NS:YESB) stock can easily reach Rs 50 or Rs 100 from here. In the recent times, the Yes Bank stock has traded around Rs 400. The business size of the bank is still large and a big bank is doing business at the cost of every paisa. Hence, it is extremely cheap at current levels.
Let us try to know from this analysis of Investing.com that how cheap it is and whether it can reach 50 rupees or more in the near future or not?
Rapid dilution of ownership of existing shareholders
In 2020, Yes Bank carried out 2 times the fund raising activity. The scale of fund raising was not small. During 2020, the bank issued over 2,000 crore new shares to investors in the range of Rs 10 to 13.
After all this fund raising at lower levels, the outstanding quantum of shares of Yes Bank was now around 2500 crores. Due to this, the market capital of the bank has already reached to Rs 30,000 crore when the share price is trading only around Rs 12. If it trades around Rs 100 per share, the bank will have around Rs 2,50,000 crore (2,500×100) as market capital.
No promoter holding in Yes Bank stock
There is no promoter left in Yes Bank who can care about its ownership in the bank, continued dilution of ownership of existing shareholders and the steep rise in outstanding shares on the balance sheet. As of now, all these things are not the main concern for the present management of the bank. At present, the main objective of management is to stabilize operations and reduce risk in the business.
Most of the new shares issued in the range of 10-13
Having a large stock of equity shares not only affects the market capital, but it also affects the supply of shares in the market. If Yes Bank shares start trading in the range of Rs 25-30, then those who have been allotted shares in the range of 10 to 13 will get more than 100 per cent return on their investment.
While this completely depends on the strategy of the investors, the basic rules say that when the stock price reaches a higher level and there is no significant growth or improvement in the business, more investors will want to exit, as they are doing well. Will be earning money.
Therefore, expect to see a major level of supply in the stock at higher levels, if it happens now. In the second round of fund raising, raised more than Rs 10,000 crore by issuing shares at Rs 12.
Based on the recovery in earnings and interest among investors, there is no doubt that the Yes Bank stock is likely to rise from here, but the potential is not high, at least in the near term.
When we look at the chart and see that the Yes Bank stock has traded at the first time (around 400 level), the stock can definitely be a good option for a turnaround bet in the long term, But it needs to be analyzed along with some other important facts.
Keeping all these factors in mind, the upside in Yes Bank seems quite limited. It is now very difficult for the stock to reach around Rs 50 or cross this level. With the current financial position, if Yes Bank is able to trade and maintain a range of around Rs 20/25 in the near future, it will be a milestone for the stock.
If Yes Bank can post some solid gains in trading and the key ratio sees a major correction from here, then the stock could see some percentage correction. Otherwise, investors who are holding lower level shares of Yes Bank will find it difficult to allow the share price to rise from here.
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