Should I invest in Yes Bank or not?

This time, according to market conditions, the question is: should I invest in Yes Bank or not?

Yes Bank was once highly regarded until 2018. Back then, its stock price hovered around 400 Indian Rupees. However, trouble struck when a scam led by Rana Kapoor was exposed. The stock plummeted to just 12-13 Rupees (or maybe even lower).

For the past four years, the stock has remained relatively stable within a narrow range. Some people believe that since the stock has already fallen so much, it can’t possibly drop any further. But here’s the catch: stocks can consolidate for extended periods.

On the bright side, sentiments around Yes Bank are improving. Profits and revenues are growing, and signs of a turnaround are emerging. Even if the bank’s stock price were to reach just one-fourth of its 2018 value (around 100 Rupees), it could still multiply by 6 to 7 times from its current level. These potential gains are what we call “multi-bagger returns.”

However, there are crucial points that many people overlook:

1. Institutional Involvement: When the stock fell, various organizations (like FII/DII) were compelled to buy Yes Bank shares. But now, they also need to sell. Recently, Carlyle sold Yes Bank stock worth 1000 crore Rupees, which affects the stock price.
   • Note: Markets are carefully managed. If Yes Bank were to collapse completely, it could have a ripple effect on other banks. So such situations are handled strategically.
2. High PE Ratio: Currently, Yes Bank’s price-to-earnings (PE) ratio stands at 78. Unfortunately, revenues haven’t significantly increased since 2018, and profits remain modest.

The bank’s high interest payments contribute to this. After 2018, Yes Bank faced a bad credit rating, leading to                            elevated financing costs that persist even now.

Additionally, the bank borrowed money at high interest rates from certain players, and it will take years for these                        debts to mature.

Conclusion:

In summary, while Yes Bank shows promise, it’s essential to consider above these factors before making any investment decisions.

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