Exposures Towards Jet Airways and IL&FS Behind Yes Bank Crisis

Yes Bank investors lost nearly Rs 16,316 crore market capitalisation on Tuesday, April 23, as the private bank’s shares plunged 30% to Rs 167 on the National Stock Exchange (NSE), days after the bank reported a whopping Rs 1,507 crore net loss for the March quarter (fourth quarter of financial year 2018-19). The bank posted a net profit of Rs 1,180 crore during the same period an year ago.

Since the last three quarters, Yes Bank has been posting lacklustre financial results on the grounds of massive exposure to crippled entities in infrastructure, airlines and real estate sectors. The setbacks to the Yes Bank growth story reflect the deepening crisis in the Indian banking sector fuelled by high levels of non-performing assets (NPA).

The Bank had also attracted downgradings from a set of brokerage firms - Macquarie Research has double-downgraded the Bank’s stock to ‘underperform’, foreign brokerage house Citi downgraded the stock to ‘sell’ and HSBC downgraded to‘reduce’ call.

During the March quarter, Yes Bank’s gross non-performing assets ratio more than doubled to 3.22 % from 1.28 % in the year- ago period and 2.10 % in the December quarter. The gross NPA Ratio is the ratio of total gross NPA to total advances (loans) of the bank.

Also Read: The Jet Airways Crisis Sheds A Stark Light On India’s Aviation Market

On the outset, Yes Bank’s market performance can be attributed to its massive exposures to stressed companies whose financial transactions are under probe by various state- agencies and its board’s mismanagement, as flagged by the Reserve Bank of India.

Last year, the RBI demanded the private lender’s founder Rana Kapoor to step down as Chief Executive Officer, following a spat over breaches of confidentiality and regulatory guidelines revealed in their inspections. Kapoor was replaced by Ravneet Gill in January this year.

As per the bank’s recent filings, it’s gross slippage (accumulated bad loans) stood at Rs 3,481 crore. Of that, Rs 552 crore were on account of exposure to an airlines (reportedly, the airlines in question is the recently grounded Jet Airways although the bank did not reveal this) while Rs 529 crore was because of exposure to struggling infrastructure conglomerate IL&FS.

Yes Bank has a total exposure of over Rs 2,600 crore to various special purpose vehicles of IL&FS.

In November last year, the RBI also initiated probe into Yes Bank’s exposure towards IL&FS, Dewan Housing Finance Corp. Ltd (DHFL), Indiabulls Group, and Sudhir Valia-promoted entities Fortune Financial Services India Ltd and Suraksha ARC.

Read More: Will Ravneet Gill Get Yes Bank out of the RBI's Cross-Hairs?