Surge in Yes Bank stock makes Rana Kapoor a billionaire
With YES Bank’s stock price jumping 16.4 per cent this month, Rana Kapoor (in pic), co-founder and chief executive officer of YES Bank who holds 11.6 per cent stake in the bank, has become a billionaire.
Kapoor is only the second billionaire to emerge from India’s banking industry after Uday Kotak, principal founder and promoter of Kotak Mahindra Bank, who has $7.2 billion net worth (Rs 49,065 crore).
As per to Bloomberg billionaires index, YES Bank’s gain this month has lifted Kapoor’s net worth to $1 billion (Rs 6816 crore). The majority of his fortune is derived from his 11.6 percent stake in the lender.
Strong Casa growth and loan growth, stable asset quality and return on equity (RoE) of more than 20 per cent over the last eight years have made YES Bank a favourite pick for analysts that continue with a buy rating on the stock. For instance, Morgan Stanley has maintained an overweight rating on YES Bank; however, they have increased their price target from Rs 1,300 to Rs 1,450.
“Stabilising macro climate and improving macro indicators puts YES in a better situation to manage margins and loan growth. Valuations rerated meaningfully in 2016 to 13.6 times the F18 earnings estimate. We don’t expect further re-rating in near term, but stock performance should be driven by earnings compounding (around 23 per cent earning per share CAGR for F16-18 estimates).
The key value drivers are asset quality, loan growth, margin progression and non-interest income growth. The potential catalysts are execution of branch expansion and low cost deposit strategy, evidence of growth story panning out, and better than expected margin progression,” said Anil Agarwal, equity analyst at Morgan Stanley Asia, in a report.
Motilal Oswal too has a buy recommendation with a target price of Rs 1,500 on YES Bank. “YES Bank, our top pick, was the best performing stock in CY16 with a return of 65 per cent. With a favourable environment, healthy capitalisation, expected improvement in return ratios and a structural shift in the balance sheet profile, we expect the out performance to continue. Our sensitivity analysis indicates RoE (even after capital raise) will stay superior at 18-20 per cent. Reiterate buy rating with a target price of Rs 1,500,” said Alpesh Mehta at Motilal Oswal Research.
Investec Securities too gave a buy rating with a target price of Rs 1,640. India’s banks have seen their profits squeezed recently by a surge in bad loans. The industry’s gross bad-loan ratio jumped to a 14-year high of 9.1 per cent in September, according to the Reserve Bank of India’s financial stability report released in December.
YES Bank announced its third quarter results on Thursday and beat street estimates by reporting a 31 per cent rise in net profit to Rs 82.6 crore year-on-year. The earnings was driven by (a) high balance sheet growth (b) increase in NIMs (net interest margins) (c) higher non-interest income and (d) lower credit costs.
Its net-interest income was Rs 1,507.5 crore for Q3FY17; y-o-y growth of 30.3 per cent on the back of growth in advances & CASA and expansion in NIM. For the third quarter, NIMs improved by 10bps to 3.5 per cent versus 3.4 per cent sequentially. The RoA was healthy at 1.8 per cent while the RoE increased to 22.3 per cent from 20.5 per cent y-o-y.
Post the results, the stock rose 0.11 per cent to close at Rs 1,347.45 on NSE. The stock has jumped 16.4 per cent in January, compared with a 5.9 per cent gain in the S&P BSE Bankex Index, which tracks 10 banks.
Kapoor, 59, co-founded YES Bank with his brother-in-law Ashok Kapur and colleague Harkirat Singh in 2003. The following year, it became the first new Indian lender in a decade. The trio had acquired their seed capital of $10 million each a year earlier, when they sold their stakes in Rabo India Finance, a joint venture they had formed with Rabobank Groep of the Netherlands.
Previously, Kapoor had spent two years working for ANZ Grindlays and another 15 year at Bank of America. He is the only founder among the three to remain at the helm of YES Bank. Singh left after an early dispute with both his partners, and Kapur was killed in the Mumbai terror attack in 2008. Madhu Kapur, the co-founder’s widow and sister of Kapoor’s wife, continues to have a 9.4 per cent stake in the lender. Her net worth is valued at $800 million. The Bombay High Court ruled in 2015 that she had inherited the right to nominate directors to YES Bank’s board. The lender contends that those rights can’t be transferred to family members and is appealing the decision.
(With inputs from Bloomberg)