Investment in Yes Bank: Understanding Lockin Periods and Risks

Dear investors, if you are considering purchasing more than 100 shares of Yes Bank, it is important to clarify the lockin period and the risks involved. The lockin requirement was applicable only to shares held on or before March 6, 2020, when the stock price plunged to 5 rupees. If you buy now, in July, the shares will not be subject to the previous lockin rules. However, it is crucial to exercise caution and seek professional advice before making any investment decisions.

Lockin Periods and Current Conditions

To address your concerns, let's break down the importance of lockin periods and the current state of the Yes Bank stock:

The lockin period does not apply to purchases made after March 6, 2020. This means that if you buy shares of Yes Bank now, you will not be subject to the 75% lockin requirement for a period of three years. This is a significant point to consider, as earlier lockin periods were a regulatory measure aimed at stabilizing the stock market amid the financial turmoil.

Current Scenario and Future Prospects

Although Yes Bank has seen some rise in stock value for a few trading sessions, it is important to note that this does not necessarily indicate a recovery of the sizable losses incurred. It is estimated that a recovery in the stock value would require at least one to two years, with a clean balance sheet being essential for this recovery. The bank's situation is complex and requires a thorough evaluation of various factors including capitalization and business scope.

Current issues within Yes Bank include non-performing assets, loans given to unworthy individuals, and a crisis of liquidity. These issues have significantly diminished the bank's trustworthiness, especially following the departure of the former CEO, Rana Kapoor. As trust is a critical component of any financial institution, this is a major concern for potential investors.

Problems in Yes Bank

1. Non-Performing Assets (NPAs): Yes Bank has granted loans to individuals and companies that are unable to repay their debts. This has put a significant strain on the bank's financial health and reputation.

2. Capitalization Issues: Loss of trustworthiness due to the actions of ex-CEO Rana Kapoor has caused a crisis in capitalization. The bank is currently facing challenges in attracting new investments and maintaining its operations.

3. Liquidity Issues: Inadequate liquidity poses a risk to the bank's ability to conduct daily operations and ensure the smooth flow of funds. This issue is compounded by the bank's reliance on news rather than performance in the business.

Investment Considerations

Given the current state of Yes Bank, it is imperative to approach any investment with caution. The bank's stock is not surviving based on long-term performance but instead on short-term news which may not sustain over a prolonged period. Therefore, it is highly recommended that you seek professional advice before making any investment decisions.

Conclusion

If you choose to purchase shares of Yes Bank now, you should do so with the understanding that the lockin requirements do not apply to these new shares. However, the risks associated with the bank's current situation are significant, and any investment should be made only after careful consideration and professional guidance. Your future success as an investor will depend on making informed decisions, so do not hesitate to seek expert advice if needed.

Key Takeaways

The lockin period does not apply to shares purchased after March 6, 2020. The recovery of Yes Bank will require significant time and a clean balance sheet. Current issues include non-performing assets, capitalization challenges, and liquidity issues.

For more detailed information and personalized advice, please consult with a financial professional.