Long-Term Investment in Yes Bank: A Valuable Opportunity

Investing in Yes Bank shares can be a lucrative venture, especially if held for the long term. The bank, which was on the brink of bankruptcy, has now received support from eight major institutional investors. This support, along with recent government actions, presents a promising outlook for investors looking to make a strategic investment.

The Support System for Yes Bank

Beginning in early March 2020, Yes Bank received significant influxes of capital from major financial institutions. These included:

SBI with an investment of ?6050 crores, HDFC Ltd and ICICI Bank, each contributing ?1000 crores, Axius Bank with ?600 crores, Kotak Mahindra Bank with ?500 crores, Bandhan Bank and Federal Bank both investing ?300 crores each, and IDFC First Bank with ?250 crores.

Except for SBI, which held 26% of the shares, the remaining investors were required to hold 75% of their investments as a lock-in for three years. However, by mid-to-end March 2020, substantial sales were made by Kotak Mahindra Bank (9.5%), IDFC First Bank (16.1%), and Federal Bank (19.6%). These sales are a mixed signal, suggesting caution among institutional investors.

Government Support and Future Prospects

On June 26, 2020, the Government of India amended the Banking Regulation Act 1948. This legislation grants the Reserve Bank of India (RBI) the authority to resolve weak banks through capital reconstruction or merger without requiring a prior moratorium on deposits or creditors. This is a positive development for Yes Bank and signals a significant effort by the government to restore confidence in the bank.

This government action is designed to bring stability and confidence to the bank, which is crucial for long-term investors. Enhanced customer confidence can translate into increased business and profitability for Yes Bank. As a result, it is a good opportunity for investors to consider a long-term investment in Yes Bank shares.

Personal Investment Experiences

Many investors have found success in Yes Bank. For instance, a personal anecdote involves an investor who purchased shares at ?50 to ?73 and holds approximately 450 shares. They advise that investing in Yes Bank can provide substantial returns over a five-year period.

Strategic Selling Strategy

While it is advisable to hold onto Yes Bank shares for the long term, there is a wise strategy to consider. If you have the option to sell 50% of your shares when the market reaches ?122, it is recommended to do so. This move ensures that you have your capital back to invest in other stocks. In the event that the market performs well, which is anticipated, your remaining shares can double in value.

Holding Yes Bank shares for 5 years could result in a significant return of up to 200%.

Conclusion

The recent support from major financial institutions and the government's positive actions indicate promising future prospects for Yes Bank. For long-term investors, Yes Bank shares present a valuable opportunity. While there are risks, the potential rewards suggest a strategic and patient investment strategy can yield substantial returns.

Investment is subject to market and personal risk. It is always advisable to conduct thorough research and consult with a financial advisor before making any investment decisions.