Title:
Relationship of Yes Bank Limited with Nifty Fifty and to calculate Beta.
Author: Yukta Patil
Introduction:
Yes bank is a full service commercial bank providing of complete rang of product servive and technology driven digital offering, catring to retail, MSME AS WLL AS CORPORATE clients.
Yes bank operates its investment banking ,merchant banking& brokerage businesses through yes securities a wholly owned subsidiary of the bank. Headquarterd in Mumbai it has a pan india presence including an IBU at gift city and a representative office in abu dhabi.
Objective:
To calculate Beta of Yes Bank Limited and see its significance.
Literature Review:
- Mumbai: Yes Bank may offer additional tier-1 (AT-1) bondholders shares of the bank as part of a settlement in case the Supreme Court upholds the Bombay High Court order that quashed a decision in March 2020 to write off `8,415 crore bonds, said people aware of the development.
Speaking to the media on Saturday, Prashant Kumar, CEO, Yes Bank, said the bank would challenge the high court’s Friday order. The bank counsel informed the court that it was necessary to cancel AT-1 bonds to prevent the bank from collapsing. Shares of Yes Bank fell 8.3% to close at `18.15 on Monday following the high court ruling. In December 2016, the bank raised `3,000 crore through AT-1 bonds, offering a coupon of 9.5%; later, in October 2017, it raised `5,415 crore through AT-1 bonds, offering 9% coupon.
Speaking to bank analysts on Saturday, Kumar said that “in the worstcase scenario, the common equity ti- er-1 capital of the bank would come down. However, the capital adequacy would be maintained as the AT-1 capital increases.” This would happen if the bonds’ write-off stood cancelled as ordered by the high court, said an analyst. “There is another solution. Bondholders in the past had sought to be compensated with shares of Yes Bank instead of the AT-1 bonds, which will ensure that the bank’s equity capital is not eroded,” the people said. Bank analysts said this could dilute the shareholding, which could put pressure on financial ratios. The AT-1 bonds are high-risk unsecured perpetual bonds that the issuing bank can write off at pre-specified triggers as liquidation. Soon after the Centre imposed a moratorium on March 5, 2020, AT-1 bondholders had filed a writ petition saying that they were willing to take an 80% haircut and accept equity in exchange for bonds. “The shares of Yes Bank have risen since, and they may negotiate for less haircut, but this is all subject to the Supreme Court order,” said the bank analyst cited above. However, the Reserve Bank of India’s counsel informed the court that there is no provision for the bank to give shares against the bonds, and it can only be redeemed as per the contract between AT-1 bondholders and the bank. Individuals, Nippon Mutual Fund, Franklin Templeton India, Barclays, and Kotak Mutual Fund and 63 Moons are some of the large AT-1 bondholders, according to media reports. On Saturday, Kumar also informed analysts that Yes Bank will not be required to pay any previous unpaid interest to the AT-1 bondholders. “There is no cumulative nature of coupon payment, and in a financial year when the bank is in losses, the bank cannot pay the coupon,” he said. “These are perpetual bonds, and it is not mandatory to exercise the call option,” he added.
- Pralay Mondal, the bank’s head of retail business, will vouch for that. Mondal, who was previously Head of Retail Banking at HDFC Bank, accepted [Rana Kapoor]’s offer to join YES Bank at their first meeting itself. “The meeting lasted two hours,” says Mondal, who took over in June. “We are first going to cross-sell our products to our own customers rather than through direct selling agents,” says Mondal. He says it is important to know customers’ needs and then sell them appropriate products. “Retail is more about execution than strategy,” he adds. Kapoor says the bank intends to become a one-stop shop for all financial services. The idea is to offer mutual funds, insurance, and wealth management services on a common platform. Kapoor is open to taking a minority stake in an insurance venture. “Mutual funds and retail broking will be for augmentation and acceleration of our retail strategy,” he explains. The mutual fund strategy will be focused on debt schemes. “The debt market in India has not been tapped on the retail side,” he adds.
Data Collection:
The data for Nifty and Equity of Yes Bank Limited has been collected from proquest.com and yahoo finance.com from 1st November,2022 to 31stOctober, 2023.
Data Analysis:
| SUMMARY OUTPUT | ||||||||||
| Regression Statistics | ||||||||||
| Multiple R | 0.260127764 | |||||||||
| R Square | 0.067666453 | |||||||||
| Adjusted R Square | 0.047398333 | |||||||||
| Standard Error | 0.020302311 | |||||||||
| Observations | 48 | |||||||||
| ANOVA | ||||||||||
| df | SS | MS | F | Significance F | ||||||
| Regression | 1 | 0.001376103 | 0.001376103 | 3.338565763 | 0.074165366 | |||||
| Residual | 46 | 0.018960457 | 0.000412184 | |||||||
| Total | 47 | 0.02033656 | ||||||||
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | |||
| Intercept | 0.002403638 | 0.002931555 | 0.819918965 | 0.416490659 | -0.003497277 | 0.008305 | -0.003497277 | 0.008304552 | ||
| X Variable 1 | -0.08122637 | 0.044454638 | -1.827174256 | 0.074165366 | -0.170708914 | 0.008256 | -0.170708914 | 0.008256175 | ||
Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations ANOVA df SS MS F Significance F Regression Residual Total Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept X Variable 1.
The Coefficients table shows the following information:
- Intercept: The intercept is 0.002403638. The standard error is 0.002931555. The t-statistic is 0.819918965. The p-value is 0.416490659. The lower 95% confidence interval is -0.003497277 and the upper 95% confidence interval is 0.008304552.
- X Variable 1: The coefficient for X Variable 1 is -0.08122637. The standard error is 0.044454638. The t-statistic is -1.827174256. The p-value is 0.074165366. The lower 95% confidence interval is -0.170708914 and the upper 95% confidence interval is 0.008256175.
Conclusion
The regression analysis output shows that the R-squared value is 0.0677 which indicates that only 6.77% of the variance in the response variable can be explained by the predictor variable. The p-value for the predictor variable is 0.0742 which is greater than 0.05, indicating that the predictor variable is not statistically significant. Therefore, we can conclude that there is no significant linear relationship between the predictor and response variables.
References:
- Mehta, Sangita. The Economic Times (Online); New Delhi. 24 Jan 2023. Yes Bank May Offer Equity to AT- 1 Bondholders as Part of Settlement [Markets]: BANK OFFER of shares depends on SC upholding HC verdict quashing the write-off; cancellation of bonds necessary to prevent bank from collapsing, informs Yes Bank. Retrieved from https://www.proquest.com/docview/2791902609/824777BB70F34CB4PQ/2
- Adhikari, Anand . (Dec 09, 2012). Best Banks 2012: YES Bank seeks to cast a wider net: In the Business Today-KPMG study 2012, YES Bank has emerged the best midsized bank, edging out close rivals such as Kotak Mahindra Bank and DBS Bank as well as last year’s winner, IndusInd Bank. Rana Kapoor has taken YES Bank to the top in its category. He now wants to rapidly grow the retail business. Retrieved from https://www.proquest.com/docview/1179126231/824777BB70F34CB4PQ/1