Maintain ‘buy’ on YES Bank; impact of legal tussle limited: Citi

The boardroom challenge to CEO & primary shareholder (~11.8%) Rana Kapoor from the family of a copromoter (~10.3%) has got some closure with the Bombay High Court’s ruling. It validates Kapoor’s term and role as CEO (and does not grant the challenger a board seat) – key for the business, and leaving it largely business-as-usual for YES Bank. It does however annul the appointment of three executive directors, and seeks procedural reviews for four others. While the legal tussle is not necessarily over, it should not impact the business or the stock.

Rana Kapoor’s CEO role/term is validated, the co-promoters’ family does not get a seat on the board: This is a material win, effectively leaving current management control unchanged, and removes the possible risk of an operating challenge or uncertainty. This is a key gain for Kapoor/management, and it should effectively leave the business and the stock un-impacted.

We believe management would do well to get over the ongoing legal and public tussle, which is a slight overhang, and probably does impact the business at the margin. That said, it’s probably not meaningful – operationally, or from a strategic perspective (stock +70%, over two years during the public legal challenge), and we continue to maintain ‘buy’, with target price of Rs 1,025.

Yes Bank