Stock retraces ~45% in the follow up to the FPO! With the FPO being offered at a massive discount (@Rs.12) to the then trading price (@Rs.26), its only logical that existing investors would be inclined to offload in the secondary market, with a intent to benefit from the arbitrage of buying it back in the FPO.
However, the fall has been steeper than what most imagined, despite a large part of the shareholding being locked-in, which ideally should have restricted the selling pressure.
With the stock collapsing 20% today, with steep rise in traded volumes, here’s something interesting to note. My observations are based on the latest shareholding pattern released on the exchanges (Jun 30th).
The total no of shares held by non institutional shareholders (Individuals + clearing members + HUF) is close to 200 cr shares. Of this, ~64% (~129 cr shares) is under lock-in, implying that ~72 cr shares are free to trade. This leaves merely ~72 crs which can be sold in the open market, technically.
And today the counter saw volumes in excess of 49 crs shares being traded (both exchanges together) on a single day! Or, in other words, ~70% of saleable shares got traded in one single day, bringing the share down by 20%.
Surprising.
I have good enough reasons to count only the non-institutional holders quantities for the purpose of free float calculation. With the majority of shareholding with the institutional holders, who are typically long term in nature, i would want to believe that they would tend to refrain exercising such arbitrage opportunities.
If this data puzzles me on one. hand, theres another recent data which confuses me even more. Yes Bank shares were auctioned (short delivery of shares sold) on the exchange 2 days back. A quantity as small as ~9 lac shares got auctioned on the exchange that day, at a +20% premium to the market price!!! Simple logic suggests that if there was/is ample shares available for delivery, then there was no way that the shares would be auctioned at such a premium to the underlying shares. no?
What am i missing??
Today was indeed a roller coaster ride for some shareholders. Some can also say it comedy of errors.
- A lot of shareholder invested in FPO with an intention to book short term gain.
- This was like a cat & mouse race, sell before in declines below Rs 12
- This means, sell as early as possible
- Now, considering T+2 settlement, any shares sold on Thursday needs to be delivered on Monday. So, there was a selling as soon as market open.
- Now, came a rumour, that the new allotment might be blocked for a day and the delivery might not be possible for the new allotment on Monday. Was discussed on CNBC as well.
- The FPO investors now panicked to cover their short position, taking stock price to mid 16.
- Then came some clarification, that delivery would be possible on Monday itself, again triggering sell off for the covered position.
The sale, buy and resell, all were for the FPO shares, which are yet to hit in Demat accounts.
Hope this gives some perspective!!
Apologies in advance as i am a new investor.
My understanding was that T+2 settlement is only for Cash settlement and not shares (shares are settled the same day). To my knowledge one cannot sell the shares they dont already have.
Can anyone shed some further light ?
Thanks Naman. I understood the bit that you have explained and guess that retail holders have rushed to book profits, risking any delays in allotment process etc. However, what explains the massive premiums that the auctions have apparently attracted, given the highly liquid nature of the stock?
The ‘cash’ and ‘shares’ segment is the same. There are 2 segments in which a investor can deal in - Cash segment (meaning shares) and F&O segment (meaning derivatives). Cash segment (shares) are settled on a T+2 basis. For instance, if you have bought a stock on Monday morning, if you don’t square off the trade by the end of the trading session (T day), then you will have to compulsorily take delivery of the stock for which your account will get debited on Wednesday morning (T+2 day) called the pay-in and you will receive the shares in your demat account on Wednesday evening (T+2 day) called the pay-out.
So what Naman was trying to explain is that FPO investors may have sold off the stock yesterday (Thursday), as they are expecting the shares to be in their demat account by Monday (which is the T+2 day, when they are supposed to deliver the shares sold on T day).
Trust this explains.
Thanks Padi…
Yes i understand however that is for buying shares and making payment. i checked the statements between my broker and NSDL and realized that Sell trades deducts the shares by EOD (same day as trade execution) and settlement (money in the bank account) takes 2 days.
if i go by this logic, i cannot sell the shares that i dont have in my depository.
You are allowed to sell shares and are expected to deliver it on T+2. That said, if you are unable to deliver it on the pay-in date, for whatever reasons, then the exchange will bid auction the shares on your behalf and fulfill your delivery obligation.
This is precisely what happened in the recent auction in which some sellers who had sold 8 lac odd shares were unable to deliver and it got auctioned at a 20% premium to the then ruling market price.
Brokers typically transfer the shares from your demat account to their pool account on T or T+1 day and deliver them for settlement on T+2. If you don’t have the shares in your demat on T+1, they will check again on T+2. If you still dont have it, it will go for auction settlement.
Hi, I just a technical clarification? Did anyone try this out?
I got allotment in my Zerodha account, but when i tried short selling in CNC (Cash n Carry) mode in Zerodha, it kept giving an error saying “Shares not available in holding”. So if that was the case with everyone at Zerodha, the volumes quoted above should be subdued.
And we are seeing a bigger selling volume today.
Given the price action of this script and impending results, is there any directions from experts here???
Yes bank recently completed the FPO of 15000 cr. It included anchor investor like Amansa holdings, ICICI Lombard, HDFC life, RBL bank etc. The lower band of FPO issue price is Rs 12.
Banking business in the words of Aditya Puri - Get money at lower rates(like FD) and lend it at higher rates. Yes Bank’s CASA ratio is 27% and it is deemed to get lower as most people will think three or four times to deposit money in a bank whose image is tarnished. Especially, when they know about the cap on withdrawal of their deposits in the month of March.
The current price of Yes bank is Rs 11.20. What is that one thing which the above mentioned anchor investors are finding value in Yes bank? I personally find Ashish Prakash (Amansa Holdings) to be one of the best in stock picking.
At 1:47:09 - Akash Prakash explains about his firm’s way of doing valuation.
Is it that with Prashant Kumar from SBI now handling the operations of Yes Bank, they divert some business to Yes Bank or they find value in Yes securities or some other subsidiary of it?
Just want to understand what can be the positive triggers from fellow value pickers.
The Ken’s article shed some light on Yes Bank’s API / Software business. Quite an interesting read it was. Here are few excerpts :
Yes Bank’s software is an invisible layer in many Indian startups like Ola, Swiggy, PhonePe, Meesho and many others. “APIs are a software business. You have to treat them like that. Banks don’t get/understand software business. But Yes Bank did,” an anonymous start-up executive.
But due to recent turn of events, start-ups have started switching to ICICI Banking APIs to minimize risks. However, it’s worth monitoring if Yes Bank can capitalize on their strengths and draft a turn-around story from here.
Disclosure : Invested
Thansks for sharing. May be this is the reason they are looking to monetize it in a new subsidiary.
Yes Bank added to MSCI India Index. May be this is causing the stock rally for last few days
Yes bank posted a consolidated PAT of Q3FY21 Rs.147.68 crore.
Key points to be noticed:
-
Deposit mobilization continous : at Rs. 146223 crore grew 7.7% q-o-q and 38% over 9 months period.
-
CASA ratio at 26%,2.2lac CASA accounts opened in Q3FY21 VS 1.5 lac last quarter
-
GNPA of 15.4% VS 16.9%last quarter
4 NNPA of 4.0% VS 4.7% last quarter
Key monitorings :
- Loan recoveries
- CASA ratios
- New product launch
- GNPA and NNPA
- Diluting equity for new funds
Can it be a turnaround story?.
I strongly believe it can be turned around and a good risky bet.
Your opinions are welcome
Personally, for me the fiasco at the bank last year teaches one clear lesson… its very, very difficult to find the truth behind the facade that management takes big efforts to mount, especially for small investors and depositors. While the repair is well and truly underway, asset quality is still a major concern, and what distorts the picture further is the extended moratoriums, sweeping potential NPAs under the rug for the time being. Here is a report from Emkay global calling out the risk. Whether its for real or a just a misplaced concern, only time will tell.
Sbi holds majority in YES bank
So whether it will be public sector bank
If so this will also benefit from Bad Bank concept for transfer of stressed assets.
I also request members to inform about the status of the application filed by YES bank for floating ARC.
