Yes Bank’s recent history has been checkered with a series of false hopes and promises. The management has gone on record time and again to provide assurances about the quality of the bank’s book as well as its ability to raise funds, but these have mostly been belied. The supposedly interested global technology and marquee private equity investors have given way to proposals from “never heard of before”, in the Indian capital market context, investors like Erwin Braich and Citax.

Board meetings are called frequently, transaction dates extended and a lot of fundraising plans laid out, but without any delivery. Interestingly, it is not clear if the earlier proposed fundraise target of $2 billion has been crimped to $1.4 billion (Rs 10,000 crore), or that still stands. Clearly, the bank needs all the money it can get, but it is seeming increasingly that it isn’t able to get that kind of financial commitment. Why is that? That is the big question.

Red flags about the bank’s quality of book are flying even higher now. The unease lies in the un-spelt reasons behind prominent private equity and other prominent investors walking away after initially weighing investments. Is there more than meets the eye?

Investors wary

At such a juncture, the resignation of a director doesn’t bode well. While the bank seems to imply via its communication that the person in question was under the scrutiny of the regulator on “fit and proper” grounds, and this might have triggered an exit, some of the allegations made by the outgoing director do warrant consideration.

One significant contention in the list of allegations is regarding issuing of communications around fund raise without having credible investors and their binding bids in place. The management of the bank, one expects, would realise that such messages do impact the price of the bank’s stock, and influencing stock prices in such a manner is clearly unbecoming of a professionally-run bank. Investors repose a lot of trust in a bank, and that trust is today being belied.

Given the recent communication track record of the bank, one can see why most investors would be wary of putting money in the bank’s stock. Will Yes Bank finally be able to raise a significant sum of money? That’s tough to call, but what’s easy to decipher is that it’s safer to stay away from a floundering ship that could well sink under its own weight unless it finds some courageous white knight investors.

Yes Bank is a perfect case study of what not to do from a corporate communications perspective. Perhaps one of the leading B-Schools will incorporate it in their curriculum.

First Published:Jan 13, 2020 3:51 PM IST