Information Technology and Concepts Project Report

Submitted to:

Dr. Shashi Kant Srivastava

Presented By:

Hansraj Verma (MBA23123)

Aman Kumar (MBA23108)

Abhinav Verma (MBA23104)

Vanshika Soni (MBA23150)

Kotesh Babu (MBATM23025)

Ansh Kumar Gupta (MBA23110)

Company: Yes Bank

Introduction:

Youth Enterprise Scheme Bank, i.e., Yes Bank, is one of the leading private sector banks
headquartered in Mumbai and was started in 2003. The chairperson of Yes Bank is Sunil
Mehta, while the Chief Operating Officer and Managing Director are Prashant Kumar.

The primary business of Yes Bank is to provide loan facilities to Corporate Industries. In
2005, Yes Bank started its operations in Retail Banking. In 2005, Yes Bank listed itself in the
public listing and offered an IPO, for investors in BSE and NSE with a face value of RS 10
and an issue

price of RS 35. In 2017, Yes Bank partnered with an online banking system, i.e., BHIM UPI,
and launched its own Digital Wallet.

Yes Bank has been in the limelight for many wrong reasons in 2004, landing in many
controversies and corporate mismanagements, while being unable to maintain sound financial
records, which thoroughly impacted their performance.

The total assets of the company were Rs 354,786 crore as of 2023. With equity of valuation
of

USD 4.2 billion, with a net profit of USD 130 million and an operating income of USD

$180 million.

From the analysis we have generated, Yes Bank has gone through various issues, whether in
terms of maintaining records or with their performance. Group 5 will analyze this company
and its situations, while we will also review the financials and articles of the company and
decode the fall of this banking company.
Share Price Angle:

Now moving forward towards the analysis part of the financials of Yes Bank and the reasons
for the bank's crisis, let's have a look at the share price of Yes Bank from 2005 to 2023 to get
an idea of the timelines and important dates.

Reasons for the Yes Bank Crisis:

Rana Kapoor, the CEO, gave up his position in 2019. During this time, one chairman and two
independent members also quit. RBI chose Ravneet Gill as CEO in March 2019. Yes Bank's
first quarterly loss was 1507 crores, which was revealed in April 2019. Its NPL ratio went up
to 8%. A NPL ratio of less than 2% is considered safe.

On March 5, 2020, RBI said that Yes Bank would have to stop doing business for 30 days.
During this time, each depositor could take out up to Rs. 50,000. The RBI took this step to
protect the money and funds of depositors. SBI took over the operations of Yes Bank after
holding 49% of the bank and reorganizing the processes and books. After that, the ED nabbed
Rana Kapoor on charges of fraud and theft.
 1. A large number of loans:

On March 31, 2014, the Yes Bank book of accounts showed that loans were worth 55,633
crores and deposits were worth 74,192 crores. Since then, the number of loans has grown a
lot, reaching $2.25 trillion as of September 30, 2019, which eventually reflected the lending
situation of Yes Bank in these years.

Due to all these situations, the asset quality of the bank got worse. According to a global
financial company, Yes Bank is giving stressed loans to some defaulting companies while
also taking risks in terms of bad loans.

2. Loan to defaulters:

Yes Bank is involved in providing loans to some defaulter companies, which makes them
uncomfortable and puts them in a risky situation many times. Companies like DHFL, CCD,
Essel Group, Reliance Group of Industries, etc. were in this category because they couldn't
pay back the loan amount in a short amount of time. About 25% of loans went to non-banking
financial companies, real estate firms, and the building and construction industry. India has
been having the most trouble in these areas over the past few years.

3. Numerous withdrawls:

As loan amounts were increasing at a high rate, and at the same time, withdrawals were also
increasing. Due to these frequent withdrawals, the bank and balance sheet both collapsed.
This situation arises when large numbers of depositors withdraw their money during the same
period of time.
 4. Financial Position of Yes Bank amid Improper Governance:

The price of a Yes Bank share reached as high as 400 INR in January 2018, and it fell as low
as 16,60 INR on March 6, 2020. The real fall began when Mr. Uttam Agarwal, who was an
independent director of Yes Bank at the time, sent a letter to the SEBI head giving his
resignation. In that letter, he said a lot of things that showed that the top people at the Yes
Bank did not have a good balance of power and were not running the bank well, especially
the CEO and MD.

The word "orally" is emphasized because Mr. Agarwal was one of the bank's directors and
decision-makers, and neither he nor anyone else got any written paperwork to confirm and
check the information. He said that the CEO and MD didn't get the board members together
to make this choice. There was not even a meeting to talk about this choice. It looked like the
group was run by a single man who wasn't even skilled enough to run the private bank. He
also said that this was just the tip of the iceberg because, even after getting the "oral" message
about the investment, the person in charge didn't say anything about the investors' names. For
reasons best known to the CEO, the "head" didn't tell the investors everything they wanted to
know or give them a firm deal. Mr. Agarwal said that these problems let some people take
advantage of It appeared that a single man, who wasn't even qualified to run the private bank,
was in charge of the organization. and may have led them to buy or sell securities with more
enthusiasm. Sources said in December 2019 that the Bank couldn't get money from the
market. Many top investors and investment firms are pulling out of Yes Bank, and the bank
needs about $2.5 billion to $3 billion in funding. People thought that if the bank couldn't get
more money in the next six months, it would be in big trouble. During the RBI's superseded
period, Yes Bank hired a new CEO and MD, Mr. Prashant Kumar, who was previously the
CFO and deputy managing director of State Bank of India. This showed how bad the
previous leaders were, and the Bank needed a new, trustworthy face to raise money.

5. Load of liabilities:

The balance sheet shows that Yes Bank's debts kept getting bigger until 2020. We can see that
the loans were worth as much as 380,836 crore in March 2019. The borrowings that Yes Bank
had to pay back made up a big part of these obligations. It made up almost 88% of all loans,
which was a big worry for the bank. For the bank to pay these people back, it needed billions
of dollars. Return on equity and Return on capital kept going down so much that the ratio
went negative in March 2020. This showed how bad Yes Bank's situation was.

6. Bank mergers:

After the Reserve Bank of India put a 30-day moratorium on Yes Bank in March 2020,
Nirmala Sitharaman, the finance minister, said that the State Bank of India will buy a 49%
share in Yes Bank. But Chairman Rajnish Kumar made it clear that the banks will not join
together.

After this announcement, the total responsibility was on largest bank of India SBI to save Yes
Bank from this crisis.

He said, "There is no way that we could merge." The newly named administrator on CNBC
TV18 said that there was no plan for a full merger between Yes Bank and SBI.

At first, when State Bank of India made their move towards investment to cope with the
current situation, the depositors of Yes Bank were not confident about the safety of their
money but later on they realised that their money is in safe hands.

7. Corporate Loans:

Mr. Rana Kapoor was arrested on allegations of approval of loans for corporate firms. Total
number of NPAs was 42000 crores. Large number of customers were from corporate sectors.
Such companies took loan from bank and later on they were not able to repay that loan on
time which eventually affected the image and situation of bank in the market.

Let’s have a look at some ratio analyses of Yes Bank and find out what went wrong for them:
 Cash Flow
80,000
60,000
40,000
20,000
0
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
-20,000
-40,000
-60,000
-80,000

Cash from Operating Activity - Cash from Investing Activity -

Cash from Financing Activity - Net Cash Flow

The company's cash outflows dramatically rose since the bank had a hard time getting back the
money it had borrowed. A significant portion of the available money was used to maintain on-going
corporate operations. Due to a considerable amount of non-performing assets (NPAs), Yes Bank
encountered a liquidity problem in both 2019 and 2020. This deficiency led the bank to exhaust its
cash reserves in order to meet on-going client management needs. It is obvious that the cash
outflow from operating activities for the year 2020 alone totalled more than INR -60,000 Cr. With
such a substantial cash loss, a risky and unstable firm faces major challenges. As a result, it is safe to
state that Yes Bank undoubtedly encountered financial difficulties.

Now, let’s have a look over the key financial ratios to understand Yes bank’s condition more
effectively.

Net Profit Margin

30.00%
20.00%
10.00%
0.00%
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
-60.00%
-70.00%
Net Profit Margin = (Net Profit / Total Revenue)

Basically, this ratio is one of the key indicators of the financial health and stability of a company and
shows how effectively a company is managing its operations and expenses. From the above graph,
we can infer that in the initial years or time period of 2014 to 2018, the margin grew with a stable
pace but after that, there is a tremendous decline in the same.

ROA
0.02

0.01

0
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
-0.01

-0.02

-0.03

-0.04

-0.05

-0.06

-0.07

ROA = (Net Income / Total Assets)

The financial statistic known as return on assets (ROA) is used to assess an organization's profitability
in relation to its investment in assets. Net income is divided by total assets to arrive at ROA. This
indicator demonstrates how effectively a company makes use of its resources to generate revenues.
Since ROA and a company's efficiency are directly correlated, a higher ROA demonstrates greater
efficiency in generating profits. Over the years, Yes Bank steadily improved its return on assets (ROA),
but starting in 2018, it began to decline in a way that resembled Return on Equity (ROE). The reason
for this constancy is that both models feature the same net income component, and the company's
assets didn't change significantly.
 Return on Equity%
40.00%

20.00%

0.00%
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
-20.00%

-40.00%

-60.00%

-80.00%

-100.00%

ROE = (Net Income / Shareholders' Equity)

Return on equity (ROE) is computed by dividing a company's net income by the total of its
shareholders' investments. This indicator assesses a company's profitability in relation to the
investments that its shareholders have made. Yes Bank continued to have a strong ROE despite a
steady decline until a critical blunder. Within one year of that happening, the ROE plummeted
substantially, falling to an astonishing minus 75%. The only thing to blame for this reduction during
that time period is the huge losses incurred. The ROE did, however, soon recover thanks to corrective
measures that were implemented right away.
 Debt to Equity Ratio
7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23

Debt to Equity Ratio = Total Debt / Shareholders' Equity

The debt-to-equity ratio, a measure of leverage, provides insight into how a company finances its
operations. This ratio is obtained by dividing total debt by total shareholder funds. After 2018, the
debt-to-equity ratio grew significantly after initially falling within a normal range. This increase was
primarily due to the company's decision to expand debt levels in order to pay off losses and meet its
financial obligations. However, after 2020, the ratio began to decline, and this movement can be
attributed to variations in both debt and equity. In 2020, a significant increase can be seen in the
company’s shareholders. At the same time, they deliberately reduced their long-term debt. The debt-
to-equity ratio of the bank was dramatically lowered as a result of these two actions.

Finally, we can have a look on the consolidated table of the above mentioned ratios.

2015 2016 2017 2018 2019 2020 2021 2022 2023

Net profit 17.26% 18.69% 20.33% 20.89% 5.77% 63.08% -17.41% 5.59% 3.24%
margin
ROE% 17.12% 18.38% 15.15% 16.44% 6.36% -75.74% -10.53% 3.16% 1.85%
ROA 0.014671 0.015309 0.01553 0.013548 0.004488 -0.06373 -0.01275 0.00334 0.002072
Debt to equity 1.01 1.02 1.34 1.27 0.91 0.83 1.65 1.77 1.75
At the end, we would also like to present EBITDA and EPS forecast.
 EBITDA Forecast
₹25,000.00

₹20,000.00

₹15,000.00

₹10,000.00

₹5,000.00

₹0.00
2015A

2020A
2014A

2016A

2017A

2018A

2019A

2021A

2022A

2023A

2024E

2025E

2026E

2027E

2028E
(₹5,000.00)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

YES BANK LTD - EBITDA Sales YES BANK LTD - EBITDA Sales Growth

EPS Trends and Forecast

₹25.00
₹20.00
₹15.00
₹10.00
₹5.00
₹0.00
2014A

2015A

2016A

2017A

2018A

2019A

2020A

2021A

2022A

2023A

2024E

2025E

2026E

2027E

2028E

(₹5.00)
(₹10.00)
(₹15.00) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
(₹20.00)
(₹25.00)

YES BANK LTD - EPS Sales YES BANK LTD - EPS Sales Growth