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Case Study

To Say Yes or No to Yes Bank Ltd - Valuation Approaches

M. Sriram, Assistant Professor - Finance, SDMIMD, Mysore
Yes Bank, relative valuation, P/E ratio, P/BV ratio, CAR, NPA, NIM


On 11th July,2019, Ganesh Ram an MBA (Finance) from a premier B-School in India is appointed as an analyst in a leading Investment Banking firm. His first assignment is to advise one of the clients of the firm on whether it was feasible to invest in Yes Bank Ltd at the current market price.  The client has zeroed in on Yes Bank as it was ranked as the fourth largest private bank in India’. The bank had surpassed the entire Indian Banking Industry on parameters such as net interest margin, gross NPA, net NPA etc during 2013-2017. Also, during 2018-19 with the news spreading thick and fast about the bank’s exposure of more than one third exposure to sensitive sectors such as telecom, steel, real estate etc., the markets became jittery and one could witness volatile movements in the bank’s price. For instance, the price of the share has seen a drastic fall from Rs. 150 to Rs. 91 (During March-July, 2019) In the wake of meteoric downtrends, Ganesh Ram wonders whether advising his client to invest in this bank at the current market price will yield any significant returns. More so, it becomes pertinent to analyse whether the bank can command the current valuation in the immediate future. The decision would of course be based on identifying appropriate valuation tools for analysing banks and taking a final call on Yes Bank.

Case Learning Objectives

The case aims to understand the performance of a bank using key parameters associated with the bank/banking industry. Key parameters such as net interest margin (NIM), Gross Non-Performing Assets (GNPA), Net Non-Performing Assets and Capital Adequacy Ratio (CAR) will be analysed to assess the performance of the bank. The objective is to understand the status of the banking industry and how Yes Bank has fared in terms of performance when compared to the Industry figures. The case will also help participants to understand various approaches to valuation of a company’s stock, its approach and suitability. The case will also help participants to learn as to why conventional methods like free cash flow to firm (FCFF), free cash flow to equity (FCFE) may not be applicable to value banking companies and why relative valuation matrices such as Price to Earnings Ratio (P/E), Price to Book Value Ratio (P/BV) will be relevant to address the issue in the case. Finally, participants will understand as to how decisions are taken using relative valuation techniques.

  • Pub Date:
    13 Nov 2020
  • Source:
  • Discipline:
    Financial Management,E-Commerce,Accounting / Banking & Financial Services
  • Product#:
  • Keywords:
    Yes Bank, relative valuation, P/E ratio, P/BV ratio, CAR, NPA, NIM
  • Length:
    Pdf : 9 page(s) ,

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