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Govt should have done the Yes Bank thing fast: Samir Arora

The SBI Chairman said in Davos ‘I am confident that the bank will not be allowed to fail’. The stock goes up. It should have been apparent to everybody it means the bank is about to fail, says the Founder and Fund Manager at Helios Capital.

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Last Updated: Mar 06, 2020, 02.15 PM IST
SAmir Arora-1200
What is your take on the whole YES Bank saga that is unfolding?
My first take is, this is absolutely too late. All this information was already known to RBI. It has its own director on board. Even otherwise, everybody knows if all depositors are withdrawing money from the bank, then there is a problem. This should have been solved overnight. You close it tonight, and after holiday, you say whatever is the new plan. It is useless to take one month over this, because all through this one month, there will be so much uncertainty; this is very bad.

My main issue is, it is wrong to argue with all those people who say we should not bail out companies. It is morally hazardous. That is, if you make investors a hole, then you can say you are bailing them out. But here investors would be anyway going to zero. Rana Kapoor has already gone to zero. Then, it is better for the government or somebody to take it over, manage it for two-three years and sell it back like they did with the UTI-64 scheme, where they made billions out of those ITC and Axis Bank and whatever. The US government did the same thing when it bailed out AIG and all, and at the end made serious money. If we want distressed companies to come from outside and make money on these distressed things, sometimes for the sake of the system, even the government can do it. Because you would have been very happy if JC Flowers came in at Rs 8 and then made 50 times and then you would have told the world see how foreign investors have made money, what an attractive market it is. The private sector may not be able to do it. So it is not to be viewed as a bailout, as if some major wrong thing is being done.

Yes Bank desperately tried to raise capital…
I am saying the government has to put in $2 billion, instead of now exposing itself to so many billions of collateral damage. It was a very easy one to solve, but more than that, whatever you are planning to do now, at least that could have been done overnight. Now you throw away whatever is left of these franchises.

We have the same problem in telecom; either you want to save Idea or not, but if you say I will save it after two months, then in between, millions of guys are desperately trying to leave that company and migrate to other companies and all. So you cannot do these things in public domain. For four months, you know the problem. At least have a backup plan and say okay close tonight, opening on Monday and tell this new thing; story over. Now for one month, forget about the depositors, he still save because he saves. But think of NCD holders, tier-I holders, current account holders, Demat accounts and things like that.

I have got distressed calls from people and friends and relatives of relatives saying that what will happen to their deposits, not in Yes Bank but in other banks too. Is that a valid fear now? I mean suddenly you are worried about your deposits.
Not a valid fear, I do not think that is a valid fear. I believe even in Yes Bank, the depositor is safe. Because even yesterday’s press release says it. Secondly, if you saw the Budget, which I was seeing from the US, I remember distinctly Nirmala Sitharaman said all deposits in scheduled banks are safe. At that time, I thought she would name Yes Bank, because there was no need for that line to be inserted into a Budget. After that, they said the saving insurance cover has become Rs 5 lakh. So I think the pure depositor is safe, but please note that a bank has many-many more relationships than just with savings and fixed deposit holders. So I think depositor is okay. It says so, and there is no reason to not believe that.

What about some of those people who were still hopeful as shareholders. They were getting it cheap, they could buy more quantity and someday someone will come and rescue and something will happen to Yes Bank? Do you think the regulator should just come out and halt trading in Yes Bank for now?
No, of course not. All the shorts should be allowed to make money. This is how people learn. Look at the retail investor, poor guy, that Mr Kumar, the SBI Chairman says in Davos ‘I am confident that the bank will not be allowed to fail’. The stock goes up, as if they are talking about investors. It should have been apparent to everybody it means the bank is about to fail and an effort is being made for it not to fail.
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