NEW DELHI: The YES BankNSE -0.68 % management is optimistic it would be able to raise $1.2 billion by December end by roping in strategic investor/investors.

If things go as per the plans, the move should address some apprehensions around the private lender’s status as a going concern.

But there is more than one concern haunting the bank.

In the past, there have been exceptions like Catholic Syrian Bank, where RBI approved such large deals.

come back for the private lender. A few of them even think the bank may end up reporting losses for the ongoing financial year, as gross NPAs continue to rise. Most of them have ‘sell’ ratings on the stock.

Nomura India says the bank would raise $1.2 billion by selling shares at Rs 60 a share, which implies a 50 per cent dilution in the bank’s equity and a 30 per cent stake may be issued to a single investor.

If that happens, “CET-1 ratio could increase to 10.5 per cent. This, coupled with Rs 1,500 crore of quarterly pre-provision operating profit (PPOP), could materially reduce risks related to the bank’s going concern status,” it said.

Morgan Stanley has cut its price target for the stock to Rs 40 from Rs 55 earlier. Citi has reduced its target to Rs 50 from Rs 80. CLSA has slashed its target for the stock to Rs 75 from Rs 110. Goldman Sachs sees the stock at Rs 62. Macquarie target has ke .

On Monday, the stock fell 10 per cent to hit a low of Rs 59.95 following the flurry of price target downgrades. The stock later recovered and traded at Rs 64.25, down 3.53 per cent at 9.50 am.

YES Bank said it incurred Rs 600.08 crore loss for September quarter due to a one-off DTA adjustment of Rs 709 crore on account of the change in the corporate tax rate.

But investors seemed more concerned about the rise in gross slippages, which stood at Rs 5,945 crore for the quarter.

Gross non-performing assets (GNPA) for the quarter jumped to 7.39 per cent from 5.01 per cent in June quarter and 1.6 per cent in the year-ago period.

“We had anticipated a couple of resolutions during the quarter that went by, which were there in the public space as well, that they would get done. But for whatever reason, they haven’t and the overall credit environment continues to remain reasonably challenging,” CEO Ravneet Gill told ET.

On capital raising plans, the lender on Friday claimed it had received a binding offer from a global investor for a $1.2 billion investment subject to regulatory and other necessary approvals. It also claimed to have received multiple other non-binding but strong bids from marquee domestic and global institutional investors and family offices

“There are two parts to this. The board part of it will happen fairly quickly, but regulatory and shareholder approvals will also be required.

My sense is, before the end of the calendar year, we should be able to get the capital in,” Gill said.

Kotak Institutional Equities said dilution of book value would be high as the bank would make higher provisions on this capital raised.

“We are still unsure of growth, excess capital and path of RoE improvement, given the changes in lending environment and progress of building the bank’s liability franchise, which is currently inferior to its peers, and also profitability,” it said.

“Stability of the senior management is critical at this juncture. We still see a lot of headwinds, which give us discomfort to change our view on the bank despite a steep price decline,” it said.

The brokerage has a ‘sell’ rating on the stock with a price target of Rs 55, valuing the stock at 0.6 times September 2021E book.

Phillip Capital said that while clarity on capital raising plan is a big positive, asset quality continues to remain a key concern.

“With ‘BB’ and below rated book increasing to 10 per cent, we expect the bank to continue to report higher slippages over the next few quarters. We assume slippages of Rs 21,700 crore for FY20 and Rs 9,200 crore for FY21. As a result, we expect GNPA/NNPA to rise to 9.3 per cent/5 per cent in FY20/21. We expect the bank to report loss in FY20 and an RoA of 0.13 per cent in FY21,” the brokerage said, even as it lowered its target price for the stock to Rs 50 from Rs 85 earlier.

CLSA said earnings headwinds will continue and balance sheet consolidation is likely until capital is raised. Morgan Stanley said net stressed loans at over 150 per cent of 1CET 1(Common Equity Tier 1) is concerning. PPoP is likely to come under further pressure against this backdrop, it said.