Will Yes Bank's lingering court battle end next week?

Saikat Das
moneycontrol.com

The long-drawn legal battle over a board membership in the Yes Bank may come to an end next week. The Bombay High Court is expected to deliver its final judgment in the case between Yes Bank and Madhu Kapur as well as her daughter Shagun Kapur Gogia, a source told moneycontrol.com.

Madhu & Shagun

Madhu Kapur is the wife of late Ashok Kapur, a co-promoter of the bank, who was killed in the 2009 Mumbai-terrorist attack. Shagun is their daughter. Almost a quarter back, Madhu had filed a petition primarily staking a claim to include her daughter as a board member. Rana Kapoor, the MD & CEO of the bank, is the co-brother of late Kapur.

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Current status in the case

Justice S J Kathawala is hearing the case at the Bombay H C. In the last lap of the court battle, Madhu's counsel has already argued the case in front of the judge. Yes Bank is expected to start the same from Wednesday. Maharashtra Advocate-General Darius J Khambata is the counsel for Madhu Kapur.

"Shgaun's counsel has so far argued for about two hours on Monday and Tuesday. They will complete it tomorrow (Wednesday). On the other hand, Yes Bank is likely to do the same for 4-5 hours. Hence, the final court judgment is expected next week only," a person with the direct knowledge of the development told moneycontrol.com on conditions of anonymity.

It is learnt, the petitioner's counsel was interpreting the Article of Association with reference to section 110 (B). Besides, attempts were made to explain the inheriting rights of a partner of a firm.

Amicable solution

Of late, the family feud turned a little acerbic with all efforts for amicable solutions falling flat. Recently, both the families met in an occasion wherein some efforts were reportedly made to burry the hatchet outside the court but in vain.

An embarrassment for Yes Bank?

According to an investor relation manager with a large broking house, institutional investors are very keen to know about the Yes Bank legal issue. There may not be any direct correlation with the bank performance but undoubtedly, it is a huge embarrassment for the bank.

"The matter has turned out to be an ego fight. This is however, a trifling issue. It could have easily been resolved through out of the court settlement. If the antagonism continues further, the bank's concentration might shift from business to tackling legal issues after a certain point," the person said on conditions of anonymity.

Time consuming affair…

Investors, who are a little apprehensive of its outcome and impact on the bank's performance, evinced huge interest in the legal battle. Analysts tracking the bank did not hint at any probable negative effect.

However, the lingering nature of the legal bouts has prompted a section of analysts to start bating an eyelid.

"We continue to hold a 'buy' recommendation on the stock. While the issue is consuming some management time, we don't expect it to affect Yes Bank operationally. The bank has taken a principled stand on the issue and it sets a clear precedence on leadership related issues," said Ravikant Bhat, banking analyst from SBICAP Securities.

Stock plunged

Since last one month Yes Bank shares tanked nearly 37 percent as against a fall of 15 percent in the Bank Nifty - the broader index for banking stocks. A combination of liquidity issues and sharp rise in bond yields were the primary reason behind such a sharp slide.

The bank mostly relies on money market to borrow short term wherein interest rates have shot up due to regulatory measures. Moreover, the bank maintains a book for credit substitute - a form of indirect credit wherein the lender underwrites bond issues of rated companies. As on June 30, 2013; it stood at 13,240 crore out of total book at Rs 61,240 crore.