Telecom Status Report: VLR numbers at the end of May'19

TRAI's report on Subscriber numbers at the end of May'19 is out. The numbers for Top-3 players, which together account for about 90% of the market-share, have progressed on expected lines. Reliance Jio continued to lead the charge with addition of 8.1 million subscribers in May'19. Bharti Airtel lost 1.5 million, while Vodafone Idea lost 5.7 million subscribers during the month.

The bigger news that grabbed the headlines was that Reliance Jio has now overtaken Bharti Airtel to become the No.2 player in the Wireless telecom industry, in terms of Total Subscribers. Reliance Jio's Total Subscriber count has reached 323 million, compared to Bharti Airtel's 320 million at the end of May'19. This is something that was expected to happen sooner or later. Reliance Jio is expected to topple the current No.1, Vodafone Idea, sometime before the end of end of this year.

But if we look at the Active Subscriber base count, i.e. the VLR base of each of these three operators, Bharti Airtel is still very comfortably placed in the No.2 spot, with 320 million active subscribers. It lost 4 million Active subscribers during the month. On the other hand, Vodafone Idea continued to lose Active Subscribers at a faster pace. After the big slump of 26 million in April'19, Vodafone Idea saw it's Active users base drop by another 8 million during May'19. It's lead over Bharti Airtel is now just 14 million.

At the same time, Reliance Jio's Active users base increased by a mere 3 million, compared to the 8 million of Gross additions it did. It still trails the Top-2 by a good margin, with an Active subscribers base of 268 million. If the current trend continues for a few more months, Bharti Airtel will become the No.1 player toppling Vodafone Idea, maybe in another 2 or 3 months, well before Reliance Jio catches up with these 2 and overtake them.

Vodafone Idea seriously needs to ramp up it's Integrated network rollout to more circles and simultaneously start with wider marketing campaign. Since it is currently focusing on the Network rollout part, it has stopped Advertising it's brand & services on a large scale. This is clearly hurting the operator's numbers month after month. The operator is said to have completed the Integrated network rollout, which is expected to have much larger Capacity & Speed, in about 10 circles. Vodafone Idea is expected to complete the rollout across the country by the end of this year.

Bharti Airtel has been Advertising it's brand & services very aggressively, which is helping it gain 4G subscribers month after month, though at a pace slower than Reliance Jio. Industry reports suggest that a major portion of Reliance Jio's subscriber additions are happening for the Jio Phone subscribers, which are actually low-revenue subscribers.

We will get more details on each operator's performance in their Quarterly Results presentations this month.

Yes Bank's June'19 Shareholding: Some green signals.

The April to June'19 quarter has probably been the worst quarter faced by Yes Bank at the stock market. From a level of around Rs.275 on 1st April 2019, Yes Bank's share price collapsed nearly 64% to end around the Rs.100 mark at the end of June 2019. The price fall started a few days before the announcement of Q4FY19 Results, as if some people had got a whiff of the huge Provisioning and the resulting Net Loss that the Bank was to declare.

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Yes Bank's share price has continued to fall more & more after the announcement of Q4FY19 numbers. Hence it was quite evident that there must have been massive changes in Shareholding structure of different segments of investors. Following table shows the Shareholding pattern of various segments over the last 5 quarters:

There has been no significant change in Promoters Shareholding over the last 5 quarters. But there has been significant changes in the Shareholding of other 2 segments over the last 5 quarters.

Institutional holdings were at a high of 67.67% in June'18, which dropped to 57.7% in December'2018. During this period, Yes Bank's share price dropped from Rs.330 levels to Rs.180 levels. By March'2019, the number again increased to 61.31%, which resulted in the share price rebounding to about Rs.275 levels. And now during June'19 quarter, their holdings have dropped to a low of 50.72%, resulting into a massive share price erosion of 64% during the quarter.

In the Institutional category of Investors, the FPIs are the largest holders and also the biggest influencers of Yes Bank's share price. Out of the 17% reduction in Institutional shareholding between June 2018 to June 2019, the FPIs contributed to about 9% drop. Mutual Funds contributed to 5% reduction and Insurance Companies the rest. Amongst the Mutual Funds, Birla Sunlife, HDFC AMC and Reliance MF have been the biggest sellers. From Insurance companies, ICICI Prudential was the biggest seller. LIC of India has not just held on to it's stake in Yes Bank, in fact it even increased it by 0.8% in December 2018 quarter to take it to almost 8.9% now. LIC is probably the single largest non-Promoter shareholder in Yes Bank currently.

Considering the volatility in FPIs buying & selling pattern of Yes Bank's shares, they could very well start buying again this quarter, especially after Yes Bank's Q1FY20 numbers clearly suggest that the situation is not at all as bad as the market was fearing during the previous quarter.

Coming to Non-Institutional Shareholders, the Small Retail shareholders are clearly doing exactly opposite of what the FPIs are doing. These shareholders buy when the FPIs are selling and they sell when the FPIs are buying. That means they buy when the price is dropping and they sell when the price is rising. This lot of shareholders seem to be doing the clever thing. Between June 2018 and June 2019, their shareholding has increased from 6.27% to 18.72%.

A few Corporates too seem to have got interested in buying a stake in Yes Bank as the price was falling. This category has seen it's shareholding increase from 2.53% to 4.63% in just the June 2019 quarter. This is a positive sign as these shareholders are likely to be better informed investors and they know the risks & rewards of investing in Yes Bank's shares in the current situation. NRIs too have increased their holding from 0.89% to 1.21% in the quarter gone by.

But the biggest positive sign is the fact that Employees of Yes Bank have acquired nearly 3.5 crore shares of the Bank, which is 1.53% stake in the Bank, during the June 2019 quarter. A total of over 600 employees of Yes Bank have together acquired over 3.55 crore shares during the quarter. This is the single biggest signal that things are not as bad with the Bank as the market is fearing or the rumour mills are spreading.

It will be interesting to see how the share price of Yes Bank behaves in this quarter and how the shareholding pattern evolves.

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Yes Bank Q1FY20: This ship is NOT Sinking

Following are the important points from Yes Bank's Q1FY20 Numbers and Investor Presentation:

* Total Income stood at Rs.9089 crores, jump of 8% Q-o-Q and 10% Y-o-Y.

Interest Income stood at Rs.7816 crores, flat Q-o-Q and 19% higher Y-o-Y. This growth is despite the fact that some previous Interest Earnings related to recent NPA accounts were reversed. Other Income stood at Rs.1273 crores, 139% higher Q-o-Q and down 25% Y-o-Y. Other Income was boosted by Treasury Gains of about Rs.450 crores.

* Operating Profit stood at Rs.1959 crores, jump of 48% Q-o-Q and down 20% Y-o-Y.

Operating Expenses came at Rs.1594 crores, lower by 7% Q-o-Q and an increase of just 9% Y-o-Y. Some bit of serious savings on operating costs clearly evident. Interest Expended stood at Rs.5535 crores, higher by 3.4% Q-o-Q and by 27% Y-o-Y.

* Provisioning for the quarter stood at Rs.1784 crores, compared to Rs.3662 crores in previous quarter and Rs.626 crores a year ago.

Provisioning is said to have included about Rs.1100 crores of one-time Marked-to-Market losses on a few investments due to rating downgrade of the assets. That means NPA Provisioning stood at just about Rs.700 crores.

* Net Profit stood at Rs.114 crores, compared to a Loss of Rs.1507 crores in the previous quarter and a Profit of Rs.1260 crores a year ago.

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* Retail Term Deposits increased 38% Y-o-Y and 8% Q-o-Q to a figure of about Rs.63,300 crores.

This is excellent news, especially in the backdrop of the terrible quarter Yes Bank faced at the stock market, while being surrounded by huge amounts of rumour-mongering, claiming that the Bank is set to face a huge Liquidity crisis and will find it difficult to survive. Strong growth in Retail Term Deposits means that customers are reposing faith in the Bank.

* Corporate Term Deposits too grew by 13% Y-o-Y and 1.2% Q-o-Q to a figure of about Rs.93,400 crores.

Even the corporate clients seem to have held faith in Yes Bank and did not get too affected by the rumours in the Stock market.

* Retail Loan Book grew 43% Y-o-Y and 7.2% Q-o-Q to reach a figure of about Rs.43,200 crores.

Retail segment contributed about 61% of the incremental growth in Yes Bank's overall Loan Book. It's other segments, i.e. Corporates and MSMEs too continued on the growth path, though at a slower pace of about 5 to 6%. Yes Bank's Corporate Loan book now stands at about Rs.1,31,800 crores.

* Yes Bank continues to post strong growth in all kinds of Digital Transaction processing with Market Leadership in many of them.

Yes Bank processed about 44 million IMPS transactions, 85 million AePS (Aadhar enabled Payment System) and 767 million UPI transactions during Q1FY20, with strong double-digit growth Q-o-Q.

* Gross NPAs have increased to Rs.12,092 crores and Net NPAs to Rs.6,883 crores.

This is only major sore point from Yes Bank's Q1 numbers. Most of the NPAs seem to be coming from the EPC industry segment. The most likely accounts are from Reliance Infrastructure subsidiaries and Essel Group companies. But the promoters of both the groups have promised to repay all loans by selling their Assets. Even Yes Bank management seems to be fairly confident about recovery from most of these NPA accounts.


Do Share your thoughts on this report or Views on the points discussed. Awaiting your Comments.