Yes Bank, India’s fourth largest private lender and a stock market darling for years, is now being shunned by investors.

In the past month alone, the bank’s stock has lost nearly half its value, after the lender reported a record loss for the quarter ended March 31, 2019. From Rs 255 ($3.66) on April 18, its shares closed at Rs 134.55 apiece on the Bombay Stock Exchange on May 17.

Following the March quarter loss, several brokerage houses including Macquarie, HSBC, Citigroup, and Morgan Stanley have either a “sell” rating on the stock or remain “underweight”.

Trouble began around September last year when the Reserve Bank of India asked co-founder Rana Kapoor, the bank’s Chief Executive Officer since 2004, to step down. On March 1, Ravneet Gill, the former India head of Deutsche Bank, took charge as the first Chief Executive Officer from outside the founding family.

Before this RBI decision, Yes Bank’s shares were hovering at levels close to Rs 400 apiece.

Data: BSE
Data: BSE

While the central bank never offered a reason for booting out Kapoor, it is widely believed that repeated under-reporting of bad loans on the bank’s books in financial years 2016 and 2017 led to his exit.

Since then, attempts to clean the mess up have only aggravated matters at the bank.

From bad to worse?

The record loss of Rs1,507 crore posted in the March quarter of the last financial year, came after Yes Bank decided to make provisions for loans that could go bad in future. In the year-ago quarter, the bank had posted a profit of Rs1,179.4 crore.

The lender also announced that the cleanup of its books could take time and put Rs 10,000 crore worth of loans on the watchlist, as these have the potential to turn sour in the future.

“This spooked investors,” said Sidharth Purohit, research analyst at SMC Global Securities. “To begin with, the losses and the higher NPA [non-performing assets] in the quarter ended March, and on top of that there is now a watchlist as well which means troubles may continue.”

In the March quarter, the share of gross non-performing assets at the bank more than doubled to 3.22% of overall loans, from 1.28% in the year-ago period.

It is likely that the share of bad loans can increase further. “The bank has exposure to some stressed groups that have seen fast credit deterioration in the last six months,” said Jindal Haria of India Ratings and Research. “So, if there are significant delays in resolution plans or any other unforeseen trouble, then there is a possibility that the watchlist of Rs10,000 crore may be breached.”

Among firms it has exposure to are the Anil Ambani-led Reliance Group and the ZEE group, both in the red.

More pain

As the clean up continues, it also means the bank is unlikely to see the scorching revenue growth of between 40% and 50% it had witnessed in the past, believe analysts. This means the pressure on the stock is likely to continue for the next few months.

One important reason why the investors loved the stock was Yes Bank’s ability to raise capital at will which has now been significantly impacted, added Haria.

“Yes Bank had a core equity tier 1 capital [a measure of available capital] of about 8.4% at end of March 2019,” he said. “This is substantially lower than better-rated banks and if they raise capital at this price, which they need to, then it will come at a higher price as the stock has corrected and it will lead to more dilution.”

Recently, the RBI also appointed R Gandhi, a former central bank deputy governor, as an additional director on the board of Yes Bank for two years. This is an unusual move and signals that the regulator wants to keep a close eye on the bank considering the governance issues that were highlighted under Kapoor’s term, believe experts.

Given the concerns over RBI’s vigil, it is unlikely that the stock is likely to pull up any time soon.

“At the moment, there are other banks doing well, so the investors have choices,” said Purohit. “And the lender needs to assure the investors over the next few quarters that its strategy is paying off. Only then would one want to bet money on it.”

Yet, some see a silver lining.

“Adequate provision, attempts to clean up the bad loans, and a shift in strategy such as improving deposits should augur well for the bank in the coming quarters,” said Haria.

This article first appeared on Quartz.