In freefall! Yes Bank crashes 20% after SC ruling on AT-1 bond write-off

Yes Bank’s share price came under pressure on Thursday after the Supreme Court upheld the Bombay High Court's ruling quashing the lender's Additional Tier-1 (AT1) bonds worth ₹8,415 crore.

 

On Thursday, as of 03:06 PM, Yes Bank’s share price was trading 14.15 per cent lower at ₹18.21 per share on NSE. In comparison, Nifty 50 was up 1.45 per cent at 22,951. In intraday trade, the stock crashed 20 per cent to touch the day's low at ₹16.96 per share. 

A Bench of Justices Dipankar Datta and AG Masih dismissed appeals filed by Yes Bank, the Reserve Bank of India (RBI) and the Centre challenging the high court's January 2023 judgment. “We have decided on merits, and our answers to both the questions are in the negative. Therefore, for the reasons assigned in our judgment, we have held that we see no reason to interfere with the impugned judgment. The appeals are dismissed,” the Bench said, reported LiveLaw.

 

 The dispute stems from the RBI-led reconstruction plan for Yes Bank in March 2020, under which AT1 bonds worth more than ₹8,300 crore were written down.  

The Yes Bank Reconstruction Scheme, 2020, was framed by the RBI under the Banking Regulation Act after Yes Bank faced a severe financial crisis in March that year. In simple terms, it was the rescue plan designed to prevent the bank from collapsing. 

 

Avinash Gorakshakar, founder and head of research at Avinash Mentor Research Services said this development was completely unexpected; what the lender does next is something the markets would like to hear about. Until then, there is a lot of uncertainty and the reason why the stock is down. This is a major jolt for the bank.

 

He added that, “unless we get some clarification from the management and the bank on what exactly the solution will, I don't see the stock going up”

 

Gorakshakar added that the quarterly numbers and the commentary from the management on this issue will be very important to watch. The markets will want to know whether the obligations will be honoured, whether there will be a default, or what kind of solution emerges. “I think there is no point in entering the stock at this juncture,” he said. 

 

Vipin Kumar, AVP research at Globe Capital Market said that the shares of Yes Bank fell sharply following the Supreme Court verdict upholding the Bombay High Court's decision to quash the write-off of ₹8,415 crore in AT-1 bonds. “The technical chart structure on long-term charts is negative, and a decisive close below the ₹16 level will further dent sentiment, which could push the stock toward ₹12 in the near term,” he added. 

 

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