In a blow for Yes Bank, the Bombay High Court on Friday, January 20, set aside the order of its administrator, which had written down AT-1 bonds of more than Rs 8,300 crore. The court has given 6 weeks to Yes Bank to implement its order.

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Jignesh Shah-founded 63 moons technologies had an exposure of Rs 300 crore in AT-1 bonds of Yes Bank. The judgment will benefit all bondholders, including of course 63 moons technologies.

Sources privy to the developments told CNBC-TV18 that Yes Bank is set to appeal the Bombay High Court's ruling in the AT-1 bonds matter in the Supreme Court.

Market regular Sebi had imposed a penalty of Rs 2 crore on Yes Bank founder Rana Kapoor in September 2022 for mis-selling AT-1 bonds. It was alleged that the bank and certain officials did not inform investors of the risk involved while selling the AT-1 (Additional Tier-1) bonds in the secondary market. The sale of AT-1 bonds started in 2016 and continued till 2019.

According to Sebi, 1,346 individual investors had invested approximately Rs 679 crore in the AT1 bonds, of which 1,311 were existing customers of Yes Bank and invested approximately Rs 663 crore. Further, 277 customers had existing fixed deposits with Yes Bak and the bank prematurely closed their existing FDs and reinvested an amount to the extent of Rs 80 crore in these AT-1 bonds.

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Yes Bank, whose board of directors was reconstituted and fresh capital was infused in 2020, had issued AT-1 bonds in the nature of debentures in December 2013, December 2016 and October 2017. These bonds were written down as part of reviving the bank in 2020.

Back in 2020, Yes Bank cited the RBI’s Basel III capital regulations, which says that if the relevant authorities decide to reconstitute a bank or amalgamate it with any other lender under Section 45 of the Banking Regulation Act, 1949, the bank will be deemed as non-viable or approaching non-viability.

In such a case, the trigger for conversion or write-down of the AT-1 instruments will be activated, it said.

It pointed out that such bonds would need to be fully written down permanently before any reconstruction of the bank is undertaken. Hence, the perpetual subordinated Basel-III compliant additional tier-1 bonds issued for an amount of Rs 3,000 crore as on December 23, 2016, and the perpetual subordinated Basel-III compliant AT-1 bonds issued by the lender for Rs 5,415 crore on October 18, 2017, have been fully written down and stand extinguished.

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The lender is all set to report its December quarter results tomorrow, January 21. As per ICICI Securities, Yes Bank's third quarter will see net interest income grow to Rs 2,069.9 crore, up 17.3 percent year-over-year and 3.9 percent quarter-on-quarter.

Profit after tax is estimated at Rs 276.6 crore, up 3.8 percent YoY and 81 percent QoQ. Provisions are likely to remain elevated and the brokerage house felt stressed assets movement would be watched closely.

Shares of Yes Bank ended at Rs 19.80, down by Rs 0.35, or 1.74 percent on the BSE.

(Edited by : Shoma Bhattacharjee)

First Published:Jan 20, 2023 5:23 PM IST