Yes Bank Shares Plunge 15% After Court Restores Bondholders’ Claims

Yes Bank lost ₹9,605 crore in market value in one day as its shares fell 14.5%, their steepest daily drop in six years. The slide followed a Supreme Court ruling that left ₹8,415 crore of the bank’s Additional Tier 1 bonds outstanding, undoing a write-off made during its 2020 rescue. The ruling brought a long fight back into focus for investors and the bank alike. ^2,3

The ₹8,415 crore write-off began in March 2020, when an administrator appointed during Yes Bank’s reconstruction cancelled the bonds. Bondholders challenged the move, and the Bombay High Court overturned it in January 2023. On October 15, the Supreme Court dismissed appeals by Yes Bank, the Reserve Bank of India and the Union government. It agreed that the final reconstruction plan did not give the administrator specific authority to write off the bonds. ^5,10

That missing authority matters because the bonds were meant to absorb losses when the bank was under stress. But the court said investors should not bear the cost of administrative mistakes. The bonds carry coupon rates of 9.5% and 9%; the court said annual coupons remain payable under their terms. Yes Bank estimates that restoring the principal could cut its Common Equity Tier 1 ratio by about 250 basis points, while its Tier 1 ratio would remain 14%. Analysts say the hit could limit the bank’s growth or make it necessary to raise capital. ^1,3,12

That 250-basis-point estimate is one reason investors reacted sharply. Citi kept its “Sell” rating and lowered its price target to ₹17.50 from ₹22, warning that the ruling could weaken Yes Bank’s capital cushion. The bank says it is reviewing the judgment and considering legal options and other steps to strengthen capital. The court’s decision does not require immediate cash repayment. Yes Bank’s next step is to assess how to account for the bonds and meet their terms. ^3,4,12