Yes Bank Shares Tumble 14.5%; Market Valuation Falls Rs 9,605 Cr

New Delhi: Shares of Yes Bank tanked 14.5 per cent on Thursday after the Supreme Court upheld an order of the Bombay High Court which quashed a decision of the company’s administrator to write off Additional Tier 1 bonds worth Rs 8,415 crore in March 2020.

The stock dropped 14.43 per cent to end at Rs 18.15 on the BSE. During the day, it crashed 19.94 per cent to Rs 16.98 — the 52-week low.

At the NSE, the stock tumbled 14.52 per cent to end at Rs 18.12.

The company’s market valuation eroded by Rs 9,605.05 crore to Rs 56,971.16 crore.

Additional Tier 1 (AT-1) is a perpetual bond issued by banks to increase their capital base, and they are riskier than traditional bonds, with higher interest rates. The RBI can ask a bank to cancel them if the bank is in trouble.

A bench comprising Justices Dipankar Datta and Augustine George Masih dismissed appeals challenging the Bombay High Court’s January 20, 2023, judgment, which had quashed the write-off.

“We see no reason to interfere with the impugned judgment. The appeals are dismissed,” the bench said.

The top court said the triumvirate of the RBI, the Yes Bank administrator and the Yes Bank in conducting the entire affair of dealing with the bonds worth more than Rs 8,514 crore was questionable.

“Putting the investors to such uncalled-for risk could have well been avoided. The purpose of the AT-1 bonds is imperative: it acts as a safety barrier to the Bank from collapsing altogether. That purpose could have been served had the RBI and Yes Bank acted in accordance with the terms of the Master Circular.

“The RBI was a mere bystander, allowing the CET1 ratio of Yes Bank to drop to an astonishing low of 0.6 per cent while the business of Yes Bank was being carried out in a clandestine manner. It cannot be denied that material irregularities in the functioning of Yes Bank were noticed much prior; criminal prosecution has also been initiated against the personnel of Yes Bank. However, to have the investors at the receiving end of the administrative lapses would be highly unfair,” the bench said.

The top court said the administrator had no authority to write off the bonds in the absence of a specific provision in the reconstruction scheme.

The High Court had on January 20, 2023, quashed the decision of the Yes Bank taken on March 14, 2020, to write off the bonds, noting that the administrator did not have the authority to take such a decision.

(Disclaimer: Except for the headline, this article has not been edited by HDFC Sky editorial team and is auto-generated from PTI feed.)