Shares of Yes Bank gained 6% in Friday’s trade on November 6 to settle at ₹17.26 apiece, extending their winning run to a third consecutive session. The rally also lifted the stock’s weekly returns to 14%, marking a sharp reversal after seven consecutive weeks of losses.
Although there was no immediate fundamental trigger behind the rally, a sharp spike in trading volumes helped the stock recover from its recent weakness. Around 514 million shares changed hands across the BSE and NSE during the session, nearly 3.78 times the stock’s weekly average volume, according to Trendlyne data.
Sharp rebound after October sell-off
Yes Bank shares came under significant pressure in October, declining 28% after the Supreme Court upheld the Bombay High Court judgment against the write-off of ₹8,415 crore worth of Additional Tier-1 (AT-1) bonds, undertaken in March 2020 as part of the lender’s reconstruction.
The verdict marked a significant victory for bondholders whose investments were written off during the bank’s rescue six years ago.
On October 15, the apex court dismissed appeals filed by Yes Bank, the Reserve Bank of India (RBI), and the Union government, upholding the Bombay High Court’s January 20, 2023, judgment on the matter.
The ruling raised concerns about the potential impact on the bank’s capital position and the status of the bonds, which were written off during its 2020 reconstruction.
A day after the Supreme Court ruling, Yes Bank said its Common Equity Tier 1 (CET1) capital ratio could decline by around 250 basis points. However, the bank’s overall Tier 1 capital ratio is expected to remain unchanged at 14% on a pro forma basis.
AT-1 bond coupon payments remain in focus
In a follow-up development, Yes Bank is unlikely to pay coupons due this year on its AT-1 bonds despite the Supreme Court ruling overturning their write-off, Reuters reported last week, citing two people familiar with the matter.
The bank is preparing to seek a review of the ruling, the report said, citing one of the sources. Meanwhile, bondholders are pressing for payment of coupons that have remained unpaid since the bonds were written off in 2020.
Retail investors holding the bonds said they had not received coupon payments due on October 18, according to the report. In a letter to Axis Trustee Services, investors sought clarity on the payments and urged the debenture trustee to intervene.
However, the sources cited by Reuters said the bond documentation gives the bank discretion over coupon payments, and the matter can be considered only after the AT-1 bonds are reinstated on the bank’s balance sheet.
The Supreme Court’s decision has therefore left investors assessing both the potential capital implications for Yes Bank and the unresolved question of coupon payments to bondholders.
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