Yes Bank share price sees sharp fall of 15% after Supreme Court ruling on ₹8,400 crore AT-1 bond write-off

Shares of Mumbai-based private lender Yes Bank Ltd

. fell 15% on Thursday, October 15, after the Supreme Court ruled against the write-off carried out by the lender of its Additional Tier-1 (AT-1) bonds worth ₹8,400 crore, as part of its rescue and restructuring exercise in 2020. This is the biggest single-day fall for the stock since July 2020.

The Supreme Court has upheld the decision of the Bombay High Court, that had quashed the write-off the AT-1 bonds. The Apex Court held that Yes Bank will have to honor the ₹8,400 crore AT-1 Bonds as per the prescribed coupon rate of 9.5% and 9%.

The court also observed that the write-off of the ₹8,400 crore AT-1 bonds could not have been done by the Yes Bank administrator and was not consistent with the master circular.

The value of the AT-1 bond is a significant number as it is more than double of the net profit that Yes Bank had reported in all of financial year 2026. Yes Bank had reported a net profit of ₹3,476 crore in financial year 2026, a growth of 44.5% on a year-on-year basis.

During Yes Bank's rescue in 2020, the administrator had approved the write-off of these AT-1 bonds, stating that the decision is necessary for the bank's survival. Yes Bank had raised ₹8,415 crore through the issue of these AT-1 bonds back in 2016 and 2017.

Bond holders represented by Axis Trustee Services argued against a write off, and had questioned the legal authority of the administrator to write off bonds, claiming that only RBI could approve any such write off.

Under the Basel-III regulations, AT-1 bonds are used as hybrid capital instruments designed to absorb losses when the bank hits a point of non-viability. The write-off meant that the AT-1 bondholders lost their entire principal. According to information available, over 97% of the AT-1 bondholders were individual bank customers.

Back in 2021-2022, market regulator Securities and Exchange Board of India had penalized former Yes Bank MD & CEO Rana Kapoor for mis-selling, citing inadequate risk disclosures, and targeting unsuitable clients including senior citizens.

The decision taken by the administrator to write-down the AT-1 bonds was taken quashed by the Bombay High Court in January 2023. Yes Bank had appealed against the decision in the Supreme Court back in March 2023.

Shares of Yes Bank are trading 15% lower on Thursday after the Supreme Court Judgment at ₹18.02. The Stock has also turned negative on a year-to-date basis. The fall has resulted in over ₹8,300 crore of Yes Bank's market capitalisation being wiped out in a matter of minutes.