MUMBAI:Yes Bank MD & CEO Prashant Kumar said that there was no compulsion on the bank to pay interest on or redeem its additional tier-1 (AT1) bonds, which are the subject of litigation with investors. The Bombay high court on Friday had struck down Yes Bank’s order extinguishing Rs 8,415 crore of these bonds as part of arestructuring scheme
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Kumar said that the worstcase scenario for the bank was that the common equity tier-1 capital — comprising of pure equity without any subordinate debt — would come down. However, the capital adequacy would be maintained as the AT1 capital increases. “The judgment has only said thatour notification related to write-down is not upheld. These are perpetual bonds and it not mandatory to exercise the call option,” said Kumar. He added that the bank was going in for an appeal against the high court order.
“On previously due, unpaid interest payout, according to the regulation, it is the discretion of the bank for payment of coupon.
There is no cumulative nature of coupon payment, and in a financial year when the bank is in losses, the bank cannot pay the coupon,” he said. The coupon payment refers to the periodic interest payout on bonds. In AT1 bonds, the decision to redeem the bond or make coupon payments is subject to the bank’s financial performance.
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Yes Bank on Friday reported a net profit of Rs 52 crore for the quarter that ended December 2022, a decline of 80% over the year-ago period. The bank’s operatingprofit stood at Rs 914 crore, an increase of 25% year-on-year and the highest in the last eight quarters.
The decline in net profit was due to an increase in provisioning on bad loans amounting to around Rs 40,000 crore that were sold to JC Flowers ARC. While the bank cannot recognise gains on individual bad loans sold to the ARC, it has to make provisions where the valuation is lower.
During the quarter, the bank also raised Rs 8,900 crore from the private equity funds of Carlyle and Advent. The investment was through a combination of equity and warrants to ensure that SBI’s stake did not fall below 26% before March 13, 2023. This is when the three-year lock-in for investors who led the bank’s bailout in March 2020 ends.
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Kumar said that the investors were aware of the dispute with the investors over the write-off of the AT1 bonds and that the order would not have any impact on the investment.
