Yes Bank's evaluating capital actions to back growth plans
"The manner and the timing of reinstatement of the bonds as well as payment of the coupon is also under assessment," Niranjan Banodkar, CFO, Yes Bank told analysts over a call after the earnings.
Mumbai-based Yes Bank is currently assessing various capital actions in response to the Indian top court's decision voiding the 2020 write-down of additional Tier 1 bonds. This move has led to a 17% stock decline since Thursday, as the bank's Common Equity Tier 1 (CET1) ratio, or core loss-absorbing capital, is expected to decrease by more than two percentage points to 11.4% by September. CFO Niranjan Banodkar played a clarifying role during an analyst call following the earnings release.
Banodkar revealed that the timing and manner of bond reinstatement, as well as the payment of accrued coupons, are under evaluation by the bank. The repayment to bondholders, of which Japan's Sumitomo Mitsui Banking Corp holds the largest stake with 24.9%, would depend on the specific terms of the bonds' information memoranda and the Supreme Court's judgment. The overall Tier 1 capital ratio for Yes Bank is projected to remain close to 13.7%, which surpasses the minimum required by Indian regulations.
Yet, the bank is not compelled to immediately pay the bondholders. Instead, the principal bond amount of Rs 8,415 crore will be moved from the bank's reserves to borrowings or liabilities on its balance sheet. This adjustment will entail no repayment or cash outflow. Banodkar further explained that the bank is currently evaluating potential capital measures to ensure that it maintains adequate capitalization to meet its growth objectives.
The lender remains committed to evaluating various areas of capital actions while considering regulatory requirements, the cost and availability of capital, shareholder interests, and long-term objectives. Yes Bank's managing director and CEO Vinay Tonse highlighted this during the analyst call. The Supreme Court's decision on October 15 upheld the Bombay High Court's ruling, which reversed a key measure taken during Yes Bank's reconstruction in March 2020.
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