YES Bank is facing a substantial financial challenge after the Supreme Court reportedly nullified its decision to write off Additional Tier-1 (AT1) bonds worth Rs 8,415 crore. This ruling has created a potential liability estimated between Rs 13,000 crore and Rs 15,000 crore, including accrued interest, according to an analysis by Kotak Institutional Equities.
The brokerage firm highlighted that this outcome could severely impact YES Bank's capital structure. Based on their estimates, the Common Equity Tier-1 (CET-1) ratio could fall by 450 basis points, from its current 14% to 9.3%. Such a decline significantly raises the probability of the lender needing to raise additional capital. Furthermore, Kotak projects a 25-30% impact on the bank's net worth for the fiscal year 2026.
The news has already led to a notable negative reaction in the market. YES Bank's shares closed 14.43% lower on Thursday, experiencing an intra-day dip of 20% to Rs 16.98 from its previous close of Rs 21.21. In the subsequent trading session, the stock continued to fall by 3% to Rs 17.55. This market reaction has resulted in shareholders losing nearly Rs 11,260 crore in market capitalisation since October 14, with the bank's market cap dropping to Rs 55,652 crore.
Kotak Institutional Equities has maintained its 'sell' rating on YES Bank, setting a fair value of Rs 19. The brokerage indicated it would reassess its valuation and rating following management commentary and the bank's upcoming earnings report.