Bombay HC rejects write-off of Yes Bank’s AT1 bonds. Which MFs will benefit?
1 min read . Updated: 20 Jan 2023, 05:17 PM IST
PremiumAbout 32 individual schemes of mutual funds were exposed to Yes Bank debt and total exposure stands at ₹2,848 crore
The Bombay High Court has set aside Yes Bank and Reserve Bank of India’s (RBI) decision to write-off ₹8,500 crore worth of additional tier 1 (AT-1) bonds of Yes Bank, according to people in the know. This order was passed in a batch of petitions filed by bond holders including financial institutions as well as retail individual investors.
About 32 individual schemes of mutual funds were exposed to Yes Bank debt and total exposure stands at ₹2,848 crore.
The largest exposure of ₹637.8 crore was with Nippon India Equity Hybrid Fund (8.11%) of its assets, followed by Nippon India Credit Risk Fund at ₹540.1 crore (10.96% of its assets) and Nippon India Strategic Debt Fund at ₹436.3 crore (21.25% of its assets).
Fund houses including Nippon India Asset Management Co., Baroda Asset Management India Ltd, UTI Asset Management Co. Ltd, Franklin Templeton Asset Management (India) Pvt. Ltd, PGIM India Asset Management Pvt. Ltd have side-pocketed their exposure to Yes Bank.
Side-pocketing is the separation of a part of the portfolio in lieu of bad debt. Investors can exit the remaining portfolio without giving up their chance of debt recovery, which will accrue to the side-pocketed units. Retail investors were also mis-sold these bonds in large numbers.
Apart from institutional investors, several other individual bondholders had exposure to the AT1 bonds of Yes Bank.
Clarity is awaited on whether the ruling will be challenged further by Yes Bank and RBI.
