Yes Bank case: Nippon India MF expresses concern over RBI's proposal to write-down perpetual bonds
The fund house, which has an exposure of over Rs 1,800 crore to Yes Bank debt, last week created segregated portfolios in its schemes. This came after the downgrade of debt instruments of Yes Bank to 'D', which is below investment grade, by ratings agency Icra.
Yes Bank was last week put under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board.
As part of the resolution plan, the RBI has proposed that the additional tier-1 bonds or perpetual bonds issued by the bank will be completely and permanently written down.
In a note to investors, Nippon India Mutual Fund said,"We have expressed our concerns to RBI through the discussion forum pointing out the negative implications of the proposal to the financial system and to the various investors."
Simultaneously, the fund house through its debenture trustee has already moved the Bombay High Court.
Perpetual bonds are an important part of many banks' capital structure and are also preferred by investors -- individual, retail, high net worth individuals -- and various financial institutions such as mutual funds, insurance companies and provident funds.
"We will continue doing our best in the interest of investors," the fund house added.
Nippon India MF said it made the Yes Bank investment in 2016 and 2017, when it was one of the top five private sector banks and a Nifty company with assets of over Rs 2.1 lakh crore and deposits of more than Rs 1.4 lakh crore.
Besides, many of the other reporting and financial metrics were healthy and worthy of investments, the fund house said.
It further said the financial position of the bank had been deteriorating in the recent past. The bank's attempts to raise capital have not been successful, triggering invocation of bond covenants by investors and withdrawal of deposits.