Some money managers in India have suspended purchases in their debt and retirement funds on expectations that the value of Yes Bank Ltd.’s riskier bonds they hold would rise after the nation’s top court ruled in favor of investors.

The judgment could increase the market value of those bonds and in turn the funds’ net asset values, prompting Kotak Mahindra Asset Management Co. and Nippon Life India Asset Management to halt fresh investments. Both fund managers are reviewing the judgement and are awaiting clarity on how the bonds would be valued.

The Supreme Court on Thursday overturned the permanent write-off of the so-called Additional Tier 1 bonds during a government-backed rescue in 2020, raising the prospect of new liabilities for the private lender. The move, the first of its kind in India, wiped out 84.15 billion rupees ($888 million) of Yes Bank bonds held by investors.

The verdict marks a win for the holders of the AT1 bonds. While Yes Bank shares have tumbled after the court ruling, holders of these bonds are bracing for a windfall after these were marked down to zero following the restructuring six years ago.

“Investors holding these bonds are set to earn a bonanza, a windfall profit. That’s because Yes Bank will now have to pay them the principal and all the interests because of the ruling,” said Suresh Darak, founder of FixedIQ.com, a bond data aggregator.

AT1 bonds count as banks’ regulatory capital but can be written off when specified loss-absorption triggers are breached, including when a lender becomes nonviable. They rank below other debt instruments in the event of a bank failure, exposing investors to potentially substantial losses.

Kotak Mahindra Asset halted any new inflows in its medium term fund and its credit risk fund, it said in a statement on Thursday. The funds, with total assets worth 26.8 billion rupees, value the AT1 debt at zero currently. 

The bonds were worth around Rs 1.3 billion in March 2020 when Yes Bank’s restructuring was finalised, according to people familiar with the matter, asking not to be identified because they aren’t authorized to speak publicly. Kotak Mahindra Asset didn’t respond to queries on past valuations of the bonds.

Nippon Life said it has also suspended subscription in its India retirement funds, under both wealth creation and income generation plans. Both funds currently value the riskier bonds at zero market value.