Japanese Giant SMBC Set to Buy into Yes Bank
SMBC to Acquire 20% Stake in Yes Bank
India’s banking landscape is set for a major shakeup as Sumitomo Mitsui Banking Corp (SMBC), a leading Japanese financial institution, is on the verge of acquiring a 20% stake in Yes Bank. This move comes after a year-long effort and follows a board meeting scheduled for Friday between SMBC, State Bank of India (SBI), and Yes Bank.
SBI’s Exit and SMBC’s Entry
SBI, which had rescued Yes Bank in 2020 under the guidance of the Reserve Bank of India (RBI), is looking to monetize its significant stake in the private sector lender. SMBC, with its impressive global presence and assets exceeding $1.728 trillion, is poised to become a major player in the Indian banking market.
Deal Structure and Timeline
According to sources familiar with the matter, SMBC will acquire its stake through a secondary share sale from SBI and existing shareholders, including other private banks and financial institutions. The deal is expected to be phased, with SMBC gradually increasing its ownership to a majority stake while ensuring SBI retains a 10% shareholding.
SMBC is reportedly offering around Rs 20 per share for the initial investment, a slight premium to Yes Bank’s closing price on Thursday but below its 52-week high. The transaction is subject to regulatory approvals and a formal announcement is anticipated following the board meetings.
Impact on Yes Bank
This acquisition marks a significant development for Yes Bank, as SMBC’s influence is expected to shape the bank’s future direction. Both SMBC and SBI have agreed to maintain their current board representation, with SMBC holding two seats and SBI retaining one.
The impending change in leadership at Yes Bank, as the current managing director and CEO’s term ends in October, adds another layer of complexity to the situation. SMBC aims to have a say in appointing the next CEO, potentially leading to a transition in leadership within the bank.
Regulatory Considerations
The deal has been met with careful scrutiny from the RBI, which has previously granted exceptions to foreign ownership limits in certain cases. However, the RBI remains unwavering in its stance on limiting voting rights for foreign entities, capping them at 26%. This ensures a balance between foreign investment and domestic control within the Indian banking sector.
Key Takeaways
The SMBC acquisition of Yes Bank signifies a major shift in the Indian banking landscape. It highlights the growing interest of foreign financial institutions in the Indian market and the potential for consolidation within the sector. Additionally, the deal underscores the RBI’s commitment to balancing foreign investment with domestic control, ensuring the stability and integrity of the Indian banking system.
