Yes Bank Expects SMBC to Maintain 20 Stake Amid Strategic Investment Deal
- SMBC (Sumitomo Mitsui Banking Corp) to acquire a 20% stake in Yes Bank.
- Marks the largest cross-border M&A deal in India’s financial sector.
- Yes Bank CEO Prashant Kumar expects SMBC to maintain at least 20% stake.
Yes Bank anticipates that Japan’s Sumitomo Mitsui Banking Corporation (SMBC) will maintain at least a 20% stake in the lender, according to CEO Prashant Kumar. This development follows SMBC’s announcement of a definitive agreement to acquire a 20% stake in the Mumbai-based bank, marking the largest cross-border M&A deal in India’s financial sector.
SMBC, a subsidiary of Sumitomo Mitsui Financial Group and Japan’s second-largest bank, is expected to play a key role in Yes Bank’s future capital-raising efforts. “SMBC would be contributing to potential capital raises in the future, and they would not like to get their stake below 20%”, Kumar stated in an interview with Reuters.
The acquisition stops just short of the 25% threshold that would trigger a mandatory open offer under Indian regulations. An open offer would require SMBC to offer an additional 26% stake to public shareholders at the same price, which would also classify SMBC as a ‘promoter’ a status that brings additional regulatory and disclosure obligations. Kumar indicated that this was likely a strategic decision by SMBC to avoid such obligations.
As part of the broader deal structure, the State Bank of India (SBI), Yes Bank’s largest existing investor, will sell a 13.19% stake, while other consortium banks that supported Yes Bank during its regulator-led rescue in March 2020 will divest a combined 6.81% stake.
Kumar expects the transaction to receive the necessary regulatory clearances by September. The deal is subject to approvals from the Reserve Bank of India (RBI), the Competition Commission of India (CCI), and Yes Bank’s shareholders.
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Since the announcement, Yes Bank’s shares have surged by 7.5%. Moody’s Ratings has termed SMBC’s investment as credit positive for Yes Bank, potentially paving the way for cheaper fundraising and broader lending opportunities. Kumar also noted that a potential re-rating could enhance the bank’s ability to raise capital and strengthen its market position.
While SMBC’s presence is likely to boost the bank’s corporate banking and transaction services capabilities, Yes Bank remains committed to retail lending, which comprised 41.2% of its loan portfolio as of March-end. “We would be more focused towards retail. I don’t think the retail-corporate mix will change post the deal”, Kumar emphasized.
