Japan's Sumitomo Mitsui Banking Corporation (SMBC) is making significant strides towards acquiring a controlling stake in India’s Yes Bank, with reports indicating that the deal could see SMBC securing up to 51% of the troubled lender. This potential acquisition has stirred considerable interest in the Indian financial market, leading to a notable rally in Yes Bank's share prices.
SMBC, one of Japan's largest financial institutions with total assets exceeding ¥249,700 billion ($1.728 trillion), is reportedly set to purchase a 20% stake in Yes Bank through a secondary share sale. This transaction will involve selling shares from the State Bank of India (SBI) and other institutional shareholders. Following the initial acquisition, SMBC plans to gradually increase its stake to a majority while ensuring that SBI retains a 10% interest in the bank until the transition is complete.
According to sources familiar with the matter, SMBC is expected to pay around Rs 20 per share for its initial investment, which is slightly above Thursday's closing price of Rs 18.22 but below the 52-week high of Rs 27.41 recorded on July 8, 2024. This deal would allow SBI to realize a 100% gain on its investment, as the state-owned bank had originally acquired its shares at Rs 10 per piece during a rescue operation in 2020, prompted by the Reserve Bank of India (RBI).
The urgency behind finalizing this deal is partly driven by the impending end of Yes Bank's Managing Director and CEO Prashant Kumar's term, which is set to conclude in October 2025. SMBC is keen to influence the appointment of Kumar's successor, and if a suitable candidate is not found quickly, Kumar may receive a temporary extension.
In addition to SBI, other major Indian banks and financial institutions, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, and Life Insurance Corporation of India (LIC), collectively holding 11.34% of Yes Bank, are expected to halve their stakes as part of the transaction. Meanwhile, private equity firms Advent International and Carlyle, which own a combined 16.04% stake in Yes Bank, are not planning to sell their shares at this time.
SMBC has reportedly received informal assurances from RBI officials that it will be allowed to acquire a majority stake in Yes Bank, despite existing foreign direct investment (FDI) norms that limit single foreign ownership in Indian private banks to 15%. While FDI regulations currently restrict voting rights for foreign shareholders to 26%, the RBI has made exceptions in past distressed bank acquisitions, such as Fairfax's investment in Catholic Syrian Bank and DBS's takeover of Lakshmi Vilas Bank. However, officials have indicated that no relaxation on the voting rights ceiling is expected in this case.
The news of SMBC's potential acquisition has led to a significant uptick in Yes Bank's stock price, with shares rising over 8% to reach Rs 19.73 during trading on Friday, May 9, 2025. This marks an impressive gain of nearly 11% over the past five sessions, generating renewed investor interest.
Market analysts attribute this optimism to the speculation surrounding a foreign investment in Yes Bank, which is seen as a positive development for the beleaguered financial institution. WealthMills Securities’ Kranthi Bathini noted that the combination of a global player eyeing a strategic stake, along with improved quarterly results and positive sectoral momentum, is driving interest in the stock. He advised high-risk, long-term investors to consider holding their positions in Yes Bank as the situation develops.
Amit Goel, co-founder of Pace 360, expressed optimism about the potential for Yes Bank to transform into a significant player under SMBC's guidance, stating that his asset management firm has taken a considerable position in Yes Bank, betting on favorable regulatory outcomes and future upside. He believes that the investment could yield returns of 15–20% in the coming months.
Currently, SBI holds the largest stake in Yes Bank at 24%, while other major institutional shareholders, including ICICI Bank, Axis Bank, Kotak Mahindra Bank, and LIC, collectively hold over 11%. The involvement of these prominent financial institutions adds to the complexity and significance of the ongoing negotiations.
As discussions progress, the financial community is closely monitoring the situation, with many stakeholders eager to see how this potential acquisition unfolds. The implications of SMBC's entry into the Indian banking sector could be profound, offering both challenges and opportunities for Yes Bank and the broader market.
In summary, the potential acquisition of Yes Bank by SMBC represents a landmark moment in India's banking landscape, with the possibility of reshaping the future of one of the country's key private sector lenders. As talks continue, all eyes will be on the regulatory approvals and the strategic decisions that will follow this significant investment.
