A prominent Indian private bank, recognised for being India’s sixth-largest private lender, is at the centre of a transformative deal. Japan’s leading financial powerhouse is nearing an agreement to acquire a substantial stake in the institution, potentially triggering a mandatory open offer for an additional 26% ownership, signalling a strategic shift in its growth trajectory.
Yes Bank Limited’s stock, with a market capitalisation of Rs. 58,416 crores, rose to Rs. 19.44 during intraday trading, up 9.64 percent from its previous closing price of Rs. 17.73. However, the stock has been underperforming over the past year, with the stock price trading down by 22.8 percent.
Key Details of Takeover
Japanese financial giant Sumitomo Mitsui Banking Corp. (SMBC) is in advanced talks to acquire a major stake in Yes Bank, India’s sixth-largest private lender, potentially triggering an open offer for an additional 26%. State Bank of India (SBI), Yes Bank’s largest shareholder (24%), seeks a buyer post the bank’s post-2020 recovery. Other stakeholders include domestic banks (HDFC, ICICI, Kotak, Axis, and LIC own 11.34%) and PE firms Advent (9.2%) and Carlyle (6.84%).
A finalised deal, involving SMBC’s recent Mumbai meetings with SBI and key shareholders, could grant SMBC over 51% ownership, marking India’s largest banking M&A and surpassing its 2021 $2 billion Fullerton India acquisition. The move positions SMBC as Yes Bank’s largest shareholder.
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The Role of the Reserve Bank of India
SMBC reportedly secured verbal assurance from the Reserve Bank of India (RBI) to retain majority ownership in Yes Bank despite FDI norms capping aggregate foreign holdings in private banks at 74% (individual limit: 15%). While RBI typically bars single foreign entities from controlling stakes, exceptions like Fairfax’s 51% acquisition of Catholic Syrian Bank (2018) and DBS’s takeover of Lakshmi Vilas Bank (2020) were made when target equity neared zero.
However, the central bank clarified it won’t ease the 26% voting rights cap. Yes Bank CEO Prashant Kumar’s term ends in October, post which SMBC, designated as India’s largest stakeholder, plans to propose leadership appointments. Multiple banks, including Mizuho, MUFG, and Emirates NBD, explored acquiring Yes Bank last year, with RBI hinting at relaxed ownership rules allowing a 51% stake (reduced to 26% over five years) or a wholly owned subsidiary (WOS) route.
Talks stalled until SMBC re-entered negotiations. “Eventually the plan is to merge the two (SMBC India and Yes Bank), but that is still far out,” said an official. Key shareholders SBI and SMBC are finalising the structure, with RBI’s assurance likely expediting an announcement. The central bank’s flexibility shows its focus on stabilising Yes Bank while maintaining regulatory guardrails.
Guidance
CEO Prashant Kumar stated during an analyst call following the March quarter earnings that the bank anticipates moderate growth in its retail assets. “We would like to keep the proportion of retail and SME (small and medium enterprises) at around 60%,” he said. “Last fiscal, we continued to make steady improvements across all the core operating metrics and progressed well on the key strategic objective of improving the profitability of the bank.”
Financial Highlight
Yes Bank has demonstrated a strong turnaround since its rescue in March 2020. Total deposits surged to Rs. 2.85 lakh crore in FY25, marking a 2.7x increase over five years. Asset quality improved significantly, with gross NPAs falling to 1.6% and net NPAs to 0.3% from 18% and 5% in FY20, respectively. The bank posted a robust net profit of Rs. 2,446 crore in FY25, up 93% year-on-year and a sharp reversal from the Rs. 18,560 crore loss in FY20. Meanwhile, the net interest margin remained stable at 2.5%, compared to 1.4% in FY20.
Written By Fazal Ul Vahab C H
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