Japanese banking giant Sumitomo Mitsui Banking Corporation (SMBC) is once again in discussions to acquire a controlling stake in Yes Bank. According to sources, State Bank of India (SBI) has restarted talks with SMBC for this deal, which could change the ownership of the private bank.
SBI, which currently owns 23.97% of Yes Bank, may sell up to 20% of its stake to SMBC. In addition to this, SMBC is expected to bring in fresh capital by buying another 6–7% stake. If this happens, SMBC might make an open offer to increase its shareholding to 51%.
This deal could lead to a major shift in control. Other banks that hold shares in Yes Bank—like Axis Bank, ICICI Bank, Kotak Mahindra Bank, and HDFC Bank—along with private equity investors such as Advent International and Carlyle, may also exit through this open offer. Together, these investors hold over 23% in the bank.
Even the Life Insurance Corporation of India (LIC), which holds 3.98% in Yes Bank, forms part of the institutional investor group that may itself look to exit.
While SMBC has previously tried to persuade the relaxation of India’s 26% threshold for voting rights for bank promoters, the bank now seems willing to abide by the rules that exist. In order to effectively manage Yes Bank, SMBC will presumably appoint its own directors to significant board committees like the nomination and remuneration committee that plays a role in the recruitment of top management officials.
The deal will be presented to the Reserve Bank of India for finalization in case the proposed terms are agreed to by the SMBC. The deal may be finalized within the financial year.
In the meantime, SBI has also planned to raise Rs 25,000 crore in the near future through the issuance of equity. The bank’s business needs and market conditions will determine when this fundraising will happen.
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Source: Moneycontrol.
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