Japanese financial services giant Sumitomo Mitsui Banking Corporation (SMBC) has agreed to buy a 20% stake in YES Bank in what would be the largest cross-border transaction in the Indian banking sector.
SMBC will buy a 13.19% stake from State Bank of India and another 6.81% from HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank, YES Bank said in a stock-exchange filing.
In a separate filing, SBI said it will sell shares at Rs 21.5 apiece for a total of nearly Rs 8,888.97 crore. Assuming other lenders are selling YES Bank shares at the same price, SMBC will have to shell out another Rs 4,594.19 crore. This takes the total deal value to Rs 13,483.16 crore, or about $1.58 billion.
This surpasses the $877-million deal in April when private equity firm Warburg Pincus and Abu Dhabi Investment Authority, a sovereign wealth fund of the Gulf emirate, invested in IDFC First Bank.
SBI currently holds a 23.97% stake in YES Bank while the other seven selling banks hold a 9.74% stake in the private-sector lender. In 2020, these banks had acquired a stake in YES Bank as a part of the Reserve Bank of India’s plan to rescue the beleaguered lender. These investments were a part of the Rs 10,000-crore infusion to recapitalize YES Bank and facilitate its restructuring. SBI initially bought a 49% stake but pared it over time.
Apart from the above-mentioned banks, state-run Life Insurance Corporation of India (LIC) also invested in YES Bank and held a near 4% stake as on March 31, according to stock-exchange data.
Separately, private equity firm Carlyle and Advent International collectively hold around a 16% stake in the bank. The two PE firms had picked up a 10% stake each in YES Bank in 2022 for around Rs 8,900 crore through a combination of shares and equity warrants. Subsequently, Carlyle sold an over 3% stake in the private bank in 2024. Both Advent and Carlyle are sitting on an upside of over 50% on their initial investments.
The completion of the deal with SMBC is subject to approval from the RBI, the Competition Commission of India (CCI) as well as the shareholders of YES Bank. The bank said that the transaction will help drive its next phase of growth, profitability and value creation.
“We expect to benefit from their (SMBC) global expertise and high governance standards. This investment is a powerful endorsement of our transformation journey and future potential,” said Prashant Kumar, managing director and CEO of YES Bank.
SMBC is a wholly owned subsidiary of Sumitomo Mitsui Financial Group, the second-largest banking group in Japan with total assets of $2 trillion as of December 2024.
The investment in YES Bank boosts SMFG’s presence in India’s financial services industry. In 2021, SMFG acquired a near 75% stake in the erstwhile Fullerton India Credit from Fullerton Financial Holdings. Subsequently, the non-bank lender was renamed as SMFG India Credit Co.
“This investment aligns with our commitment to building lasting, value driven relationships in the region. We look forward to working closely with the team as a major shareholder in their next phase of growth,” said Toru Nakashima, President and Group CEO at SMFG.
YES Bank was advised by Citigroup Global Markets Pvt Ltd as its financial adviser and AZB & Partners as its legal advisor. SMBC was advised by its financial advisors JP Morgan and Jefferies, as well as legal advisors J. Sagar Associates and Anderson Mori & Tomotsune.
