According to a report by The Economic Times, negotiations are underway for the Japanese banking behemoth Sumitomo Mitsui Banking Corp (SMBC) to purchase a sizable portion of YES Bank. The State Bank of India (SBI), which owns 24% of YES Bank and has been looking for a long-term buyer since the bank’s turnaround since its bailout in 2020, is coordinating the deal.
After months of discussion, the talks are now nearing their conclusion. According to reports, SMBC’s top executives met with SBI representatives and other important parties in Mumbai last week to finalize the terms.
The deal, if finalized, will surpass SMBC’s $2 billion acquisition of Fullerton India Credit (74.9%) in 2021 as the company’s largest investment in India.
According to Indian regulatory standards, SMBC is anticipated to purchase a majority stake, possibly 51%, which would lead to a required open offer for up to 26% of the bank’s ownership.
Subject to regulatory approvals, SMBC would gain effective control of YES Bank through the sale of a 51% interest. “SMBC and SBI are making adjustments to the agreement structure. An announcement is on the horizon, though, since the RBI has offered consolation,” the newspaper said an individual with knowledge of the situation.
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According to reports, SMBC received verbal assurances from the Reserve Bank of India (RBI) that it would be permitted to keep the majority of its economic holding in YES Bank. However, the RBI’s current standards will continue to cap voting rights at 26%.
Previous instances of such exceptions include DBS’s purchase of Lakshmi Vilas Bank and Fairfax’s acquisition of Catholic Syrian Bank.
If the purchase goes through, SMBC will become the bank’s biggest shareholder. Other institutional holders, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, LIC, Carlyle, and Advent International, may or may not leave, though.
In October, Prashant Kumar, the bank’s CEO, will finish his tenure. SMBC will suggest applicants for the position to the central bank if the deal closes. In anticipation of the transaction, SMBC has already established India as a distinct operating zone. The co-head of SMBC for Asia Pacific, Rajeev Kannan, will now be reporting directly to Tokyo.
