In a significant move for the Indian banking sector, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) has agreed to acquire a 20% stake in YES Bank for ₹13,483 crore ($1.58 billion). This transaction marks the largest foreign investment in India’s banking industry to date.
Deal Overview: SMBC’s Strategic Investment in YES Bank
SMBC will purchase a 13.19% stake from the State Bank of India (SBI) for ₹8,889 crore and an additional 6.81% from seven other Indian banks, including Axis Bank, HDFC Bank, ICICI Bank, IDFC First Bank, Federal Bank, Kotak Mahindra Bank, and Bandhan Bank, for ₹4,594 crore. The shares are being acquired at ₹21.50 each, representing an 18% premium over YES Bank’s closing price before the announcement.
Post-transaction, SMBC will become the largest shareholder in YES Bank, with SBI retaining just over a 10% stake. The deal is subject to approvals from the Reserve Bank of India (RBI), the Competition Commission of India (CCI), and YES Bank’s shareholders.
Background: YES Bank’s Journey and the 2020 Reconstruction
YES Bank faced a severe financial crisis in March 2020, leading the RBI to implement a reconstruction scheme. Under this plan, SBI and seven other financial institutions infused capital into the bank, acquiring significant stakes to stabilize its operations. SBI initially held a 49% stake, which has since been reduced.
The current divestment by these banks aligns with their long-term strategy to monetize their investments in YES Bank, especially after the mandatory three-year lock-in period concluded in 2023.
SMBC’s Expansion Strategy and India’s Growth Potential
SMBC, a subsidiary of Sumitomo Mitsui Financial Group (SMFG), is Japan’s second-largest banking group with assets totaling $2 trillion as of December 2024. The acquisition of a significant stake in YES Bank underscores SMBC’s commitment to expanding its footprint in high-growth markets like India.
India’s robust economic growth, favorable demographics, and increasing demand for banking services make it an attractive destination for foreign investors. SMBC’s investment is a strategic move to capitalize on these opportunities and strengthen its presence in the region.
Market Reaction and Future Outlook
Following the announcement, YES Bank’s shares surged nearly 10%, closing at ₹20.05 on the BSE, reflecting investor optimism about the bank’s future prospects. The Times of India
SMBC’s entry is expected to bring in global best practices, advanced technology, and enhanced governance standards to YES Bank. This partnership could pave the way for further collaborations and possibly an increased stake by SMBC in the future, subject to regulatory approvals.
Conclusion
SMBC’s acquisition of a 20% stake in YES Bank for ₹13,483 crore is a landmark deal in India’s banking sector, signaling increased foreign interest and confidence in the country’s financial institutions. As YES Bank embarks on this new chapter with a strong international partner, stakeholders anticipate a period of growth, innovation, and enhanced financial stability.
