Japanese Bank SMBC in Talks to Acquire Controlling Stake in Yes Bank; SBI to Sell Majority Holding

Japanese banking giant Sumitomo Mitsui Banking Corporation (SMBC) is once again showing interest in acquiring a controlling stake in Yes Bank, according to sources familiar with the matter. The State Bank of India (SBI), which currently owns 23.97% of Yes Bank, has reopened discussions with SMBC to sell a large part of its shares.

What’s Happening Between SBI and SMBC?

This isn’t the first time SMBC has tried to take over Yes Bank. Talks had started earlier in 2024, but now the terms of the deal have been updated. Sources say SBI is planning to sell up to 20% of its stake to SMBC.

In addition to buying SBI’s shares, SMBC is also expected to bring in fresh capital by investing another 6-7% into Yes Bank. Once this investment is made, SMBC may make an open offer to other shareholders to increase its total ownership to 51%, giving it majority control.

SBI is also likely to sell the rest of its shares through this open offer, slowly exiting the bank.

Other Investors May Exit Too

Apart from SBI, other big investors like Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank together own 7.36% of Yes Bank. Private equity firms Advent International (9.2%) and Carlyle (6.84%) also hold stakes. These investors are also expected to sell their shares during the open offer, allowing SMBC to increase its control.

Life Insurance Corporation of India (LIC), another key shareholder, holds 3.98% of the bank.

A banker involved in the discussions said, “This is the structure that’s been shared with SMBC. We’re now waiting for their response.”

Will the Deal Go Through?

So far, both SBI and SMBC have not commented publicly on the matter. But sources say some guarantees have been offered to SMBC to help close the deal smoothly, especially regarding voting rights and majority control.

Interestingly, SMBC had earlier tried, along with another Japanese bank Mitsubishi UFJ Financial Group (MUFG), to invest in Yes Bank last year. But those talks fell apart because both banks wanted voting rights equal to their shareholding (51%), while Indian laws cap voting rights for private bank promoters at 26%.

However, it seems SMBC has now accepted this voting rights limit and is still interested in moving forward with the deal. A banker explained, “SMBC understands that Indian law won’t change, but they still see value in owning Yes Bank.”

If SMBC gains 51% ownership, they could consolidate Yes Bank’s financials under their global operations, although they might need to work out some regulatory approvals in Japan.

SMBC May Take Over Management Roles

Once SMBC becomes the majority shareholder, it is expected to nominate directors to Yes Bank’s board, especially to important committees like the Nomination and Remuneration Committee (NRC), which plays a big role in picking the bank’s top executives, including the CEO.

A senior official said, “Once SMBC gives their feedback on these terms, we will move forward with getting regulatory approvals. If all goes well, the deal could be finalized within this financial year.”

SBI’s Fundraising Plans

Meanwhile, SBI recently announced a plan to raise Rs 25,000 crore in equity on May 3. SBI’s chairman CS Setty said during a press conference that the bank would consider various options for raising funds but didn’t provide a timeline. “We’ll decide based on business needs and market conditions,” he stated.