Japan’s Sumitomo Mitsui in Talks for 51% Acquisition of Yes Bank

In a significant development in the Indian banking sector, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) is reportedly in advanced talks to acquire a majority 51% stake in Yes Bank. This move, if finalized, could mark a major foreign direct investment in a private Indian bank that has been recovering from a financial crisis. The acquisition process is said to involve negotiations with key shareholders including the State Bank of India (SBI), which currently holds a 24% stake.

Why in News?

The possible acquisition is creating ripples in the financial market due to its potential impact on Yes Bank’s ownership and future direction. Yes Bank shares surged 10% before dropping to 1% following the bank’s denial, showing immediate market sensitivity. A 51% acquisition by a Japanese bank would be a major FDI event in Indian banking.

Background of Yes Bank

• Yes Bank, a major Indian private sector bank, faced a near-collapse in 2020 due to mismanagement and risky lending.
• The Indian government, with support from SBI and other banks, undertook a restructuring to stabilize the bank.
• SBI, as a result, became the largest shareholder with a 24% stake.

Proposed Acquisition Plan

Sumitomo Mitsui Banking Corporation (SMBC) plans to,

• Acquire 25% stake from existing shareholders including SBI.
• Launch an open offer for an additional 26% stake to comply with SEBI norms.
• SMBC has applied for RBI approval, which is still pending.
• Yes Bank has officially denied being in acquisition talks, calling the media reports speculative.

Key Stakeholders

• State Bank of India (SBI): 24% stake
• Life Insurance Corporation (LIC) and other banks: ~11% stake
• Public Shareholders: Majority of the remaining stake

Strategic Significance

SMBC’s entry could,

• Provide long-term stability and credibility to Yes Bank.
• Introduce global best practices and capital inflow.
• Reflect rising interest of Japanese firms in Indian financial markets.