Sumitomo Mitsui 51 Percentage stake Yes Bank

Sumitomo Mitsui CEO Explores Acquisition of 51% Stake in Yes Bank for $5 Billion

Sumitomo Mitsui Banking Corp (SMBC), one of Japan’s largest lenders, is considering acquiring a 51% stake in Yes Bank Ltd for approximately $5 billion. This potential acquisition would mark a significant move in the Indian banking sector, potentially mirroring a precedent set in 2018 when Canada’s Fairfax Holdings Ltd acquired a majority stake in Catholic Syrian Bank.

Details of the Potential Acquisition:

• SMBC CEO Visit: Akihiro Fukutome, the global CEO of SMBC, is scheduled to visit India this week to discuss the acquisition.
• Meetings Scheduled: Fukutome will meet with officials from the Reserve Bank of India (RBI) and State Bank of India (SBI) to explore the potential deal.
• Valuation: SMBC is reportedly targeting a valuation of around $5 billion for a 51% stake in Yes Bank. As of Monday’s close, Yes Bank’s market capitalization was approximately ₹76,531 crore, or about $9.1 billion.
• Due Diligence: SMBC has initiated due diligence and is seeking detailed information from Yes Bank.

Context and Precedents:

• RBI Precedent: The potential acquisition could follow a precedent set in 2018 when the RBI permitted Canada’s Fairfax Holdings Ltd to acquire a 51% stake in Kerala-based Catholic Syrian Bank, the first instance of a foreign investor gaining majority ownership in an Indian bank.
• SBI Stake: SBI, which currently holds a 23.99% stake in Yes Bank, has been looking to reduce its holding since the end of a three-year lock-in period last year. SBI had acquired a 49% stake in Yes Bank in 2020 as part of a government-led rescue plan.

Regulatory and Legal Considerations:

• RBI Approval: The RBI is expected to review and approve the “fit-and-proper” assessment of the potential new investor.
• Legal Concerns: Prospective investors are likely to seek clarity on an ongoing court case related to the write-down of Yes Bank’s additional tier-I (AT-1) bonds, valued at ₹8,415 crore. These bonds were written off as part of the bank’s reconstruction scheme in March 2020. The Bombay High Court ruled in favor of retail bondholders in January last year, and Yes Bank, along with the RBI and the government, has appealed the decision in the Supreme Court.

Advisors:

• SMBC: JPMorgan has been appointed as the financial advisor, and J Sagar Associates has been selected as the legal advisor for the proposed acquisition.
• Yes Bank: Citigroup has been engaged to shortlist potential promoters for the stake sale.

Company Responses:

• Yes Bank’s Statement: In response to queries about the stake sale, a Yes Bank spokesperson stated, “We have no comments to offer regarding stake sales as these inquiries are speculative in nature.”

Advantages:

1. Increased Global Presence: The acquisition by a major global bank like SMBC could enhance Yes Bank’s international profile and bring additional expertise.
2. Capital Infusion: The $5 billion investment could provide a significant capital boost to Yes Bank, supporting its growth and expansion plans.

Disadvantages:

1. Regulatory Approval Risks: The acquisition is subject to regulatory approvals, which may pose uncertainties.
2. Ongoing Legal Issues: The unresolved court case regarding the AT-1 bonds could impact the investment’s attractiveness and complicate the acquisition process.

Conclusion: The potential acquisition of a 51% stake in Yes Bank by Sumitomo Mitsui represents a major development in the Indian banking sector, reflecting growing interest from global investors. While the deal could provide significant capital and strategic benefits, it faces regulatory and legal challenges that will need to be addressed before it can proceed.

FAQs

Q1: What is the value of the proposed stake acquisition in Yes Bank by Sumitomo Mitsui? A1: Sumitomo Mitsui is considering acquiring a 51% stake in Yes Bank for approximately $5 billion.

Q2: When is Sumitomo Mitsui’s CEO expected to visit India? A2: Akihiro Fukutome, the global CEO of Sumitomo Mitsui, is scheduled to visit India this week to discuss the acquisition.

Q3: What is the market capitalization of Yes Bank as of the latest update? A3: As of Monday’s close, Yes Bank’s market capitalization is approximately ₹76,531 crore, or about $9.1 billion.

Q4: What are the key regulatory and legal hurdles for this acquisition? A4: The acquisition is subject to regulatory approval from the RBI and clarification on an ongoing court case related to the write-down of Yes Bank’s AT-1 bonds.

Q5: Who are the financial and legal advisors for the proposed deal? A5: JPMorgan is the financial advisor, and J Sagar Associates is the legal advisor for Sumitomo Mitsui. Yes Bank has engaged Citigroup to shortlist potential promoters.

Sumitomo Mitsui 51 Percentage stake Yes Bank

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