Yes Bank in India expects a 20 % stake to the second largest bank in Japan, Sumitomo Mitsui Banking Corporation (SMBC), a subsidiary fully owned by the Sumitomo Mitsui Financial Group, with $ 1.58 billion, hanging on organizational approvals from the Indian Reserve Bank (RBI) and the Competition Committee in India.
If it succeeds, the transaction will be the largest deal for integration and purchase across the border in the financial sector in India and is likely to be completed by the second quarter of 2025. During the yes bank crisis in March 2020, RBI proposed a reconstruction plan to save the bank with the support of the State Bank in India (SBI) and other banks. SMBC will get 13.19 % of SBI and 6.81 % share of other institutions, including Axis Bank, Bandhan Bank, Feder Bank, HDFC Bank, ICici Bank, IDFC First Bank, Kotak Mahindra Bank, by buying a secondary class.
The fact that Yes Bank, which suffers from crises, attracts high -quality investors to replace the SBI and other banks confirm its recovery after the 2020 crisis, which gives a boost to the banking sector. SMBC is optimistic about the Indian banking sector, and thus aims to invest in the long term.
After the deal, SMBC will become the largest shareholder in Yes Bank and will appoint two members of the Board of Directors. SBI will keep a 10.8 % stake in YES, while other banks will collectively keep only 2.9 %. Ca Basque Investments, affiliated with the Carlyle Group, and VERVENTA HOLDINGS, which is a subsidiary of Advent International, will retain by 6.8 % and 9.2 %, respectively. The public will have a 50.26 % stake in yes bank.
The entry of SMBC determines a new precedent for future foreign acquisitions in the banking sector in India and enhances corporate governance standards. Moreover, the deal will facilitate the exchange of goods and services between India and Japan.
Indian foreign investment rules decrease voting rights for investors in banks by 26 % and investments by financial institutions in Indian banks by 15 %, which is a stumbling block for foreign investors entering. It can encourage the maximum vote rights and increase the threshold of investment foreign investors.
