Japan’s SMBC in talks with SBI for Yes Bank stake acquisition

By Admin

06 May, 2025

In a significant development for India’s banking sector, Japanese financial giant Sumitomo Mitsui Banking Corporation (SMBC) has resumed discussions with the State Bank of India (SBI) to acquire a controlling stake in Yes Bank. This move could mark a strategic shift in ownership and potentially reshape the future trajectory of the private sector lender.

Renewed Discussions with Fresh Terms

Talks between SBI and SMBC initially began in 2024 but have now been revived with revised terms. SBI, which currently holds a 23.97% stake in Yes Bank, is considering selling up to 20% of its holding to SMBC. The Japanese banking major is also expected to bring in fresh capital infusion in the range of 6–7%. With this combination of stake purchase and capital infusion, SMBC may trigger an open offer to increase its total shareholding to 51%, thus aiming for a controlling stake.

Open Offer Could Lead to Major Shareholder Exits

The open offer is anticipated to prompt exits from other institutional investors in Yes Bank. This includes Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank, which together hold a 7.36% stake. Additionally, private equity firms Advent International and Carlyle, with 9.2% and 6.84% stakes respectively, are also expected to tender their shares. Life Insurance Corporation of India (LIC), another key stakeholder with a 3.98% share, may also be impacted by the deal.

Regulatory and Governance Considerations

A key concern in the deal remains India’s regulatory cap that limits the voting rights of promoters in a private bank to 26%, even if their shareholding crosses 51%. While this legal constraint had derailed previous talks with SMBC and Mitsubishi UFJ Financial Group (MUFG) in 2024, SMBC now appears reconciled to the restriction. Insiders suggest that despite the limitation, SMBC is still keen on the acquisition and may seek appropriate dispensations within its home jurisdiction to consolidate Yes Bank into its parent entity.

To gain operational and management control, SMBC may also push for nominations on crucial board committees, particularly the Nomination and Remuneration Committee (NRC), which plays a decisive role in top-level executive appointments, including that of the CEO.

Awaiting Final Response and Regulatory Nod

The proposed structure and terms have been shared with SMBC, and the banking sector is closely watching for the company’s official response. A senior official noted that if SMBC agrees to the current deal framework, it could be escalated to regulatory authorities for final approval. There is a possibility that the transaction may conclude within the current fiscal year.

SBI’s Strategic Exit in Sync with Fund-Raising Plans

Interestingly, the revived talks align with SBI’s recent announcement of a Rs 25,000-crore equity fundraising plan made on May 3. While SBI Chairman CS Setty has not committed to a specific timeline for the raise, he confirmed that the bank is evaluating various options based on business needs and market conditions.

A Game-Changing Move for Yes Bank

If successful, SMBC’s acquisition of a controlling stake in Yes Bank will not only bring in global banking expertise but also instill greater investor confidence in the lender’s turnaround story. For SMBC, the deal presents a gateway into one of the world's fastest-growing banking markets, positioning it for long-term strategic gains.