Japan’s Sumitomo Mitsui to exit Kotak ahead of Yes Bank stake purchase
Japan’s Sumitomo Mitsui Banking Corp. (SMBC) is reshaping its India strategy with a major financial move exiting Kotak Mahindra Bank to pave the way for a sizeable investment in Yes Bank. This shift underscores the growing global interest in India’s private banking sector and highlights the scale of one of the largest cross-border banking deals in recent years.
SMBC to Sell Entire Stake in Kotak Bank
According to deal terms, SMBC will sell its entire 1.65% stake equivalent to 32.8 million shares in Kotak Mahindra Bank through a block deal. The floor price has been fixed at ₹1,880 per share, a discount of 4.1% to Kotak’s Tuesday closing price of ₹1,960.40 on the National Stock Exchange. The transaction is expected to fetch the Japanese lender at least ₹6,166 crore.
The book for the deal will close at 7 am on Wednesday, though there is an option to shut it earlier. Kotak Securities, Jefferies India, and Nomura Financial Advisory and Securities (India) are acting as the joint placement agents.
Regulatory Approvals for Yes Bank Investment
The move comes after SMBC received the Reserve Bank of India’s (RBI) approval on 22 August to acquire up to 24.99% in Yes Bank. The approval is valid for one year, with the RBI clarifying that SMBC will not be classified as a promoter of the bank. Earlier this month, the Competition Commission of India also cleared the proposal, giving SMBC the green light for the transaction.
The decision to divest its Kotak stake is likely to avoid any potential conflict of interest, as Kotak itself holds a small 1.21% stake in Yes Bank.
Funding the Yes Bank Stake Purchase
Reports suggest that proceeds from the Kotak share sale will be channelled into SMBC’s investment in Yes Bank. Back in May, Yes Bank had estimated that a 20% stake sale to SMBC would be valued at around ₹14,000 crore. Subsequently, in July, SMBC applied for RBI’s permission to acquire an additional 4.9% stake.
SMBC will acquire a 13.19% stake in Yes Bank from the State Bank of India and a cumulative 6.81% from Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, and Kotak Mahindra Bank.
Market Response
Yes Bank’s shares reflected investor optimism, closing 0.8% higher at ₹20.35 apiece on the NSE on Tuesday, compared with a 0.05% rise in the Bank Nifty index. Kotak Bank shares, meanwhile, are expected to witness some trading pressure due to the block deal discount.
SMBC’s Growing Presence in India
SMBC is a wholly owned subsidiary of Sumitomo Mitsui Financial Group (SMFG), Japan’s second-largest banking group with assets worth $2 trillion as of December. The group’s expanding presence in India through Yes Bank aligns with its global growth strategy and the increasing opportunities within India’s financial services market.
Conclusion
SMBC’s exit from Kotak Mahindra Bank and its pivot towards Yes Bank marks a significant restructuring of its India portfolio. With nearly ₹14,000 crore lined up for the Yes Bank stake purchase, this deal is poised to be a landmark in India’s financial sector, bringing in foreign capital and reinforcing the confidence of global lenders in the Indian banking industry.
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