JAPAN’S SUMITOMO MITSUI BANK IS ACQUIRING A 𝟱𝟭% STAKE IN YES BANK-AN ANALYSIS

 JAPAN’S SUMITOMO MITSUI BANK IS ACQUIRING A 𝟱𝟭% STAKE IN YES BANK-AN ANALYSIS

Japan’s Sumitomo Mitsui Banking Corp (SMBC) has received 𝗥𝗕𝗜 𝗮𝗽𝗽𝗿𝗼𝘃𝗮𝗹 to buy a 𝟱𝟭% 𝘀𝘁𝗮𝗸𝗲 𝗶𝗻 𝗬𝗲𝘀 𝗕𝗮𝗻𝗸. This deal could value Yes Bank at $𝟭.𝟳 𝗯𝗶𝗹𝗹𝗶𝗼𝗻.

WHY IT IS UNIQUE?

·      Deal could be largest in India's banking sector

If the deal goes through, it could potentially be the largest in India's banking sector, where deal-making, especially involving foreign entities, is rare.

• ·      SMBC will first buy less than 26%, then merge its subsidiary with Yes Bank to reach 51%.

• ·      Voting rights will be capped at 26%, even with a 51% stake. RBI regulations need the largest shareholder of a bank to reduce their holding to 26% in 15 years.

·      Existing shareholders like SBI, Axis Bank, and HDFC Bank will sell some of their shares.

 SBI holds a 24% stake in Yes Bank. ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and Life Insurance Corporation of India together hold an 11.34% stake in Yes Bank.

WHY IT IS IMPORTANT?

• ·      A takeover of troubled Lakshmi Vilas Bank by Singapore-based DBS Group in 2020 was the last major deal in the sector.

• ·      SMBC has been in discussions with Yes Bank's largest investor, State Bank of India and with RBI last year, but the negotiations faltered amid concerns over ownership and voting rights

·      This could reinforce Yes Bank’s operations, bring in global expertise, and mark a new phase of foreign investment in Indian banking sector.

R V Seckar FCS , LLB 79047 19295