Japanese banking major Sumitomo Mitsui Banking Corporation (SMBC) has accelerated its next steps to obtain management control over Yes Bank. The Japanese major is readying to deploy around Rs 4,000 crore in Yes Bank for an additional 4 – 5 percent stake in the private lender.
The primary infusion of capital is expected to increase SMBC’s stake from 20 percent (it is in the final stages of acquiring shares from State Bank of India and other banks) to 24.99 percent. This would bring it at a par with the permissible stake SMBC can hold in Yes Bank as per the Reserve Bank of India’s approval received last month. Yes Bank plans to raise equity capital by the end of 2025. SMBC will be the lead participant in the fund-raising exercise. The fund raise may be a preferential issue or a qualifies institutional placement, depending on the feedback from investors, say sources. "Talks are currently ongoing with a few mutual funds," said a banker.
Highly placed sources say once SMBC infuses primary capital in the bank, it will approach the RBI again to seek permission to take control of Yes Bank as a promoter. At present, SMBC is expected to be classified as a public shareholder owning single largest stake with two board seats.
“One of the main reasons for SMBC to participate in the equity raise of Yes Bank is to demonstrate that it wants to have skin in the game and is serious about its plans with Yes Bank. It will demonstrate intent to the regulator and reassure that SMBC is here for the long haul,” said a person with knowledge of the development.
It is gathered that infusion of fresh capital in Yes Bank may have been an ask by the regulator, which SMBC is honouring as part of its commitments to the central bank. Once the RBI approves SMBC’s request to be classified as a promoter of Yes Bank, it might trigger an open offer, though that could take time till early FY27 to materialise.
In June this year, Yes Bank’s board approved Rs 16,000 crore of capital infusion, comprising of Rs 7,500 crore of equity (resulting in 10 percent dilution) while the rest is debt.
Citigroup, which has been the banker to the deal and has been instrumental in structuring the transaction enabling SMBC to take a stake in Yes Bank in May this year, has started work on the equity raise, according to sources. “The target is to raise capital by December, though given the pace at which the transaction is progressing, it is likely that the equity raise could happen sooner,” said a banker aware of the development.
Emails sent to SMBC and Yes Bank seeking comments on the fund raise remained unanswered till publishing the article. “We decline to comment on the matter,” said a spokesperson for Citigroup.
On September 10, Yes Bank announced that RBI had approved SMBC and SBI’s request to nominate two and one director respectively on the board of Yes Bank. This is in line with the shareholders agreement governing SMBC’s stake acquisition in Yes Bank, which was entered into in May.
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