Sumitomo Mitsui CEO weighs picking up 51% in Yes Bank for $5 billion: Report

Yes Bank

Akihiro Fukutome, the global CEO of Sumitomo Mitsui Banking Corp (SMBC), one of Japan's largest lenders, will be in India this week to explore the possibility of picking up a significant stake in Yes Bank Ltd, business daily Mint reported. Fukutome is expected to meet officials from the Reserve Bank of India (RBI) and State Bank of India (SBI) to discuss the acquisition.

On April 12, 2024, Moneycontrol was the first to report that Sumitomo Mitsui Banking Corp. (SMBC) had expressed interest to acquire a majority stake in Yes Bank. Later on April 23, Moneycontrol also first reported that Emirates NBD was in the fray for the deal.

According to the Mint report, sources familiar with the matter said that SMBC is eyeing a valuation of approximately $5 billion for a 51 percent stake in Yes Bank. As of Monday's close, Yes Bank's market capitalisation stood at Rs 76,531 crore, or about $9.1 billion.

"SMBC has initiated due diligence and is seeking detailed information from Yes Bank," a source told Mint. "The global CEO will engage in discussions with senior officials from the RBI and SBI early this week to advance the stake sale plan."

SBI, which holds a 23.99 percent stake in Yes Bank, has been looking to reduce its holding since the expiration of a three-year lock-in period last year. The state-owned bank initially acquired a 49 percent stake in Yes Bank as part of a government-led rescue plan in 2020.

"The RBI is keen to see a global bank acquire a stake in Yes Bank," said another source. The central bank is yet to approve the "fit-and-proper" assessment of the potential new investor.

This potential acquisition could mirror a precedent set in 2018 when the RBI allowed Canada's Fairfax Holdings Ltd to acquire 51 percent in Kerala-based Catholic Syrian Bank, marking the first acquisition of majority ownership in an Indian bank by a foreign investor.

Sumitomo Mitsui has appointed JPMorgan as its financial advisor and J Sagar Associates as its legal advisor for the proposed deal. Yes Bank has engaged Citigroup to shortlist suitable promoters. "As previously stated, and as clarified to stock exchanges, we have no comments to offer regarding stake sales as these inquiries are speculative in nature," a Yes Bank spokesperson said in response to Mint queries. Moneycontrol could not independently verify the report.

The report also highlighted that prospective investors are likely to seek clarity on an ongoing court case related to the write-down of Yes Bank's additional tier-I (AT-1) bonds, valued at Rs 8,415 crore. These bonds were written off as part of the bank's reconstruction scheme in March 2020. The decision was subsequently challenged in the Bombay High Court by retail bondholders, who won the case in January last year. Yes Bank, along with the RBI and the government, has appealed the ruling in the Supreme Court, where the matter is awaiting a final hearing.