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

Deal likely to involve an element of primary capital infusion and open offer, though talks are still in early stages.

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26 Aug, 2025 12:21

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Japanese financial conglomerate Sumitomo Mitsui Banking Corporation (SMBC) is back in the fray to acquire a controlling stake in Yes Bank. State Bank of India (SBI) has reopened talks with SMBC to pick up a controlling stake in the Mumbai headquartered lender, sources said.

While talks first started in 2024, this time, the deal terms have undergone some changes, sources said.

SBI, which holds a 23.97 percent stake in Yes Bank, is likely to sell up to 20 percent of its holding to SMBC. The Japanese major is also expected to infuse fresh capital of 6–7 percent. Upon fund infusion, SMBC may make an open offer to take its stake to 51 percent.

SBI is likely to tender its remaining shareholding through the open offer.

Other Yes Bank investors Axis Bank, Kotak Mahindra Bank, ICICI Bank and HDFC Bank, which collectively hold a 7.36 percent stake, and private equity majors Advent International and Carlyle, who have a 9.2 percent and 6.84 percent holdings, respectively, are also expected to exit through the open offer.

Life Insurance Corporation of India holds a 3.98 percent stake in Yes Bank.

“This is the structure that has been presented to SMBC,” said a banker aware of the matter, adding the Japanese company’s response was awaited.

Emails sent to SBI and SMBC remained unanswered till the publishing of this article.

Some assurances have been extended to SMBC to ensure that the deal sails through smoothly, especially with respect to voting rights and controlling majority, sources said.

Deal talks with Mitsubishi UFJ Financial Group (MUFG), another Japanese player, and SMBC did not fructify last year, as both financial majors were seeking dispensation on voting right limits.

The buyers wanted the voting rights and shareholding at 51 percent, though Indian law limits the voting rights of promoters in a private sector bank at 26 percent.

“SMBC is reconciled to the fact that this cannot be changed and has yet shown interest in Yes Bank,” said the banker cited above. With a 51 percent shareholding, Yes Bank may be consolidated at its Japanese parent level, though it may have to seek some dispensations in its jurisdiction. “These factor are under consideration,” the person added.

To have operational and management control, SMBC may nominate directors in key committees of the bank’s board, including the nomination and remuneration committee (NRC). The NRC has a strong say in key managerial appointments including the chief executive officer.

“Once SMBC reverts on the proposed terms, the deal will be taken to the regulator for further consideration,” said a senior official, adding it an agreement may be reached this fiscal if the Japanese firm is agreeable to shareholding and voting rights’ laws.

After nearly seven years, SBI on May 3 announced a Rs 25,000-crore equity fund raise plan. Speaking at a post-earnings conference, chairman CS Setty said SBI would consider all option but refrained from giving any timelines. “That (fund raise) will depend on our business needs and market conditions,” he said.