YES Bank shares: Japan's SMBC may buy significant stake, open offer to follow, says report

YES Bank share price: Shares of YES Bank Ltd are in focus after a media report suggested that Japanese banking giant Sumitomo Mitsui Banking Corp (SMBC) was in advanced discussions to purchase a significant stake in the sixth-largest private bank by assets. The move may likely trigger an open offer for an additional 26 per cent, the Economic Times report suggested. 

To recall, similar reports emerged last year as well. At that point, reports suggested Japanese lender SMBC and Dubai-based Emirates NBD were in advanced talks to acquire a majority stake in YES Bank. Sumitomo Mitsui is a unit of Sumitomo Mitsui Financial Group, Japan's second-biggest bank. At that point, it was believed that the banking regulator was yet to give a clear 'fit and proper' approval and was opposed to the idea of a foreign buyer acquiring over 51 per cent stake in the YES Bank. 

But the fresh report suggested that SMBC received a verbal assurance from the Reserve Bank of India (RBI) that it will be allowed to retain a majority stake in the bank. 

YES Bank shares are down 26 per cent in the past one year and 34 per cent in the past five years.

SBI, which owned a 24 per cent stake in the bank, could be among the sellers. The ET report suggested that it was still not clear, which of the other financial institutions will exit. If a deal takes place and following an open offer, SMBC is poised to become the single-largest shareholder, the ET reported..

Domestic banks such as Kotak Mahindra Bank, Axis Bank, ICICI Bank and life insurer Life Insurance Corporation of India (LIC) held a combined stake of 11.34 per cent in YES Bank. Private equity funds Advent International and Carlyle held 9.2 per cent and 6.84 per cent, respectively, as of March 31, ET reported.

While the FDI rules do not permit a single foreign bank to take a controlling stake in an Indian lender, the ET report cited the  exceptions made in the cases of Prem Watsa’s Fairfax acquiring a 51 per cent stake in Catholic Syrian Bank in 2018 and DBS taking over Lakshmi Vilas Bank in 2020.