Japan's SMBC succeeds in its pursuit of Yes Bank; to acquire a 20% stake

Mumbai: Japan’s Sumitomo Mitsui Banking Corp. (SMBC) will acquire a 20% stake inYes Bank for ₹13,482 crore, making it the largest cross-border investment in the Indian banking sector.

SMBC will purchase the shares from State Bank of India and other Yes Bank shareholders at a price of ₹21.50, valuing the Mumbai-headquartered lender at $7.9 billion.

“SMBC has entered into a definitive agreement on 9 May 2025 to acquire 20% stake in YES Bank through a secondary stake purchase of 13.19% from SBI and 6.81% aggregate stake from other bank shareholders,” Yes Bank said in a press statement on Friday.

SMBC will look to increase its holding in Yes Bank over a period of time, eventually triggering an open offer for additional shares, according to two bankers aware of the matter. However, SMBC’s voting rights will be capped at 26%, as per Reserve Bank of India regulations, they said, declining to be identified.

SMBC will also get two seats on the board of Yes Bank, they said.

Various banks collectively hold a 33.74% stake in Yes Bank—including SBI (23.99%),HDFC Bank (2.75%),ICICI Bank (2.39%), Kotak Mahindra Bank (1.21%), and Axis Bank (1.01%).

SBI, which acquired a 49% stake in Yes Bank as part of a 2020 government-engineered rescue, has been looking to sell its shares in the private lender ever since a three-year lock-in period ended in 2023.

The stake sale to SMBC paves an exit path for SBI and the other lenders that had been brought in to save Yes Bank five years ago. The transaction also ushers in a new owner who can help India’s sixth-largest private lender compete better with nimble rivals.

Mint first reported on 6 May thatSMBC had received RBI’s go-ahead for acquiring a 51% stake in Yes Bank. The Japanese lender has been courting Yes Bank for about a year now. In August last year,SMBC’s global chief executive Akihiro Fukutome met RBI and SBI officials to discuss buying a stake in Yes Bank as a global race for Mumbai lender heated up.

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An Indian subsidiary for SMBC

According to the bankers above, the Japanese conglomerate will seek RBI’s permission to set up a wholly owned subsidiary in India. Mint had reported that RBI was pushing SMBC to set up a domestic subsidiary to ringfence its India operations from its Japanese parent.

SMBC could create an amalgamation of its Indian wholly owned non-banking financial company, SMFG India Credit, and a wholly owned subsidiary into Yes bank, according to the banks. It isn’t clear if SMBC will retain Yes bank’s branding after it acquires a controlling stake in the bank.

Yes Bank was advised by Citigroup Global Markets Pvt. Ltd as its financial adviser and AZB & Partners as its legal advisor. SMBC was advised by financial advisors J.P. Morgan and Jefferies and legal advisors J. Sagar Associates (JSA) and Anderson Mori & Tomotsune.

SMBC, is a wholly owned subsidiary of Sumitomo Mitsui Financial Group Inc. (SMFG), the second-largest banking group in Japan with total assets of $2 trillion as of December, besides having a strong global presence.

“We expect to benefit from their global expertise and high governance standards. This investment is a powerful endorsement of our transformation journey and future potential,” Prashant Kumar, Yes Bank’s managing director and chief executive officer, said in the statement. “Over the past few years, our growth has been shaped by the strong partnership and unwavering support of SBI and they will continue to remain a valued stakeholder.”

Toru Nakashima, president and group CEO of SMFG, and Akihiro Fukutome, president and CEO of SMBC said in the Friday statement that India represented a key market for the Japanese lender and that they saw “immense long-term potential in its dynamic and fast-growing economy”.

A Japanese bank’s Indian ambitions

SMBC, which began its India operations in 2013, operates as a foreign bank with branches across New Delhi, Mumbai and Chennai. The Japanese conglomerate had been eyeing a bank in India for several years.

In 2010, the Japanese lender acquired 4.5% stake in Kotak Mahindra Bank, which it gradually sold until it completely exited in March this year. In 2021, SMBC picked up a 74.9% stake in Fullerton India before it increased its stake to 100% in the non-banking finance company.

According to the bankers cited earlier, Yes Bank will benefit from SMBC’s strong credit rating of A1 / A- (Stable), which will have an impact on the Indian lender’s cost of funds.

SMBC’s entry is also expected to give a much-needed boost to Yes Bank’s retail business, which has seen a major revamp over the past year. Yes Bank is also undertaking arestructuring, laying off at least 500 employees and asking four senior officials to step down recently.

For the fourth quarter of 2024-25, Yes Bank reported a 64% year-on-year increase in net profit to ₹738.12 crore, and a capital adequacy ratio of 15.6% at the end of March.