The Indian stock market is expected to react positively to the news of Sumitomo Mitsui Banking Corporation (SMBC), a Japanese financial institution, acquiring a 20% stake in Yes Bank. The deal, valued at ₹13,483 crore (approximately $1.6 billion), marks a significant cross-border investment in the Indian banking sector.
Details of the Deal
SMBC will purchase a 13.19% stake from the State Bank of India (SBI) for ₹8,889 crore and the remaining 6.81% from other lenders, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank, for ₹4,594 crore. The purchase price is ₹21.50 per equity share. Upon completion of the deal, SMBC will become the single largest shareholder in Yes Bank. SBI's stake in Yes Bank will reduce from 23.97% to just over 10%.
Positive Market Sentiment
Following the announcement, Yes Bank shares surged, closing nearly 10% higher at ₹20.05 apiece on the NSE on Friday. Experts believe the deal could be a "game-changer" for Yes Bank, potentially transforming it from a local bank into an international one. This could make it easier for the bank to raise funds from overseas markets.
Analysts' Views
Prashanth Tapse, AVP — Research at Mehta Equities, noted that the transaction could bring global governance standards, improved risk frameworks, and access to international growth capital to Yes Bank. He added that a successful execution of the deal could catalyze a rally in Yes Bank shares. Anshul Jain, Head of Research at Lakshmishree Investments, pointed out that Yes Bank's share price has already broken above the swing structure resistance, signaling a structural shift in trend. Kunal Parar, Vice President, Choice Equity Broking, anticipates that Yes Bank shares can cross ₹20 in the near term, with a short-term target price of ₹22. He suggests that if the shares cross ₹22 and sustain the level, a further rally towards ₹28 can be expected.
Strategic Implications for Yes Bank
The investment from SMBC is expected to provide Yes Bank with access to world-class banking expertise and risk management practices. Yes Bank CEO Prashant Kumar stated that the bank expects to benefit from SMBC's global expertise and high governance standards, calling the investment a "powerful endorsement" of Yes Bank's transformation journey and future potential.
SMBC's Perspective
SMBC views India as a key market with immense long-term potential. The Yes Bank deal aligns with SMBC's commitment to building lasting, value-driven relationships in the region. SMBC established an Indian Division in April of this year to strengthen its focus and commitment to India and accelerate its growth strategy. This deal follows SMBC's full ownership acquisition of Fullerton India Credit Co. a year prior, demonstrating its increasing interest in the Indian financial market.
Regulatory Approvals
The transaction is subject to regulatory approvals from the Reserve Bank of India (RBI) and the Competition Commission of India. The stake sale is expected to be completed within 12 months from the date of execution, according to SBI.
