Yes Bank shares rally 9% as SMBC agrees to buy 20% stake for ₹13,482 crore

Shares of Yes Bank surged over 8 per cent on Monday's session after Japan-based Sumitomo Mitsui Banking Corporation (SMBC) agreed to buy a 20 per cent stake of the lender from the State Bank of India (SBI) and seven private sector lenders for ₹13,482 crore. 

 

The lender's stock rose as much as 8.39 per cent during the day to ₹21.7 per share, a day after it rallied another 11 per cent. The stock, however, pared gains to trade 2 per cent higher at ₹20.39 apiece, compared to a 3 per cent advance in Nifty 50 as of 11:30 AM. 

 

 

Shares of the company extended gains for a second consecutive day and are up 4.3 per cent so far this year, levelling with the Nifty 50, which has also risen 4.5 per cent in the same period. Yes Bank’s total market capitalisation stands at ₹64,060.67 crore, as per BSE data.

 

Sumitomo agrees to buy 20% stake 

 

In the largest cross-border deal in the Indian banking sector, SBI and other lenders that had invested in Yes Bank during its reconstruction in 2020 will together sell a 20 per cent stake in the bank to SMBC. 

 

HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Federal Bank, IDFC First Bank, and Bandhan Bank are the seven other lenders apart from the SBI. The transaction is subject to regulatory and statutory approvals.

 

Business Standard earlier reported that SMBC wanted to acquire a 20 per cent stake only, and the eight banks agreed to sell their stake on a pro-rata basis. The Japanese lender's 20 per cent stake purchase keeps its total holding below the 26 per cent threshold, which otherwise would have triggered a mandatory open offer to acquire an additional 25 per cent. 

 

SBI will be offloading 13.19 per cent stake in Yes Bank for ₹8,889 crore at ₹21.50 per equity share, which is at 18 per cent premium to the lender’s closing share price on Thursday. The deal values the private sector lender, Yes Bank, at $7.9 billion.

 

The seven private banks will collectively sell 6.81 per cent in Yes Bank for ₹4,594 crore at the same share price at which SBI is selling. The total stake of SBI and the seven private banks is currently at 33.71 per cent. Following the transaction, SBI will hold 10.78 per cent while the rest of the seven will together hold a 2.93 per cent stake in Yes Bank. 

 

What led to the stake sale? 

 

In March 2020, during Yes Bank’s reconstruction, SBI committed ₹7,250 crore while erstwhile HDFC Ltd, and ICICI Bank invested ₹1,000 crore each. Axis Bank chipped in with ₹600 crore, and Kotak Mahindra Bank put in ₹500 crore in the equity shares of Yes Bank. IDFC First Bank, Bandhan Bank, and Federal Bank also chipped in with investments to rescue Yes Bank.

 

Following reconstruction, SBI held a 49 per cent stake in the bank. As much as 26 per cent of SBI’s equity investment and 75 per cent of the equity pumped in by the other seven players had to be retained in Yes Bank for three years.