The State Bank of India (SBI), the largest lender in India, is aiming to sell its 24% stake in Yes Bank worth $2.2 billion by the end of March. Japanese lender Sumitomo Mitsui Banking Corp and Dubai-based Emirates NBD are in advanced talks to acquire a majority stake in Yes Bank, with the goal of gaining substantial control over the bank’s operations. The Reserve Bank of India (RBI) has given verbal approval for the deal, and due diligence is currently underway.
Yes Bank was restructured by the RBI in March 2020 with the help of a consortium of local banks after its financial health deteriorated. SBI currently holds a 24% stake in Yes Bank, while 11 other lenders hold 9.74%. Two private equity funds collectively hold 16.05%, with the remainder owned by other investors and the public. The potential bidders for Yes Bank are seeking relaxation on the regulatory requirement of bringing down promoter shareholding to 26% within 15 years of the investment.
Emirates NBD, one of the potential bidders for Yes Bank, has also shown interest in acquiring private lender IDBI Bank. Talks regarding the stake sale are ongoing, and SBI has received verbal approval from the RBI to divest its entire stake in Yes Bank, expecting to make a profit of around $1.4 billion. Once the bidders are approved by the RBI, the process is expected to move quickly, with negotiations on valuation and other details taking place between SBI and the bidders.
At the current market price of Yes Bank, it is valued at $10.5 billion. However, talks could be delayed due to volatility in the Japanese market and a parallel government stake sale process in IDBI Bank. SBI had previously rescued Yes Bank during a liquidity crunch, but now that the situation has improved, it is considered prudent to exit the investment. The sources did not wish to be identified as they are not authorized to speak to the media. Emirates NBD, Sumitomo Mitsui Banking Corp, and SBI have all declined to comment on the matter.
In conclusion, the potential sale of SBI’s stake in Yes Bank is a significant development in the Indian banking sector. With major players like Sumitomo Mitsui Banking Corp and Emirates NBD expressing interest in acquiring a majority stake, the deal could have far-reaching implications for the future of Yes Bank. SBI’s decision to divest its stake and make a significant profit reflects a shift in the bank’s strategy and focus. As negotiations progress, the final outcome of the deal will be closely watched by industry experts and stakeholders in the banking sector.
