Sumitomo Gets RBI Approval to Acquire Yes Bank; Stock Jumps 10%

'Yes' Bank Ltd shares rose up to 9% on Tuesday after reports confirmed the Reserve Bank of India (RBI) provided its approval for the offer of Japan's Sumitomo Mitsui Banking Corporation's (SMBC) proposal for purchasing a 51% stake in the private bank. The development, reported first by Mint, improved investors' confidence, which could be a turning point for the lender.

As the sources mentioned, around $1.7 billion would be the deal's value. SMBC might start by buying below 26% and seek to merge through a share swap or buy up to 26% and make an open offer mandatorily. The move is indicative of SMBC's strategic foray in India's banking space.

Holding 22.55% of the bank, 62 lakh small retail shareholders have seen Yes Bank struggle since its 2020 turmoil. It was saved by an SBI-led group after RBI replaced its board due to critical liquidity issues. The bank doesn't have a promoter after the exit of founder Rana Kapoor in 2019.

On Tuesday, Yes Bank’s shares traded at ₹19.24, 8.5% higher but still far off its 52-week high of ₹27.44. SBI, up until March, held 24% and large size players such as HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and Life Insurance Corporation got stuck behind. The owners were CA Basque Investments and Vervanta Holdings, with 6.84% and 9.2% of stake.

SMBC negotiating for a 24% stake. Talks, delayed in the past due to a 26% voting rights cap, are now gaining speed. SMBC presently has three branches in India and has a majority holding in SMFG Credit India, which is likely to be merged with Yes Bank.