Japan’s largest banks, MUFG and SMBC, are reportedly eyeing a majority stake in Yes Bank, indicating a high-stakes bid
According to people acquainted with the situation, Japan’s Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Banking Corp. (SMBC) are allegedly considering making an offer to purchase the majority of Yes Bank, as Moneycontrol was informed.
Insiders claim that a Middle Eastern corporation has also entered the race, indicating fierce rivalry for the desired share. The development takes place against the background of the consortium headed by the State Bank of India (SBI), which is now considering selling its stake after saving Yes Bank from certain bankruptcy in 2020.
Yes Bank claimed a market value of Rs 69,762 crore at the end of Friday’s trade, valuing a controlling share at 51% of the estimated Rs 35,578 crore proposal. With SBI having the biggest portion (26.13%), there might be significant profits from the possible sale.
Although MUFG and SMBC are actively investigating the possibility, insiders warn that no decisions have been taken at this time. The growing potential of India’s industry is apparently luring both financial behemoths to increase their presence in this developing market.
Speaking under anonymity, sources said that first talks have started, although the agreement is contingent upon the Reserve Bank of India’s (RBI) permission. The precise amount of stakes up for grabs and the names of possible sellers are yet unknown.
At the time of publishing, SMBC, SBI, and Yes Bank representatives had not responded to inquiries. On the subject, MUFG refused to comment.
It’s interesting to note that Japan’s Mizuho Bank, which invested Rs 4,100 crore in its domestic branches in November, has its eyes set on India as well. In February, Mizuho made an additional investment of Rs 1,200 crore into Credit Saison India.
The revival of Yes Bank may be traced back to a group rescue in 2020 that was led by SBI and LIC under a rehabilitation plan that was overseen by the RBI. According to exchange data, the lack of a promoter entity highlights its distinct organizational structure. Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, and ICICI Bank are notable investors.
These investors’ three-year lock-in period ended in March 2023, opening them additional options. On April 12, the stock finished at Rs 24.25, indicating a solid return on an investment made at Rs 10 per share.
SBI owns 26.13% of the public domain, whereas the combined holdings of LIC, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, and IDFC First Bank are 13.84%.
Furthermore, in July 2022, prominent private equity firms Carlyle and Advent International joined the race, contributing Rs 8,900 crore to Yes Bank with the intention of acquiring up to a 10% share.
The interest that MUFG and SMBC have in Yes Bank is consistent with Japan’s overarching plan to increase its presence in the Indian banking sector. Among MUFG’s latest endeavors are strategic investments in Indian startups and a branch located in GIFT City.
SMBC, which has branches in Chennai, Mumbai, and New Delhi, aims to improve the services it provides to medium-sized enterprises and individual customers in India.
The CEO of Yes Bank revealed intentions to increase lending to small and mid-sized businesses in an interview with Bloomberg, with the goal of increasing the bank’s return on assets (RoA). The bank intends to attain 1% within two years and 1.5% within three to five years, indicating a strategy change towards profitability, from its present rate of 0.2%.
