Sumitomo Mitsui Buys 20% of Yes Bank, Boosting India's Banking Industry

Image Source: Green Climate Fund

Sumitomo Mitsui Banking Corporation (SMBC), Japan's largest bank, has made its biggest foreign investment in India's banking industry, buying a 20% stake in Yes Bank for ₹13,483 crore ($1.6 billion). The acquisition is a major shot in the arm for India's financial sector, boosting international confidence in the stability of the country's banks.

Strategic Investment & Stake Acquisition

SMBC will buy 13.19% from State Bank of India (SBI) for ₹8,889 crore and 6.81% from other banks such as Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, and Kotak Mahindra Bank.
The acquisition price is ₹21.50 per share, indicating robust investor optimism about the turnaround of Yes Bank.

Impact on Yes Bank & Market Positioning

Yes Bank has recovered from its financial crisis, with net profit reaching ₹612 crore in Q4 FY25.
The investment will accelerate Yes Bank’s growth, leveraging SMBC’s global expertise in banking and governance.

SBI’s Exit & Financial Gains

SBI initially invested ₹6,050 crore in Yes Bank in 2020, acquiring 23.97% stake at ₹10 per share.
With the sale price currently at ₹21.50 a share, SBI has generated a return of 167% over five years, demonstrating a successful exit strategy.

Japan-India Financial Collaboration

The investment by SMBC reflects increased interest by Japan in India's banking industry, which strengthens bilateral economic relations.
The transaction should facilitate increased cross-border financial collaboration that will help India's banking ecosystem.

Future Outlook & Regulatory Approvals

The deal is awaiting regulatory clearances from Reserve Bank of India (RBI) and Competition Commission of India (CCI).
Yes Bank wants to use SMBC's experience to shore up its financials and provide long-term stability.

The historic investment reflects the resilience of India's banking sector, reaffirming investors' confidence from around the globe in the country's financials.

Sources: Forbes, Indian Express, Financial Express