Japan’s Banking Giants MUFG & SMBC Eye Majority Stake In Yes Bank, Reports Suggest High-Stakes Bid

Japan's Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Banking Corp (SMBC) are reportedly mulling over a bid to acquire a majority stake in Yes Bank, sources familiar with the matter revealed to Moneycontrol.

According to insiders, a Middle Eastern company has also thrown its hat into the ring, signalling intense competition for the coveted stake. The development unfolds amidst the backdrop of the State Bank of India (SBI)-led consortium, which rescued Yes Bank from the brink of collapse in 2020, now contemplating divestment of its holding.

At the close of Friday's trading, Yes Bank boasted a market value of Rs 69,762 crore, making a majority stake, pegged at 51%, an estimated Rs 35,578 crore proposition. With SBI holding the largest share at 26.13%, the potential sale promises substantial returns.

Insiders caution that while MUFG and SMBC are actively exploring the opportunity, no final decisions have been made. Both financial behemoths are reportedly eager to bolster their presence in India's burgeoning market, drawn by its growth potential.

Speaking on the condition of anonymity, sources disclosed that preliminary discussions have commenced, although the deal hinges on approval from the Reserve Bank of India (RBI). The exact quantum of stakes up for grabs and the identity of potential sellers remain undisclosed.

Queries directed to Yes Bank, SBI, and SMBC spokespersons went unanswered at the time of publication. MUFG declined to comment on the matter.

Interestingly, Japan's Mizuho Bank has also set its sights on India, injecting Rs 4,100 crore into its domestic branches last November. In a move, Mizuho further channelled Rs 1,200 crore into Credit Saison India in February.

Yes Bank's resurgence traces back to a consortium bailout spearheaded by SBI and LIC under an RBI-monitored reconstruction scheme in 2020. The absence of a promoter entity, as per exchange data, underscores its unique corporate structure. Notable investors include HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, and IDFC First Bank.

The conclusion of a three-year lock-in period for these investors in March 2023 unlocked new possibilities. Having invested at Rs 10 per share, the stock closed at Rs 24.25 on April 12, signalling a promising return.

In the public domain, SBI holds a 26.13% stake, with LIC, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, and IDFC First Bank collectively owning 13.84%.

Additionally, private equity heavyweights Carlyle and Advent International entered the fray in July 2022, injecting Rs 8,900 crore into Yes Bank, each eyeing up to a 10% stake.

MUFG and SMBC's interest in Yes Bank aligns with Japan's broader strategy to deepen its footprint in India's financial ecosystem. MUFG's recent ventures include a branch in GIFT City and strategic investments in Indian startups.

SMBC, with branches in New Delhi, Mumbai, and Chennai, seeks to enhance its offerings in India, targeting medium-sized businesses and consumer banking services.

In a recent interview with Bloomberg, Yes Bank's CEO outlined plans to ramp up lending to small- and mid-sized enterprises, aiming to boost its return on assets (RoA). With a current RoA of 0.2%, the bank aims to achieve 1% within two years and 1.5% within three to five years, signalling a strategic shift towards profitability.