Race for Yes Bank: Japan’s MUFG, SMBC weigh majority stake buyout in lender The State Bank of India-led consortium, which rescued Yes Bank in 2020, is now considering selling its stake. Moneycontrol.news

 

Japan’s Mitsubishi UFJ Financial Group (MUFJ) and Sumitomo Mitsui Banking Corp. (SMBC) have expressed interest and are considering a bid to acquire a majority stake in Yes Bank, four people familiar with the development said.

Another company from the Middle East has also shown interest, according to three of the people cited above. The development comes amid the State Bank of India-led consortium, which bailed out the lender in 2020, is now exploring a plan to sell its stake.

At the end of Friday’s trading, Yes Bank had a market value of Rs 69,762 crore. At current levels, a majority stake of at least 51 percent would be worth Rs 35,578 crore. SBI is the largest shareholder with a 26.13 percent stake.

“These are very early days in the deal, and MUFG and SMBC are evaluating the opportunity, though they have not taken a final call. Both are keen to bolster presence in a growing market like India,” one of the people cited above said.The second person said: "Right now, their (MUFG) India game is strong, and they have also taken bets on startups here.”

Two other people also confirmed that MUFG and SMBC were in the fray for the proposed deal and that initial discussions have begun. They added that the deal would require the approval of the Reserve Bank of India.

All four people spoke to Moneycontrol on the condition of anonymity.

The exact quantum of stakes in Yes Bank to be sold or which investors were willing to sell is not immediately clear.

Several email queries sent to spokespeople for Yes Bank, SBI, and SMBC remained unanswered when this article was published. A spokesperson for MUFG declined to comment.

Incidentally, Japan’s Mizuho Bank is also betting big on India and has infused Rs 4,100 crore in its domestic branches in November. In February, it made a strategic investment of Rs 1,200 crore in Credit Saison India.

The Yes Bank rescue

Yes Bank, which was bailed out by a consortium of investors led by SBI and LIC as part of an RBI monitored reconstruction scheme, does not have any entity in the promoter category, according to exchange data. The other investors who participated included HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and IDFC First Bank.

The three-year lock-in period for these investors ended in March 2023. They invested at Rs 10 per share, and the Yes Bank stock was at Rs 24.25 at the end of trading on April 12.

According to latest exchange data, in the public category, SBI holds 26.13 percent stake, with LIC, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank and IDFC First Bank holding a combined minority stake of 13.84 percent.

Additionally, top private equity firms Carlyle and Advent International entered the lender in July 2022, which raised Rs 8,900 crore from both investors via a combination of equity shares and warrants to acquire up to a 10 per cent stake each.

On March 14, Mint reported that Yes Bank was looking for a new promoter and had mandated investment bank Citi to find a buyer.

The Twin Samurai Strategy in India

In December 2023, in an interview to Bloomberg, an MUFG senior executive expressed optimism in India’s economic growth and added that the firm was looking to further expand operations here. “I think as an investment destination, India could attract the money that might want to avoid China,” CEO Hironori Kamezawa said.

In August 2022, MUFG opened a branch in GIFT City. It also holds a stake in fintech firm DMI Finance Pvt. Ltd. The office in Mumbai serves as the hub of MUFG’s operations in India.

“With five locations across the country, we have the largest network amongst Japanese banks in India. We cater to the banking needs of Japanese and global corporates that are establishing or growing their businesses in India,” the firm’s website says.

On the other hand, SMBC’s operations in India are supported by the firm’s three branches in New Delhi, Mumbai and Chennai.

To serve the clients’ global needs better, its offices in India are supported by an offshore team in Singapore to extend funding support to Indian corporates. SMBC recently received regulatory approval to set up a branch in GIFT City.

Last month, Sumitomo Mitsui Financial Group CEO Toru Nakashima told Bloomberg that the firm was looking to become a full-fledged financial player in India and fill up gaps in its local offerings, such as targeting medium sized businesses or banking services for consumers.

Yes Bank: The road ahead and why are suitors keen?

Recently, the Yes Bank CEO said the lender would boost lending to small- and mid-sized companies as it tries to push up its return on assets.

“The single agenda (for the bank) is to focus on profitability without doing anything aggressively,” Prashant Kumar said in an interview. “The first step for us is to achieve a RoA of 1% in the next two years and 1.5% by 3-5 years.”

Yes Bank’s return on assets, the ratio of how profitable a company is compared with its total assets, was at 0.2% for the October-December quarter.

According to an earlier analysis by Moneycontrol PRO, “Today, Yes Bank is adequately capitalised. It is growing its deposits despite the systemic challenge, has diversified the asset book, making it granular, and has addressed the huge legacy NPA issue with the sale of bad assets to an ARC (asset reconstruction company).”

As the sixth largest private sector lender, Yes Bank gives access to a large network and deposit base in addition to the all-important banking licence to any entity looking for a foothold in the Indian banking system, the Moneycontrol PRO analysis adds.

According to its FY 22-23 annual report, the lender had 7.5 million customers with total assets of Rs 354,786 crore and total advances of Rs 203,269 crore. It had 1,192 branches in 700 plus cities.

In December 2022, Yes Bank announced the completion of the assignment of its non-performing assets totalling Rs 48,000 crore of principal outstanding (adjusted for recoveries since then) as of March 31, 2022, to J.C. Flowers Asset Reconstruction Pvt. Ltd. At the time, it was the single largest transaction of sale of non-performing assets in the Indian banking system.

The lender is a full-service commercial bank providing a range of products, services, and technology-driven digital offerings, catering to retail, MSME, and corporate clients. It operates its investment banking, merchant banking, and brokerage businesses through Yes Securities, a wholly-owned subsidiary of the Bank. Headquartered in Mumbai, it has a pan-India presence including presence in GIFT City and a Representative Office in Abu Dhabi.