Shares of Yes Bank Ltd soared 8% during the early trading hours on Monday, 12 May, after Japan’s Sumitomo Mitsui Banking Corporation (SMBC) agreed to buy a 20% stake in the private lender, marking one of the largest foreign investments in an Indian private bank.

The company, in its regulatory filing, said, “This transaction is the largest cross-border investment in the Indian banking sector. The transaction is subject to the necessary regulatory and statutory approvals including from the Reserve Bank of India and Competition Commission of India and will be subject to customary closing conditions.”

The deal is an important milestone in Yes Bank’s next phase of expansion, profitability, and wealth creation, and we anticipate using SMBC’s global capabilities in this phase, said the Mumbai-based private lender.

Sumitomo Mitsui Banking Corp of Japan would buy the shares for Rs 13,483 crore, or Rs 21.5 per share, through a secondary stake purchase of 13.19% from SBI and a combined holding of 6.81% in other banks.

In addition, SMBC would buy shares from a group of Indian institutions, including HDFC Bank, ICICI Bank, IDFC First Bank, Federal Bank, Bandhan Bank, Axis Bank, and Kotak Mahindra. During Yes Bank’s 2020 restoration phase, these banks made an initial investment of roughly Rs 10 per share.

SMBC’s purchase at Rs 1.50 a share might result in substantial returns of approximately 115% over five years, equating to an annual return of more than 20%. This transaction is expected to increase SBI’s profitability by 7.5 % in fiscal year 2026 and free up money that was previously earmarked for its exposure to Yes Bank.

The Reserve Bank of India (RBI) now limits foreign ownership in commercial banks to 15%, with a voting rights ceiling of 26%.  SMBC’s 20% stake purchase is remarkable since it surpasses the normal threshold allowed for foreign banks, though the RBI has previously approved exceptions for banks in trouble to maintain financial stability.

The transaction is still subject to clearance by the RBI and other regulatory organisations. SBI will have a large stake in Yes Bank.

At 11:47 am, the shares of Yes Bank were trading 2.25% higher at Rs 20.47 on NSE.

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