In a significant development for India’s banking and financial sector, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) is reportedly planning to sell its entire 1.65% stake in Kotak Mahindra Bank through block deals. According to a CNBC-Awaaz report dated September 9, the transaction could fetch around ₹6,000 crore for the Japanese lender.
This strategic move comes as SMBC prepares to utilize the funds for its planned investment in Yes Bank, a deal that has already been cleared by the Reserve Bank of India (RBI) and the Competition Commission of India (CCI).
Details of the Stake Sale
As per the report, Sumitomo Mitsui is expected to offload 3.28 crore shares of Kotak Mahindra Bank through block deals on the stock exchanges. Brokerages have already reached out to foreign institutional investors (FIIs) and domestic mutual funds to explore potential interest in participating in the stake sale.
If completed, the deal will mark one of the largest block trades in the Indian banking space this year, further underlining the rising global investor appetite for Indian financial institutions.
Also Read: Nifty IT Index Jumps 2%, Snaps Five-Day Losing Streak; Infosys, Wipro Lead Gains
Why Sumitomo is Exiting Kotak Mahindra Bank?
Sumitomo’s decision to divest its stake in Kotak Mahindra Bank is closely linked to its upcoming investment in Yes Bank. Last month, the RBI approved for SMBC to acquire up to 24.99% stake in Yes Bank, paving the way for one of the biggest foreign investments in the Indian banking sector.
The Japanese banking giant is expected to deploy nearly ₹14,000 crore in Yes Bank, making this transaction the largest cross-border merger and acquisition (M&A) deal in India’s financial sector.
By selling its stake in Kotak Mahindra Bank, Sumitomo is ensuring that it has sufficient liquidity to participate in the Yes Bank deal, which is expected to strengthen its foothold in the Indian financial services market.
Structure of the Yes Bank Deal
Back in May, both banks informed stock exchanges that SMBC had inked a binding agreement to purchase a 20% stake in Yes Bank. The structure of the deal includes:
13.19% stake to be acquired from State Bank of India (SBI).
6.81% stake to be acquired from a consortium of lenders, including Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, and Kotak Mahindra Bank.
The combined purchase values the deal at approximately ₹14,000 crore, making it a landmark transaction in Indian banking history.
RBI and CCI Approvals Smooth the Path
One of the most important developments that has enabled the deal is regulatory clarity.
The RBI has clarified that Sumitomo Mitsui will not be treated as a “promoter” of Yes Bank despite owning nearly 20% stake. This is crucial because being designated as a promoter would have subjected SMBC to stricter regulatory and compliance requirements.
Earlier this month, the Competition Commission of India (CCI) also approved the proposed stake purchase, removing any antitrust concerns.
With both major regulatory hurdles cleared, Sumitomo’s focus is now on arranging liquidity, which explains the decision to exit Kotak Mahindra Bank.
What It Means for Kotak Mahindra Bank?
While a large shareholder like Sumitomo Mitsui selling its stake may raise short-term questions in the market, analysts believe that the fundamentals of Kotak Mahindra Bank remain strong.
The bank, one of India’s leading private sector lenders, has consistently reported healthy balance sheets, stable asset quality, and robust retail and corporate lending portfolios.
Market experts say that FIIs and mutual funds may take advantage of the block deal to increase their holdings in Kotak Mahindra Bank, given its long-term growth potential and strong position in India’s banking landscape.
Impact on Yes Bank
For Yes Bank, the entry of Sumitomo Mitsui as a strategic shareholder is seen as a major positive. The deal will provide:
Capital infusion of nearly ₹14,000 crore, strengthening its balance sheet.
Increased confidence among investors, depositors, and regulators.
Access to SMBC’s global expertise in corporate banking, risk management, and digital banking solutions.
Industry observers believe that the deal will accelerate Yes Bank’s turnaround story, helping it move past the financial troubles it faced in 2020.
Expert Views
According to market analysts, the stake sale and subsequent investment in Yes Bank highlight the shifting priorities of global investors in Indian banking.
“Sumitomo’s move reflects the attractiveness of India’s financial sector for long-term foreign investments. While Kotak Mahindra Bank is a stable player, Yes Bank offers higher growth potential post its restructuring phase. The Japanese lender is clearly betting on India’s evolving credit demand and digital banking opportunities,” said a Mumbai-based banking analyst.
Another expert added, “Block deals often create short-term volatility in share prices, but institutional interest ensures that quality banks like Kotak continue to attract buyers. On the other hand, Yes Bank stands to gain immensely from the liquidity boost and international backing.”
Market Reaction
As of September 9, market participants are closely watching both Kotak Mahindra Bank and Yes Bank stocks. While Kotak may see some selling pressure due to the large stake sale, Yes Bank is likely to trade with a positive bias on expectations of fresh capital inflows.
FIIs and domestic funds are expected to actively participate in the block deal, providing stability to Kotak’s stock price once the transaction goes through.
The Bigger Picture
The deal underscores two key themes in India’s financial landscape:
Global confidence in Indian banks – Foreign players are increasingly willing to commit large sums, betting on India’s long-term growth story.
Strategic realignments – Institutions like Sumitomo are reshuffling their investments to maximize returns and capture higher-growth opportunities in India.
With regulatory approvals in place and liquidity arrangements underway, the SMBC–Yes Bank deal is set to be a landmark in India’s banking history, reshaping investor confidence and sectoral dynamics.
Conclusion
Sumitomo Mitsui’s decision to sell its 1.65% stake in Kotak Mahindra Bank for ₹6,000 crore is not a sign of weakness in Kotak but rather a strategic reallocation of capital. The Japanese lender is preparing to anchor its presence in India through a much larger bet on Yes Bank, which has the potential to transform the country’s private banking sector.
For investors, this move highlights both the resilience of Kotak Mahindra Bank and the renewed growth prospects of Yes Bank. As one of the largest cross-border investments in Indian banking, the deal reaffirms India’s position as a preferred destination for global financial giants.
Click here to explore
Yes Bank
Kotak Bank
