Yes Bank to Raise ₹16,000 Cr as SMBC Becomes Largest Shareholder

Stock gains 2% after board approval of fundraise plan

In a major development for the private banking sector, Yes Bank has received board approval to raise ₹16,000 crore through a mix of debt and equity instruments. This announcement gave a boost to investor sentiment, with Yes Bank shares gaining 2% to trade at ₹21.24 on June 4.

₹7,500 Cr via Equity, ₹8,500 Cr via Debt

The bank’s board has cleared the proposal to raise ₹7,500 crore through equity issuance and ₹8,500 crore via debt securities, which may be issued in Indian or foreign currencies. The fundraising will be executed in one or more tranches, depending on market conditions and regulatory approvals.

The proposal is subject to shareholder consent as well as other statutory and regulatory clearances, which the bank will seek in the coming days.

SMBC to Acquire 20% Stake in Yes Bank

This fundraising move closely follows a major investment announcement made on May 9, when Japan’s Sumitomo Mitsui Banking Corporation (SMBC) agreed to acquire a 20% stake in Yes Bank. The acquisition will make SMBC the largest shareholder in Yes Bank, reshaping the bank’s ownership structure.

SMBC will acquire its stake from existing shareholders, including State Bank of India (SBI), HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank. These banks were part of the rescue consortium that supported Yes Bank in 2020 during its financial crisis.

SBI to Offload 13.19% Stake

Among the sellers, SBI will offload 13.19% of its holding in Yes Bank for nearly ₹8,890 crore. The remaining 6.81% will be sold by the other consortium members. This will enable SMBC to reach a 20% holding, with a total investment of around ₹13,484 crore.

After the transaction:

• SMBC will hold 20%

• SBI’s stake will reduce to 10.8%

• Other investor banks will hold a combined 2.9%

Strong Q4 Performance Adds Confidence

Adding further confidence to the bank’s strategy, Yes Bank reported a robust Q4 performance. For the March 2024 quarter, the bank posted a 63.3% year-on-year rise in net profit to ₹738.1 crore.

• Net interest income (NII) grew by 5.7% to ₹2,276.3 crore.

• The gross NPA ratio stood at 1.6%, unchanged from the previous quarter.

• The net NPA improved to 0.3% from 0.5%, reflecting better asset quality.

A Turning Point for Yes Bank?

With a strong capital infusion on the horizon and a reputed global player like SMBC stepping in as a strategic investor, this move could mark a significant turning point in Yes Bank’s journey. The funds raised will likely be used to strengthen the bank’s balance sheet, improve credit growth, and invest in future expansion plans.

This development positions Yes Bank to regain its competitive edge in the private banking sector, especially after the challenges it faced in recent years.