The proposed sale of shares in Yes Bank will still leave SBI with 10.78 per cent shareholding.
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RUPAK DE CHOWDHURI
State Bank of India (SBI) will laugh all the way to the bank on the investment it made in 2020 to rescue Yes Bank. This investment has yielded a healthy return of about 14.5 per cent so far, going by the share purchase agreement (SPA) that India’s largest bank recently signed with Sumitomo Mitsui Banking Corporation (SMBC) to sell a portion of its stake in the private lender.
SBI will be selling a portion of the investment it made in Yes Bank in March 2020 at ₹10 per equity share to SMBC, which is a Japanese multinational financial services company, belonging to the Sumitomo Mitsui Financial Group (SMFG), at ₹21.50. It is the single largest investor in the private sector bank.
As per the investing “Rule of 72” (which tells investors how many years it will take to double their investment via compound returns; 72/ annual rate of return), the Bank’s investment has doubled in five years, fetching it a return of about 14.5 per cent.
SBI had invested invested ₹6,050 crore in March 2020 to pick up a 49 per cent stake at a share price of ₹10 per equity share (comprising ₹2 face value and ₹8 premium). It will be selling 13.19 per cent stake for about ₹8,889 crore. Over the years, SBI’s stake in Yes Bank got diluted to 23.97 per cent as the bank raised capital from other investors.
The proposed sale of shares in Yes Bank will still leave SBI with 10.78 per cent shareholding. The public sector bank can gain from an upside on this holding at a later date.
Besides SBI, seven other banks — HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank and Bandhan Bank — will be collectively selling 6.81 per cent stake in Yes Bank to SMBC and stand to benefit from the transaction. They will collectively get about ₹4,594 crore.
Mangesh Kulkarni, Head — Portfolio Management Services, Almondz Financial Services, noted that after the 20 per cent stake purchase in Yes Bank, SMBC can nominate two directors on the Board of the Bank and also recommend to the RBI the name of an experienced senior Banker who can helm the Bank once the current incumbent Prashant Kumar’s term comes to an end in October 2025.
The Bank has seen a good turnaround and has stabilised in the last few years, he added.
Banking expert V Viswanathan reasoned that SBI would have taken the decision to divest a portion of its stake as a public sector bank holding nearly one-fourth of the shares in Yes Bank may be the reason the stock market is not giving due weightage to the latter’s shares. SBI may get compensated even better in the future from sale of Yes Bank shares that it will hold post the partial divestment.
In 2020, the financial position of Yes Bank underwent a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits, according to RBI. The bank also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank, it added.
The RBI superseded the Board of Directors the Bank and placed it under moratorium on March 5, 2020. The next day RBI placed in public domain a draft scheme of reconstruction of the Bank. The moratorium was lifted on March 18, 2020.
Published on May 12, 2025
