MUMBAI: The nation’s largest lender SBI has made a killing from its Rs 2,450 crore investment for a 49% stake in the then sinking Yes Bank in March 2020, from selling just 13.18% to the Japanese banking major Sumitomo Mitsui Banking Corporation (SMBC) for Rs 8,889 crore. This translates in to a cool 3.62x gains. Moreover, the profit will not attract capital gains tax, according to the terms agreed by the RBI, government and the investee banks in the RBI-scripted bailout of the private lender, barring which it would have attracted 12.5% long term capital gains tax.
This means, SBI, in all likelihood, will continue to the most profitable company in the second quarter as well with a bumper net income. In the June quarter too, the bank was the most profitable firm with a post-tax profit of Rs 19,160 crore, beating the traditionally biggest Reliance’s Rs 17,904 crore by a wider margin.
On May 9, the Reserve Bank allowed SMBC to pick up 20% in Yes Bank for Rs 13,483 crore in Yes Bank. In late August the regulator allowed a further 4.99% in the bank for an undisclosed sum but without the promoter tag but will be considered as public shareholder.
Other banks like Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank and Kotak Mahindra Bank would collectively sell 6.81% stake for Rs 4,594 crore to SMBC at Rs 21.50 per share, as against their purchase price of Rs 10/share. Yes Bank counter was trading at Rs 20.09 at 1400 hrs today.
Recent media reports said, the Japanese financial behemoth with over Rs 2 trillion in assets, was keen to infuse an additional Rs 4,000 crore capital into Yes Bank, provided the RBI allows its to be the promoter.
In a statement Wednesday, the SBI said it has completed the divestment of its 13.18% stake in Yes Bank for Rs 8,889 crore to SMBC, which is the second largest banking group in Japan with total assets of $ 2 trillion.
The nation’s largest bank further said even after this divestment, it will continue to remain a shareholder in Yes Bank with a shareholding of 10.8% of residual shareholding. As of March 2024, SBI held 23.97% stake in Yes Bank.
SBI became the largest shareholder of Yes Bank in March 2020 under the Yes Bank reconstruction scheme 2020 notified by the government after the private sector lender went belly up with bad loans and other issue. On March 5, the RBI superseded its board and put retired SBI banker Prashant Kumar as the administrator and later as its chief executive.
Subsequently, SBI had also acquired additional shares as part of follow-on public offer by Yes Bank in July 2020, taking its total holding to 49%. But the RBI imposed a five-year moratorium on these lenders on exiting Yes Bank state.
The partial stake sale by SBI and other shareholder banks to SMBC represents the largest cross-border investment in the domestic banking sector, SBI said, adding the transaction has received the necessary regulatory and statutory approvals including from the Reserve Bank and the Competition Commission.
Commenting on the transaction, SBI chairman Challa Sreenivasulu Setty said, “Yes Bank restructuring plan by RBI in 2020 was an innovative, first of its kind public sector–private sector partnership that was fully supported and facilitated by the government.
“The Yes Bank bailout is perhaps the best example of protecting the customer interests of a large bank by collaborative efforts of SBI and other banks under the guidance of the RBI and the government. And the SMBC transaction is the largest cross-border transaction in our banking sector,” Setty said.
According to the RBI draft reconstruction scheme for Yes Bank, the authorised capital for the reconstructed bank would be Rs 5,000 crore, with 2,400 crore equity shares of Rs 2 each aggregating to Rs 4,800 crore. Under this SBI was asked to pick up 49% stake for Rs 2,450 crore at Rs 10/share and it can’t pare down its holding below 26% before three years. SBI would get two nominees to the reconstituted bank’s six-member board.