Yes Bank's stake sale runs into RBI hurdle

MUMBAI: The process of an equity stake sale in Yes Bank, giving an exit to investors that had bailed out the foundering lender four years ago, has hit a roadblock after the RBI rejected proposals from potential bidders to acquire a majority 51% in the listed private bank, said a top financial industry executive aware of the development.

Dubai's Emirates NBD and Japan's Sumitomo Mitsui Banking Corp (SMBC) are in the fray to acquire a stake in the private bank, according to recent media reports.

"The bidders are reluctant to acquire less than 51%, while the RBI has conveyed to them that it is uncomfortable with a single entity holding a majority stake," said the person cited above, when asked if the stake sale would be completed by the end of this fiscal year. This implies the sale process could be delayed.

In March 2020, a State Bank of India-led consortium bailed out Yes Bank by infusing Rs 10,000 crore-a move primarily aimed at protecting depositors. SBI, which acquired a 49% stake with a three-year lock-in, now holds 24% after Yes Bank raised money through a follow-on public issue and the preferential issue of shares to private equity investors Carlyle and Advent International.

Other lenders and financial companies, such as Axis Bank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank and Life Insurance Corp, jointly hold 11.5% equity, valued at Rs 8,440 crore.

The potential buyers are directly negotiating with the banks and other investors concerned and are in contact with the banking regulator for approval, said the person cited above. A single entity can hold up to 26% in a bank with RBI approval.

Even in the case of CSB Bank, where the RBI permitted billionaire Prem Watsa-promoted Fairfax India Holdings Corp to acquire a 51% stake, it was contingent upon Fairfax lowering its stake to 26% over 15 years. In June this year, Fairfax sold a 9.7% stake in the Kerala-based private bank.

"At some point, we need to provide exit to our shareholders, especially SBI," Prashant Kumar, MD and CEO of Yes Bank, told ET in an exclusive interview in July-end. SBI has declined to comment on the stake sale.

If SBI sells its entire stake in Yes Bank it could fetch the most-valued government lender Rs 17,611 crore on Thursday's closing price of Rs 23.43 a share on the BSE.