SBI aims to sell its YES Bank stake worth $2.2 billion by March-end

State Bank of India (SBI), the country's largest lender, aims to strike a deal by end-March for the sale of its 24 per cent stake worth Rs 18,420 crore ($2.2 billion) currently in smaller rival Yes Bank, four sources with direct knowledge said.

Japanese lender Sumitomo Mitsui Banking Corp and Dubai-based Emirates NBD are in advanced talks to acquire a majority stake in Yes Bank, two of these sources said. Sumitomo Mitsui is a unit of Sumitomo Mitsui Financial Group, Japan's second-biggest bank.

"Both the bidders are interested in acquiring a majority 51 per cent stake in Yes Bank to get sizeable control of the bank's business," one of the sources said. "The Reserve Bank of India (RBI) has verbally okayed the proposal and due diligence is on."

Yes Bank was restructured by the RBI in March 2020 with the help of a consortium of local banks after its financial health deteriorated.

SBI currently holds about 24 per cent in Yes Bank while 11 other lenders, including ICICI Bank and HDFC Bank, who were also involved in Yes Bank's rescue, together hold 9.74 per cent.

Two private equity funds - CA Basque Investments and Verventa Holdings - collectively hold another 16.05 per cent. The remainder is with some other investors and with the public.

"Bidders are seeking relaxation on the regulatory requirement that promoter shareholding be brought down to 26 per cent within 15 years of the investment, and talks are on," said one of the sources, referring to the stake by controlling shareholders.

The sources did not wish to be identified as they are not authorised to speak with the media.

SBI said it categorically denies any development in this matter.

In a response to Reuters' query, Yes Bank said it had "no comments to offer regarding (the) stake sale as these inquiries are speculative in nature."

RBI and Emirates NBD, Dubai's biggest bank, did not immediately respond to Reuters' emails seeking comment. Sumitomo Mitsui Banking Corp said it will not comment on "individual deals".

Other media earlier reported the interest of Japanese and Middle Eastern lenders in acquiring SBI's stake in Yes Bank.

SBI has already received RBI's verbal approval to divest its whole stake in Yes Bank, one of the sources said, adding that SBI is expecting to make a profit of around Rs 10,000 crore.

"SBI had rescued Yes Bank when there was a liquidity crunch, but now that things have turned around, it is prudent to exit," this person said.

Once RBI approves the bidders, the process should happen quickly and SBI will have a chance to negotiate valuation, etc., with the bidders, two of the sources said.

At the current market price of Rs 24.60, Yes Bank is valued at Rs 77,095 crore.

Talks could be delayed due to volatility in the Japanese market and a parallel government stake sale process in IDBI Bank, a fifth person familiar with the process said.

Emirates NBD, one of the potential bidders for Yes Bank, has also expressed interest in buying private lender IDBI Bank and prefers waiting till that process is concluded, the source added.