SBI makes a Rs12,000-cr windfall from its YES Bank investment

13 Mar 2023


State Bank of India (SBI) is reported to have made a windfall gain of Rs12,000 crore from its investment to bail out  fallen private sector lender Yes Bank in 2020. 

SBI, India’s largest lender, along with seven of its peers, had invested Rs10,000 crore in YES Bank three years back, when the private lender was on the brink of bankruptcy.
After the bailout, YES Bank’s earnings improved significantly, particularly on the asset quality front. The Rs9,000 crore fund infusion by the PE firms has further bolstered the capital, which, in turn, boosted profitability and its share value. 
This not only brought life back into the bank, but also its shares, which have appreciated about 70 per cent in the last 3 years. Such an appreciation in the stock has bolstered the value of SBI’s stake in YES Bank, as it has more than doubled in 3 years.
On 14 March 2020, SBI acquired a 30 per cent stake in the private lender at Rs10 a share. This stake got diluted to a little over 26 per cent after a fresh share issue by YES Bank to private equity firms Carlyle Group and Advent International in the last quarter.
The 26.14 per cent stake of SBI is valued at Rs12,655 crore at the current market price. Shares of YES Bank have appreciated about 70% since the fund infusion by the 8 lenders.
Besides SBI, 7 other lenders, including Housing Development Finance Corp Limited (HDFC), ICICI Bank, Axis Bank, Kotak Mahindra Bank, Federal Bank, Bandhan Bank, and IDFC First Bank have invested in the bank.
However, the 3-year lock-in period for these lenders will end on March 13. And the noise on a potential sale of partial stake by some of the lenders, especially SBI, is high on Dalal Street.
Given SBI’s windfall gains from its investment in Yes Bank, it can now cash in on some of them. Given the strong outlook for the lender, analysts expect good demand for the shares. 
As of end-December, the lenders, barring Bandhan Bank, cumulatively held 36.12 per cent stake in YES Bank. Bandhan Bank’s stake has dropped below 1 per cent due to the dilution and was therefore not visible in the shareholding pattern.

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