Sumitomo Mitsui Banking Corporation (SMBC) is selling its entire 1.7% stake in Kotak Mahindra Bank. The Japanese banking group intends to sell 32.8 million shares in block deals on the National Stock Exchange and Bombay Stock Exchange. According to the term sheet, the sale floor price is Rs 1,880 per share, a 4.1% discount to Monday's closing of Rs 1,960.
Jefferies India and Nomura are joint placement agents for the transaction, and Kotak Securities is the broker. Book building will commence on September 9 and end on September 10. The trades are to settle on September 11. The sale will earn SMBC over Rs 6,166 crore, which will give it the capital to invest in the next round.
SMBC has sold its Kotak Bank investment to give itself room to invest in Yes Bank. All approvals were granted to the Japanese lender to raise its stake to almost 25% in the Indian private sector bank. This action was taken after it announced on May 9 its intention to purchase a 20% stake in Yes Bank in secondary transactions.
The intended acquisition will involve a 13.2% purchase by State Bank of India and a 6.8% share by a union of lenders, including Axis Bank, HDFC Bank, ICICI Bank, and Kotak Mahindra Bank. By implementing this growth strategy, SMBC will consolidate its presence in India's growing banking markets.
Kotak Mahindra Bank has had a close relationship with SMBC. At one point, the Japanese institution owned up to 3.6% of the Indian bank shares. Over time, SMBC progressively scaled down its position as it explored other strategic options in the Indian financial market.
Kotak Mahindra Bank is a bank that is moving away. The decision to completely withdraw its services signifies a shift in strategy as the Japanese bank reinvests its capital. This step highlights SMBC's focus on integrating its investment strategy with Yes Bank, where it experiences high growth potential following regulatory approval.