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UAE bank close to acquiring $5b stake in Indian bank

Speculations rife about the lender being Yes Bank

Published: Thu 12 Sep 2024, 7:38 PM

Updated: Thu 12 Sep 2024, 7:39 PM

By
Issac John

A Yes Bank branch in Mumbai. — File photo

A leading UAE-based bank is in talks to acquire a stake in an Indian bank, with an investment expected to be in the billions of dollars, according to the UAE ambassador.

The UAE Ambassador to India, Abdulnasser Alshaali, told CNBC TV-18 in an interview that the investment could be valued at billions of dollars. However, certain unresolved issues need to be addressed first, the ambassador said. “There are some matters that need to be sorted out for this to go ahead,” he told the channel. He, however, expressed optimism about resolving the issues.

The UAE envoy did not disclose the parties involved, citing ‘market sensitivities,’ triggering speculation the target is Yes Bank. However, he hinted that an Abu Dhabi-based bank is likely to purchase a significant stake in the Indian bank.

The announcement follows bilateral discussions during Crown Prince Sheikh Khaled bin Mohamed bin Zayed Al Nahyan’s visit to India. During the visit, Sheikh Khaled held key discussions with Indian Prime Minister Narendra Modi, focusing on deepening bilateral ties across various sectors, including finance, trade, and infrastructure.

Alshaali emphasised the broadening scope of UAE-India relations, particularly in trade and investment. “We are the second-largest export destination for India, the third-largest trade partner, and the fourth-largest investor,” he said, noting the remarkable progress in bilateral trade flows and investment projects.

The ambassador said discussions during the Crown Prince’s visit covered numerous sectors, including ports, renewable energy, and advanced technologies. He also pointed out the UAE’s commitment to supporting India’s energy security and India’s role in ensuring the UAE’s food security.

According to earlier unconfirmed reports quoting Bloomberg and Reuters, the potential bidders for a $5 billion stake in Yes Bank include two leading banks from Dubai and Abu Dhabi.

There was also a report that the Reserve Bank of India (RBI) has given its approval for a 51 per cent stake sale in the bank. This was denied by the private sector lender. The report had claimed that a likely sale could value Yes Bank by around $10 billion and that the lender had appointed Citigroup to shortlist suitable candidate.

In July, reports surfaced about First Abu Dhabi Bank being among the potential suitors for a stake in Yes Bank.

Bloomberg said the lender was considering buying as much as a 51 per cent stake in Yes Bank. The stake sale has also drawn interest from Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group.

First Abu Dhabi Bank then said it was not considering any potential stake purchase in Yes Bank.

Yes Bank was restructured by the RBI in March 2020 with the help of a consortium of local banks after its financial health deteriorated. India’s largest lender, State Bank of India, 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.