Yes Bank shares rise by 4%, this is big news related to investment of Rs 16000 crore

News Topical, Digital Desk : Yes Bank Share Price: Yes Bank shares rose nearly 4% in the morning trading session on August 29. The surge in shares came after a report said that Japanese business giant Sumitomo Mitsui Banking Corporation (SMBC) will invest Rs 16,000 crore ($1.83 billion) in Indian private bank Yes Bank. This investment will be made through equity and debt.

According to media reports, the purpose of this investment is to strengthen the balance sheet of Yes Bank and it is being considered an important step towards taking a stake in the bank through SMBC. This investment will include Rs 7,500 crore in equity form and Rs 8,500 crore in debt.

This investment is different from the Rs 13,500 crore that SMBC had earlier promised to give to the existing shareholders of Yes Bank, including State Bank of India (SBI). This amount will be given to the existing shareholders for selling their stake.

How will the investment be made?
According to the report, the Rs 8,500 crore to be given as loan will be through Japanese Yen based bonds, which will have an interest rate of less than 2%. This will provide the bank with long term funding at a low cost. At the same time, equity worth Rs 7,500 crore will be invested to increase the capital of the bank through foreign currency convertible bonds (FCCBs).

Last week, Yes Bank announced that the Reserve Bank of India (RBI) has allowed Japan-based SMBC to take up to 24.99% stake in the bank. Earlier, in May, Yes Bank had revealed that SMBC proposes to buy 13.19% stake from State Bank of India and 6.81% stake from other 7 shareholders.

Impact on stock
Yes Bank shares are currently trading at around ₹ 19.41 in the morning. In the last 6 months, its shares have gained about 16% and its P/E ratio is more than 21. This investment will boost the business strength of Yes Bank as well as strengthen its operations and is expected to improve its performance in the banking sector.

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