Kotak Mahindra Bank can buy IndusInd Bank, one of the leading private sector banks. Sources familiar with the matter say that if this deal is reached, Kotak Mahindra Bank could become the eighth largest bank in the country in terms of assets. However, IndusInd Bank’s promoter company IndusInd International Holdings Limited (IIHL) has called the news a rumor.
Deal related initial talks
According to Bloomberg, Uday Kotak, co-founder of Kotak Mahindra Bank, is looking at the possibility of acquiring the entire stock. A person associated with the case said that the Hinduja family and Uday Kotak had held preliminary talks on the proposal in which the co-founder of IndusInd Bank could hold a stake in the bank after the deal. According to the report, this news has come after the dispute between the Hinduja brothers.
There will be increase in assets of Kotak Mahindra
The report speculated that the deal would strengthen Kotak Mahindra’s position. Bank assets are likely to increase by around 83%. Apart from this, IndusInd Bank will also get relief. Because the bank has seen its market value fall by $ 6 billion this year due to poor asset quality and low-cost deposits. Earlier in 2014, Kotak Mahindra Bank acquired the local unit of ING Groep NV in India. The bank paid $ 2 billion for it.
Promoters’ stake in the bank
IndusInd Promoters currently holds less than 15% stake in IndusInd Bank through IndusInd International Holdings. The remaining 85% is held by most institutional investors. On Monday, the per-share price of the bank in BSE is Rs 623 and the market cap is Rs 47,124 crore. According to Bloomberg, IndusInd Bank’s stock has fallen 64% in the past year. Earlier in June, RBI had put a break on Hinduja Brothers’ plan to increase stake in IndusInd Bank.
While Kotak Mahindra Bank’s stock is trading at Rs 1,382. Its market cap is more than Rs 2.73 lakh crore. In such a situation, after the merger of both banks at current prices, Hinduja Brothers’ stake will increase by 2%. At the same time, promoter Uday Kotak’s stake has come down by around 26% after the sale of shares worth Rs 7,442 crore during the lockdown.
Rohit Rao, Chief Communication Officer (CCO) of Kotak Mahindra Group, declined to comment on this. In addition, the Mauritius-based company IIHL has issued a statement calling the Bloomberg report as rumor and inaccurate.