Kotak Mahindra Bank is looking at a possible takeover of IndusInd Bank, according to reports. In terms of assets, Kotak Mahindra is the fourth-largest private sector bank in the country. Livemint reported that if such a deal goes through, it will expand Kotak’s presence particularly in the retail sector.
If the deal goes through, it could also significantly expand Kotak Mahindra’s presence in the Indian banking sector, particularly in the retail segment.
While Kotak Mahindra did not comment on the deal, the promoters of IndusInd Bank, which is the Hinduja Group and other NRIs, vehemently denied it and calling the news “malicious, untrue and baseless”.
Livemint reported that the promoters of both parties have discussed a merger by way of a share swap, and that the talks are still in exploratory stages. Bloomberg also reported Kotak Mahindra chief Uday Kotak is looking at an all stock acquisition.
The deal would not only cement Kotak Mahindra’s position (albeit it’ll remain at fourth place, it could narrow the gap with Axis Bank, which is third), but also help IndusInd. By asset size, the combined entity will be the eighth largest bank in the country.
IndusInd Bank has seen its market value drop 60%. Its shares have reportedly fallen by 64% in the last year amid concerns of the founders borrowing money by pledging shares, which have now been repaid. There were also concerns over asset quality, among others.
IndusInd further added in a statement that the promoters of the bank will continue to support the bank, especially to grow inorganically, should such opportunities arise in the future.
“Whenever financial crises have impacted the Indian economy and its financial institutions, the Promoter of the Indusind Bank has positively intervened to support and improve the financial position of the bank. It has a solid track record of facilitating the acquisitions in 2002 of IndusInd Enterprises and Finance Ltd (IEFL) by the bank, followed by another one of Ashok Leyland Finance Ltd (ALF) in 2004. Very recently in July 2019, it supported the acquisition of Bharat Financial Inclusion Ltd (BFIL) by the Indusind Bank. The Promoter would continue to support Indusind Bank’s initiatives to grow inorganically should any such opportunities arise on the horizon in the future. It is worth recalling that amongst the 9 original licensees (4 institutional and 5 private) that were allowed to set up banking operations in 1994, IndusInd Bank is the only privately promoted bank that successfully continues its operations because of the promoter support,” it said in a statement.
The members of the Hinduja family are currently in a legal tussle over the family’s assets.
IndusInd's shares jumped 4% on Monday morning, and at the time of writing, it was trading 1.23% up on the Bombay Stock Exchange.