MUMBAI: Kotak Mahindra Bank is exploring an acquisition of private sector rival IndusInd Bank, according to a report. The Hindujas’ IndusInd International Holdings (IIHL), which is the promoter of IndusInd Bank, has denied the report, while Kotak has been non-committal.
In a late evening report on Sunday, Bloomberg said that Kotak is looking at an all-stock acquisition. It also said that the UK-based Hinduja family began the discussion for selling control of the Mumbai-based lender following a dispute between the four brothers over the family’s fortune.
IndusInd promoters currently hold less than 15% in IndusInd Bank through IndusInd InternationalHoldings (see graphic).Ofthe remaining 85%, the bulk is held by institutional investors who have seen the bank’s share price fall by more than 60% to Rs 607. At current prices, the bank has a market cap of less than Rs 46,000 crore.
As against this Kotak Bank is only 20% down from its 52-week high even after a dilution and has a market cap of over Rs 2.7 lakh crore. A merger at current prices would bring the Hinduja promoter holding to just above 2%.
A deal between Kotak and IndusInd would find favour with the banking regulator as Kotak Bank has a strong capital base and a good asset quality, which gives it a high capacity to absorb a smaller bank. Promoter Uday Kotak’s stake in his bank has fallen to about 26% after a qualified institutional placement of shares worth Rs 7,442 crore amid the lockdown.
“We have no comments to offer,” Kotak Mahindra Group chief communication officer Rohit Rao said. IIHL, a Mauritius-based company, denied the reports by Bloomberg, stating that it is “malicious, untrue and baseless”. The statement said that the Hindujas have reiterated full support to IndusInd Bank — now and always.