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Business News/ Companies / News/  Kotak exploring potential takeover of IndusInd Bank

Mumbai: Kotak Mahindra Bank Ltd is exploring a potential takeover of smaller rival IndusInd Bank Ltd, said two people aware of the development. If such a deal is clinched, it could significantly expand Kotak Mahindra’s presence in the Indian banking sector, particularly in the retail segment.

The promoters of Kotak Mahindra and their counterparts in IndusInd Bank have engaged in discussions for the merger via a share swap, said one of the two people cited above, requesting anonymity as the talks are private.

To be sure, the two sides are still in exploratory talks, and no decision has been taken.

Kotak Mahindra Bank has a market cap of Rs. 2.75 trillion, while IndusInd Bank is valued at around Rs. 50,000 crore.

“We have no comments to offer," said Rohit Rao, chief communication officer, Kotak Mahindra Group.

The Promoter of IndusInd Bank, IndusInd International Holdings Limited (IIHL), completely denies the said rumour and considers it malicious, untrue and baseless. IIHL is promoted by the Hindujas and broad base of other successful NRIs from the overseas Indian diaspora. They reiterate their full support to the IndusInd Bank, now and always.

"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.

The Promoter reaffirms its unstinted support to the IndusInd Bank."

The proposed merger will help Kotak bolster its retail business as IndusInd Bank has a large, steadily growing retail credit and deposits book.

IndusInd’s retail lending book is diversified and growing faster than that of Kotak Mahindra Bank, the first person cited above said.

The merger discussions come at a time when the promoters of IndusInd Bank, the Hinduja family, are entangled in a family dispute, which is being heard at a London court.

The four Hinduja brothers -- Srichand, Gopichand, Prakash and Ashok -- had in 2014 signed a document saying the assets held by one brother belong to all, and that each of them will appoint the others as their executors. But now, family patriarch Srichand Hinduja, 84, and his daughter Vinoo want the letter to be declared of “no legal effect" and the family’s assets to be separated as per his wish of 2016.

In September, IndusInd Bank raised Rs3,288 crore through a preferential allotment to the promoters and other investors. The bank’s promoters have been hoping to receive an approval from the Reserve Bank of India to increase their stake in the bank (to 26%), but that proposal has not been cleared by the regulator.

IndusInd made a provision of Rs. 2,566 crore, related to non-performing loans, of which covid-19 provisions were at Rs. 1,203 crore during the June quarter. Consequently, the bank’s fiscal first-quarter profit fell by 64% to Rs. 510 crore from a year earlier.

IndusInd’s corporate lending book stood at Rs. 83,986 crore (42% of overall advances) at the end of June. The bank’s consumer finance book constituted the rest, with advances of Rs. 1.14 trillion, or 58% of overall advances.

IndusInd’s CASA deposits stood at Rs. 84,473 crore, which is 40% of the bank’s total deposits at the end of June.

IndusInd Bank has nearly 2,000 branches across the country, serving over 26 million customers. In comparison, Kotak Mahindra Bank has 1,600 branches and 2,516 ATMs.

IndusInd’s advances grew 2% to Rs. 1.98 trillion in the June quarter, while deposits grew by 5% to Rs. 2.11 trillion.

Kotak’s total advances stood at Rs. 2.04 trillion and total deposits at 2.62 trillion at the end of June.

Anirudh Laskar
Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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Updated: 25 Oct 2020, 09:13 PM IST
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