Kotak Mahindra’s promoters and their IndusInd Bank counterparts have entered into talks for the merger through a share swap, said one of the two people cited above, who requested anonymity as the talks are private.
The two sides are certainly still in exploratory talks and no decision has been made.
Kotak Mahindra Bank has a market capitalization of Rs. 2.75 trillion, while IndusInd Bank is valued at around Rs. 50,000 crore.
“We have no comment to offer,” said Rohit Rao, director of communications for Kotak Mahindra Group.
IndusInd Bank’s Promoter, IndusInd International Holdings Limited (IIHL), completely denies such rumor and considers it malicious, false and baseless. The IIHL is promoted by the Hindus and a broad base of other successful NRIs from the Indian diaspora abroad. They reiterate their full support for IndusInd Bank, now and forever.
“Whenever financial crises have impacted the Indian economy and its financial institutions, the IndusInd Bank Promoter has stepped in positively to support and improve the bank’s financial position. It has a strong track record of facilitating the 2002 acquisitions of IndusInd Enterprises and Finance Ltd (IEFL) by the bank, followed by another by Ashok Leyland Finance Ltd (ALF) in 2004. Most recently, in July 2019, it supported the acquisition of Bharat Financial Inclusion Ltd (BFIL) by IndusInd Bank. The promoter Continue supporting IndusInd Bank’s initiatives to grow inorganically should such opportunities arise in the future. It is worth remembering that among the original 9 licensees (4 institutional and 5 private) who were allowed to establish banking operations In 1994, IndusInd Bank is the only privately promoted bank to successfully continue operations thanks to the promoter’s support.
The Promoter reaffirms its unconditional support for IndusInd Bank. “
The proposed merger will help Kotak strengthen its retail business as IndusInd Bank has a large and constantly growing retail loan and deposit portfolio.
IndusInd’s retail loan portfolio is diversified and growing faster than Kotak Mahindra Bank’s, said the first person quoted above.
Discussions about the merger come at a time when IndusInd Bank’s promoters, the Hinduja family, are embroiled in a family dispute, which is taking place in a London court.
The four Hinduja siblings, Srichand, Gopichand, Prakash and Ashok, had signed a document in 2014 saying that the assets of one brother belong to all and that each of them will designate the others as their executors. But now, 84-year-old family patriarch Srichand Hinduja and his daughter Vinoo want the letter declared “void of legal effect” and the family assets separated according to their 2016 wish.
In September, IndusInd Bank raised Rs3,288 crore through a preferential allocation to promoters and other investors. The bank’s promoters had hoped to receive approval from the Reserve Bank of India to increase their stake in the bank (to 26%), but the regulator has not approved that proposal.
IndusInd made a provision of Rs. 2,566 crore, related to delinquent loans, of which the covid-19 provisions were at Rs. Rs 1,203 crore during the June quarter. Consequently, the bank’s first quarter tax profit was reduced by 64% to Rs. 510 crore from the previous year.
IndusInd’s corporate loan portfolio stood at Rs. Rs 83.986 crore (42% of total advances) at the end of June. The bank’s consumer finance book made up the remainder, with advances of Rs. 1.14 trillion, or 58% of total advances.
IndusInd’s CASA deposits stood at Rs. 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 nationwide, serving more than 26 million customers. By comparison, Kotak Mahindra Bank has 1,600 branches and 2,516 ATMs.
IndusInd advances grew 2% to Rs. 1.98 trillion in the June quarter, while deposits grew 5% to Rs. 2.11 trillion.
Kotak’s total advances stood at Rs. 2.04 billion and total deposits in ₹2.62 trillion at the end of June.
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