Kotak Mahindra to acquire IndusInd Bank in an all-stocks deal: Report

Uday Kotak, Chairman of Kotak Mahindra Bank Ltd
Uday Kotak, Chairman of Kotak Mahindra Bank Ltd

A recent Bloomberg report states that Kotak Mahindra Bank is looking at an all-stock acquisition of IndusInd bank, which, if happened, would help the former fill the gap between its top competitors. As of now, Kotak Mahindra stands at the fourth position behind HDFC, ICICI, and Axis Bank and if the acquisition goes through Kotak will be able to fill the gap, but might not advance in position. While Kotak refused to comment on the report, the IndusInd promoters made a strongly worded statement calling the “rumour”, “malicious, untrue, and baseless”.

In November 2014, Kotak Mahindra, which is backed by Asia’s richest banker Uday Kotak, had acquired ING Vysya Bank in an all-stocks deal, allowing the former a stronger presence in the Southern states. Moreover, the deal allowed the promoters to reduce their shareholding to 34%. Analysts believe that such a merger doesn’t make sense for Kotak, since their ING Vysya merger took three years to complete. The process can be tedious since different banks have different ethos when it comes to human resources and customer relations, and such a streamlining of different ideas could take time. Analysts opine that such a case can also be argued for the Kotak-IndusInd merger. However, the majority believe that all of this seems like speculation.

While a merger at this time, especially when the economy is contracting, is not ideal, the merger can help Kotak expand further, increasing their network all over the country and cement a strong fourth behind the big three. What follows the reports is yet to be known.

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