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Kotak Mahindra Bank open to acquisition opportunities; calls IndusInd Bank merger report 'speculative'

Updated : October 26, 2020 09:10 PM IST

Bank’s CFO told CNBC-TV18 during its earnings call that it had indicated its intent to look at acquisitions at the time of raising capital in June.

Top IndusInd Bank sources told CNBC-TV18 the bank will be an “acquirer” and not an “acquiree” if any merger opportunity is considered.

Kotak Mahindra Bank called reports of the bank taking over IndusInd Bank “speculative”, even as it refused to offer any comments on the story. While addressing an analyst call after the bank reported its second-quarter earnings, Uday Kotak, the MD & CEO of Kotak Mahindra Bank said the news going around since last evening was speculative, and that as a policy, the bank would not comment on rumours and speculations.

When CNBC-TV18 asked its management about whether the bank had even held any preliminary discussions with IndusInd Bank, Jaimin Bhatt, the chief financial officer of the bank said, “As a matter of company policy we will not comment on any speculation or rumour, and whenever there is something to report we will get back to you.”

Bhatt added, “Even when we raised capital sometime in the first quarter of this year, we did talk about the fact that we would look at acquisitions, whether it is companies, assets, whatnot. So, not saying no to any of those growth avenues,” in a response to CNBC-TV18’s query on the bank exploring any inorganic opportunities at all.

IndusInd Bank, on the other hand, has categorically denied any such development. In a statement to CNBC-TV18, the spokesperson for the promoter family of IndusInd Bank said, “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.”

Further, the statement said, “The Promoter would continue to support Indusind Bank’s initiatives to grow inorganically should any such opportunities arise on the horizon in the future.”

Top executives at IndusInd Bank confirmed to CNBC-TV18 that no such talks were held at the management level and that they were not aware of any potential deal with Kotak bank. “If IndusInd Bank considers any deal or merger in future, will be the "acquirer" and not the "acquiree”,” said one of the people quoted earlier.

In a note on the potential takeover of Indusind Bank by Kotak Mahindra Bank, Suresh Ganapathy of Macquarie Research noted that there is a possibility of the deal happening as “Kotak has always found difficult to build scale organically,”. Ganapathy added, “acquiring IndusInd Bank would result in Kotak’s asset book, loan book and branch network increasing by 85 percent, 94 percent and 100 percent+ thereby giving it tremendous scale/size benefits. Moreover, IndusInd Bank is now trading at closer to book value on a forward basis and hence the acquisition could come at an attractive price.”

But not the question of IndusInd Bank being willing to sell, the Macquarie note said that while the Aby has explicitly denied the merger talks, “as per news reports, there is a family dispute going on between the Hinduja brothers and RBI, in general, has been very wary of promoter disputes. Plus, there have been concerns both on the assets as well as liabilities side for IndusInd Bank, though at the margin, we believe, some of those concerns are getting adequately addressed by the new CEO Sumant Kathpalia.”

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