Mahindra and Mahindra (M&M) managing director Anish Shah said on Friday that the investment in RBL Bank is aimed at enhancing the automaker’s understanding of the banking sector.
“We have a business in the financial services sector and this investment is really to understand banking in lot more detail because we have done this with a 7-10-year view,” Shah said, adding that company has no intention of expanding its presence in the banking sector.
In the recent post April-June conference call, the company said that it is not looking to increase its stake in RBL Bank unless there is a “compelling reason to do so”. There are no plans to invest in any other banks.
These comments come days after M&M acquired a 3.5% stake in the bank for Rs 417 crore.
“We saw an opportunity with a bank that was very well run with a very strong management team, very good foundation at a price to book value of lower than 1,” Shah said.
With this investment, Mahindra and Mahindra will be the third largest shareholder in RBL Bank even as it will not necessarily get a seat on the board.
“We will also look for potential synergies where we will offer some of the things that the Mahindra Group does and that is some that they have expressed interest as well,” Shah said.
Reserve Bank of India (RBI) has capped the long-term non-promoter shareholding for banks at 10% for natural persons and non-financial entities. The cap for financial entities stands at 15% of the paid-up voting equity share capital. The cap for promoters is at 26%.
The automaker has had no discussions with RBI on the stake purchase so far and has no intentions of doing so, Shah said.
“Our intention was never to go to 9.9% when we started this. Board approval was to go up to 4.9% maximum. It had to be something meaningful between 0% and 4.9%,” he said.
The automaker owns a non-banking financial company Mahindra and Mahindra Financial Services (Mahindra Finance), in which, it holds a 52.2% stake.
“Mahindra Finance has very aggressive growth plans and has the capital it needs for the next 2-3 years. As a promoter of Mahindra Finance, it made more sense for us to invest in RBL Bank from M&M,” Shah said.
In the June quarter, RBL Bank’s bottom-line rose 43% year-on-year(y-o-y) to `288 crore. Gross non-performing asset ratio improved to 3.22% as on June 30 from 4.08% a year ago.