Buying companies an objective of recent capital-raising move: KMB amid IndusInd Bank merger buzz

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October 26, 2020 7:08 PM

Kotak Mahindra Bank (KMB) on Monday said that acquiring companies and assets was one of the objectives of a recently-concluded capital raising exercise, and did not deny reports of the lender looking for a merger with smaller rival IndusInd Bank.

kotak mahndra bank home loanDuring 2HFY19-2HFY21, KMB delivered tepid loan growth (5% CAGR, 3% excluding ECLG linked loans).

Kotak Mahindra Bank (KMB) on Monday said that acquiring companies and assets was one of the objectives of a recently-concluded capital raising exercise, and did not deny reports of the lender looking for a merger with smaller rival IndusInd Bank. KMB will chase the right opportunity and use the money “judiciously”, its group chief financial officer Jaimin Bhatt told reporters. There were reports of KMB exploring an all-stock merger with IndusInd Bank late Sunday evening. The reports were denied by Indusind Bank and its promoters as well.

“As a matter of policy, we will not talk about any specific examples. As a matter of clear company policy, we will not comment on any speculation and whenever there is something to report, we will get back to you,” Bhatt said. When asked if it will explore the merger and acquisition route, he pointed to Rs 7,000 crore raised by it earlier this year soon after the COVID-19 pandemic hit the country to affirm the lender’s interest in such deals.

“When we raised capital in Q1, we did talk about the fact that we will look at acquisitions whether it is companies, assets, what not. So, I am not saying a no to any of that growth avenues but certainly not on this one (IndusInd),” Bhatt said. To a question on how it plans to deploy the high capital, Bhatt said the bank will seek the “right opportunity”. “Having capital is a cushion but we will use it judiciously,” he emphasised.

KMB reported an overall capital adequacy of over 23 per cent as against the required level of under 10 per cent.
Deal activity among private sector banks is very rare and the last merger was in 2014, when KMB had acquired ING Vysya Bank. According to the media reports, a merger with KMB will help it on the retail front. KMB scrip gained 2.36 per cent to close at Rs 1,415.75 a piece on the BSE while the IndusInd Bank share was up 1.46 per cent to Rs 616.30 a piece, as against 1.33 per cent fall in the benchmark.

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