Even as top market voices including global brokerage firm Nomura suggest that it’s the best time for Kotak Mahindra Bank to acquire Axis Bank, top banker Uday Kotak says that he is open to sensible inorganic growth. We take a closer look.
Even as top market voices including global brokerage firm Nomura suggest that it’s the best time for Kotak Mahindra Bank to acquire Axis Bank, top banker Uday Kotak says that he is open to sensible inorganic growth. According to a report by CNBC TV18, Uday Kotak said he is open to looking at inorganic growth, as long as it is sensible, but refuses to comment directly on rumours surrounding Axis Bank.
Kotak Mahindra Bank has reported Q4 results in line with estimates. The major private lender has reported a rise of 27% in consolidated net profit to Rs 1,789 crore for the quarter ended 31 March 2018 following a marginal rise in the provisioning as the asset quality improved in the reporting period. At the same time, Axis Bank has reported a loss of Rs 2,188.74 crore for the quarter ended 31 March 2018 following a steep decline in the asset quality led by the escalation in the slippages.
Discussions about a possible acquisition gained emerged after the curtailment of Axis Bank CEO Shikha Sharma’s term. “With a very short time left in the CEO’s term at Axis Bank, RBI’s pressure on Axis Bank’s management and with an asset quality clean-up exercise continuing, we believe this is the best opportunity for Kotak Bank to acquire or merge with Axis Bank,” Nomura said in its report.
According to the global firm, Axis Bank will have to look at an external CEO. Accordingly, Nomura says that there will be limited push-back from Axis Bank for a potential merger, given the loss of confidence that the regulator has expressed by not approving the renewal of the CEO’s term and a vacuum in top management.
Apart from Nomura, a recent Bloomberg report too said that Axis Bank may have become one of the juiciest takeover targets in the history of Indian banking industry.
A likely deal between the two heavyweights Axis and Kotak Bank will make the combined entity the second largest private bank in the country in terms of loans and the largest in terms of branches. Kotak Mahindra Bank commands a market capitalisation of Rs 2.3 lakh crore, while Axis Bank has a mcap of 1.32 lakh crore. Sharing the rationale for the probable deal, Nomura said that the deal would be highly earnings per share-accretive for Kotak Bank even after paying a meaningful premium to Axis Bank shareholders.
UPDATE: In a letter sent to FE, Kotak Mahindra Bank has reiterated Uday Kotak’s response to a media query given at a press conference: “he is open to sensible inorganic growth”, but has added that it has nothing specific to announce at this stage. Kotak Mahindra Bank has refused to comment on any rumours and speculation surrounding a possible acquisition of Axis Bank.
This story was first published on 1 May 2018 on www.financialexpress.com, and was updated on 7 May 2018 to incorporate a response by Kotak Mahindra Bank.