After denying merger rumour, Kotak seeks government stake in Axis Bank; others also interested

By: | Updated: February 22, 2017 9:53 AM

Kotak Mahindra Bank is reported to have informally approached the government seeking to buy a stake in Axis Bank, in which the government holds 11.94% equity stake through SUUTI. Others including ICICI Bank and HDFC Bank have also showed interest, asking the government to plan any stake sale in it through competitive bidding.

Other large private sector banks including ICICI Bank and HDFC Bank have also showed interest in buying into Axis Bank, asking the government to plan any stake sale in it through competitive bidding.

Kotak Mahindra Bank, businessman Uday Kotak-led private lender, is reported to have informally approached the government seeking to buy a stake in Axis Bank, in which the government holds 11.94% equity stake through SUUTI (Specified Undertaking of Unit Trust of India).

Following Kotak, other large private sector banks including ICICI Bank and HDFC Bank have also showed interest in buying into Axis Bank, asking the government to plan any stake sale in it through competitive bidding, CNBC TV18 reported citing unidentified sources.

Axis Bank is India’s third-largest private sector bank, ICICI Bank is the second-largest and HDFC Bank is the largest. Axis Bank shares surged on the news and were trading up 1.22% at Rs 510.75, after rising to the day’s high of Rs 513.85.

Earlier this month, both, Kotak Mahindra and Axis Bank had denied the rumours about considering a possible merger. A newspaper report had quoted an unidentified fund manager who had heard about the Kotak Bank and Axis Bank contemplating merging their businesses.

Suitable candidate

“The synergies (between the two banks) are huge. Kotak Bank has a very strong corporate banking franchise, while Axis is strong on the retail front,” the fund manager was quoted as saying.

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Axis Bank’s market share of current account and savings account (CASA) deposits was at 4.9% for the last financial year 2015-16, rising from 3.9% in the financial year 2010-11. A good amount of retail deposits helps the lender make loans and grow business at relatively lower costs because of the low rate of interest given out on such deposits.

Only the three largest private banks – HDFC Bank, ICICI Bank and Axis Bank have good retail deposits franchises.

On the block

The government is already learned to be considering selling its stake in companies held through SUUTI to help it achieve its disinvestment target of Rs 72,500 crore in the next financial year. SUUTI holds equity stakes in over 50 companies, including large holdings in L&T, ITC and Axis Bank, earlier held by the erstwhile Unit Trust of India before its breakup.

The government is reportedly considering including SUUTI stakes in its proposed next CPSE ETF – the exchange-traded fund of public sector enterprises – which it plans to launch in the next financial year 2017-18

India’s largest insurer LIC and other state-run insurers together own about 18% equity stake in Axis Bank.

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