Kotak Mahindra is Devising to Take over its Rival Induslnd Bank

By siliconindia  |  Monday, 26 October 2020, 01:12:41 PM IST

Kotak Mahindra is Devising to Take over its Rival Induslnd Bank

Kotak Mahindra is planning to take over its smaller rival Induslnd Bank. This move would create the nation’s eighth-largest financial firm by assets. Kotak Mahindra’s founder and chief executive officer, Uday Kotak is looking at the possibility of an all-stock acquisition say the sources close to the organization.

On the acquisition, Uday Kotak and the Hinduja family have indulged in initial talks over the proposal in which the Induslnd Bank founder could retain a stake in the lender after closing the deal. This deal would further aid in elevating Kotak Mahindra’s position as one of India’s leading private banks which indeed would boost its assets by about 83 percent. Furthermore, the company would also provide a lifeline to Induslnd which has seen its market value drop by 60 percent to $6 billion this year after being hit by concerns over worsening asset quality and an erosion of low-cost deposits.

Kotak had acquired the local unit of ING Groep NV for about 150 billion in 2014. This has been one of the largest takeovers of a lender in India. However, sources close to the company said that Deliberations are at an early stage and the deal could be finalized. Yet, Kotak Mahindra spokesman declined to comment while Induslnd has denied the matter completely.

According to the close sources, the U.K. based Hinduja family initiated discussion for trading control of the Mumbai-based lender post a dispute between the four brothers over the future of the family's $11.2 billion fortune.

Alongside this, the country's central bank had pushed back on the Hinduja brothers' plan to raise a stake in IndusInd earlier this year. This news made waves in June this year. However, Kotak Mahindra's 2.7 trillion rupee market capitalization transforms it as India's third-largest lender by value.

Furthermore, IndusInd's shares have dropped by 64 percent in the past year as investors fussed over the founders borrowing money against its shares. This has further worsened the asset quality and erosion of low-cost deposits. However, the Hinduja brothers have repaid the loan backed by shares of the bank.

 

ON THE DECK