IndusInd Bank mounted up on the reports of Kotak Mahindra’s takeover exploration in a bid to beat the economic woes.
Rumours have been that Kotak Mahindra Bank, backed by Asia’s richest banker - Uday Kotak, is exploring to take over the rival IndusInd Bank Ltd. If such a trade is pulled off, it could notably mark Kotak Mahindra's existence in the Indian banking sector and would raise its existing market capitalisation of ₹ 2.7 trillion, bolstering its retail business and makingit the country's eighth-largest bank. Acquiring IndusInd would raise Kotak's asset book, loan book and branch network by 85%, 94% and more than 100% respectively, thereby providing enormous synergies.
These discussions originated after the reporting of The Hinduja Family, the promoters of IndusInd Bank, being involved in litigation in London to resolve a family dispute. According to a document signed in 2014 by the four brothers of the Hinduja Family - Srichand, Gopichand, Prakash and Ashok, all of them mutually appointed each other as executives with the right and entitlement of the assets belonging to all. However, the eldest one - Srichand Hinduja and his daughter, Vinoo claimed the letter to be void with no legal effect and wanted the family assets to be separated as per their wish.
On the other hand, the shares of IndusInd Bank had fallen significantly during the past few months due to defaults and liquidity concerns at various borrowers. While the Kotak Mahindra Bank is well capitalised and has good asset quality, IndusInd need to work on building adequate capital buffers.
Both the IndusInd Bank and The Kotak Mahindra Bank declined about the merger and said that it was "malicious, untrue and baseless." The shares of IndusInd Bank rallied over 4% and those of Kotak Mahindra saw its value marginally in the red after they refused the media reports about the collaboration. Talk of the merger has already pushed the lender above its rival ICICI Bank Ltd. to become India's second-largest in terms of the market value. Shares have risen by 15% and the market capitalisation has exceeded ₹ 3.1 lakh crore. If the deal goes ahead through a share swap at IndusInd's current price, Kotak's market value will increase by ₹ 46,450 crore, sticking it just before the rival ICICI.
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