Kotak Mahindra Bank planning takeover of IndusInd Bank

Kotak Mahindra Bank Ltd is looking for a takeover of smaller Indian competitor bank IndusInd Bank Ltd. This would help it become the nation’s eighth-largest financial firm by assets. The founder and chief executive officer of Kotak Mahindra — Uday Kotak — is exploring the probability of an all-stock acquisition. Over the proposal, the Hinduja family and Uday Kotak have held initial talks. After a deal, the founders of IndusInd Bank could retain a stake in the lender. On Monday, shares of IndusInd jumped as much as 4.1% in early Mumbai trading. On the other hand, Kotak Mahindra’s share slipped less than 1%. A deal is likely to establish Kotak Mahindra as one of India’s leading private banks.

This will boost its assets by about 83%. The deal would also provide a new life to IndusInd. The bank has witnessed its market value drop 60% to $6 billion this year. This drop was due to it being impacted by apprehensions over deteriorating asset quality and an erosion of low-cost deposits. In 2014, for an amount of 150 billion rupees ($2 billion), Kotak acquired the local unit of ING Groep NV. This was the largest takeover of a lender in India. The UK-based Hinduja family started deliberations for selling stake of the Mumbai-based lender. This was due to the family disputed between the four brothers over the future of the family’s $11.2 billion fortune.

This year, the Reserve Bank of India pushed back on the Hinduja brothers’ plan to raise a stake in IndusInd. 2.7 trillion-rupee market capitalization of Kotak Mahindra makes it India’s third-largest lender by value.

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