What Is Up Uday Kotak’s Sleeve?

Uday Kotak has called for a press conference  on Wednesday (March 29) and the buzz is that the banker could announce an acquisition either in a bank or non-banking finance company. The announcement is likely to be done after the market hours at around 3.30 pm.

Uday Kotak has often shied away from calling for press conferences apart from the customary results announcement every quarter. Lately, speculation has been rife that the fast growing mid-sized bank may be scouting for mergers and the buzz that has been doing the market rounds is that the bank could acquire Axis Bank.

The astute banker in a recent panel discussion spoke about developing the mergers and acquisitions market. “May be the time has come where we should see hostile takeovers as well. We have not seen them for a long time in the country,” Kotak has been quoted saying.

This has fuelled speculation that the bank is eyeing a merger with Axis Bank. Earlier, the grapevine was that the Kotak Mahindra Bank may also consider buying SUUTI’s 11.5 per cent stake from the government. Kotak Mahindra Bank will have to formally bid for the stake which is said to be worth about Rs 13,840 crore at current market prices.

The Kotak Mahindra Board is also meeting on 30th March to approve further fund raising plans. In a BSE filing, the bank has said that it plans to consider raising equity capital through rights issue, private placement, FPO, QIP, GDR, ADR or through any of the permissible modes or a combination of the above.

In a recent development, Uday Kotak has been given time by the Reserve Bank of India to reduce the family’s stake in the bank to 30 per cent by June 2017. The banker recently sold 1.5 per cent stake to two Canadian pension funds, which has bought down the stake of the family in the bank to 32.1 percent.
Uday Kotak also has to further reduce his stake to 20 per cent by December 2018.

A fund raising exercise by the bank will also reduce the family stake of Kotak in the bank depending on the extent of dilution. The banker is known to be shying away from diluting his stake via market sales in the bank and therefore is keen to make an acquisition soon.

Recently, IndusInd Bank has been in the news to merge the micro-finance company with itself, and here again the market buzz is that the bank will announce an all share swap deal with the company.

According to market grapevine, Kotak Mahindra Bank could also look at acquiring non-banking finance companies in a bid to expand its banking footprint.