Kotak Mahindra Bank Ltd. (KMB) jumped 6.3 percent to 1,229.10 rupees at 10:24 a.m. local time. ING Vysya, the only Indian lender controlled by an overseas company, gained 3.8 percent to 847.75 rupees. The deal, the largest takeover of a lender in India, was announced yesterday after the close of trading.
The transaction will create India’s fourth-biggest private sector bank, Uday Kotak said, and his branch network will almost double. The lender will gain presence in the country’s south, and in banking for small and medium-sized business, at a time when expectations of
accelerating growth have pushed up the nation’s benchmark stock index by one third this year.
“It’s a good acquisition,” Aditya Narain and Abhishek Sahoo, Mumbai-based analysts at Citigroup Inc., wrote in a note to clients today. “It’s strategic, it’s accretive and pushes up Kotak from a niche to a more scaled player.”
Kotak Mahindra, based in Mumbai, said yesterday it will pay 725 shares for every 1,000 shares of ING Vysya. (VYSB) The deal implies a price of 790 rupees per ING Vysya share, the buyer said. That’s a 16 percent premium to ING Vysya’s one-month average price through Nov. 19. Foreign investors will hold about 47 percent of the enlarged company, Kotak Mahindra said.
The deal will help billionaire Uday Kotak, seen here, to comply with a Reserve Bank of... Read More
‘Potent Combination’
“Kotak Bank enjoys a higher return on equity than ING Vysya,” P Phani Sekhar, a fund manager at Angel Broking Ltd., said in an interview with Bloomberg TV India. “Nevertheless, it is a very potent combination that will derive benefits over the longer term.”Kotak Mahindra had a return on equity of 14.35 percent in the year ended March 31. ING Vysya’s ROE was 11.24 percent.
Uday Kotak, 55, founded the Kotak Mahindra Group in 1985 as a financial-services company. It received a banking license in 2003, making it the first non-bank finance company in the nation to become a bank. ING Vysya was started about 80 years ago and has about 2 million customers.
The biggest bank takeover in India prior to this was HDFC Bank Ltd.’s purchase of Centurion Bank of Punjab Ltd. in 2008. That deal was valued at 95.1 billion rupees when it was announced.
“This is one of the first voluntary mergers by Indian banks in recent history,” said Hatim Broachwala, a banking analyst at Nirmal Bang Securities Ltd. in Mumbai. “The pipeline for similar deals in the country’s financial services space looks really thin as of now.”
Dutch Lender
ING Vysya is controlled by Amsterdam-based ING Groep NV. (INGA) ING expects the transaction to result in a 150 million-euro ($188 million) gain upon closing, based on Vysya’s book value at the end of September, it said. ING will have a stake of about 7 percent in the merged company, it said.The Dutch lender inherited a 10 percent stake in Vysya Bank when it bought Belgium’s Bank Brussels Lambert SA in 1998. It raised that investment to 20 percent in November 1999 and bought Vysya shares from India’s GMR Group in June 2002 to increase its holding to about 43 percent.
The transaction is expected to close by April, Kotak Mahindra Joint Managing Director Dipak Gupta told a Mumbai press conference yesterday.
The deal will help billionaire Kotak comply with a Reserve Bank of India order to cut his stake in Kotak Mahindra to 30 percent by the end of 2016 from 40 percent. The Kotak family stake in the merged bank will be 34 percent.
ICICI Bank Ltd. is India’s largest private-sector bank.
(An earlier version of this story corrected the dateline to Nov. 21.)
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