The Telegraph
Monday , June 2 , 2014
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Kotak takeover logic


Mumbai, June 1 (PTI): Under pressure from the Reserve Bank to reduce its promoter holding, private lender Kotak Mahindra Bank will “prefer” paring the stake through acquisition rather than a sale to investors, a senior official has said.

“We will prefer reducing the stake of the promoters by going the inorganic route, which may involve an acquisition,” its head of group strategy Paul Parambi said.

He said acquisition was better than a stake sale to a financial investor as it created more value for shareholders.

Parambi, however, added that the bank would not acquire for the purpose of reducing the promoter share and that creating value for the existing shareholders would be at the centre of any such move.

“Reduction in the promoter shareholding will only be a by-product in the process, not the main aim,” he said, while clarifying that the bank does not have any concrete deal to share right now, but will keep looking at inorganic growth opportunities.

Parambi declined to comment on a timeline for any such acquisition.

It can be noted that there have been periodic reports about smaller private lenders such as South Indian Bank, Karnataka Bank or the troubled Dhanlaxmi Bank getting acquired, but none of the reports have come true.

The Reserve Bank has also spoken about being more accommodative when it comes to mergers and acquisitions in the banking space.

Kotak Bank, promoted by investment banker Uday Kotak, announced the dilution of a 3.24 per cent stake by a promoter group entity last Friday. The Canada Pension Plan Investment Board picked up the stake at a 3 per cent premium to the trading price.