Pur­su­ing Ag­gres­sive Strat­egy to Ex­pand

The Economic Times - - Economy: Macro, Micro & More -

Even if this does not hap­pen, Ko­tak said he is pur­su­ing an ag­gres­sive strat­egy to ex­pand which would add value rather than erode the wealth of stake­hold­ers.

“Whole va­ri­ety of op­tions are there — both or­ganic and in­or­ganic,” he said. “We will look at both op­tions very se­ri­ously. There is one com­mit­ment that I can make, which is some­thing I truly be­lieve in, (and that) is we will do what­ever cre­ates value.”

Ko­tak is al­ready cred­ited with swing­ing the big­gest takeover in In­dian bank­ing in­dus­try when in 2014 he agreed to buy ING Vysya Bank to ex­pand his pres­ence in south In­dia. It was a stock swap deal on which Ko­tak was work­ing for 18 months and en­tailed nearly seven years of re­la­tion­ship-build­ing. “We were look­ing at ING Vysya for many years and about a year be­fore that we came to view that as a value propo­si­tion. At that stage, which was about a year be­fore we ac­tu­ally merged, it did not make sense for our share­hold­ers. But that did not mean that we didn’t like the as­set at the right value.” Axis Bank may have a fran­chise that has dou­ble the de­posits and loan book of Ko­tak, but is val­ued less than the lat­ter due to its trou­bled loans to in­fras­truc­ture com­pa­nies. Also, there are some over­laps be­tween the two busi­nesses.

Both have strong investment bank­ing units, mu­tual fund busi­nesses and stock broking com­pa­nies as well. Some of these may have to be ra­tio­nalised. Also, Axis is the big­gest seller of in­sur­ance prod­ucts for Max Life which is in the process of merg­ing with HDFC Life.

In the past one year, shares of Ko­tak Mahin­dra Bank have risen over 16% with the bank sur­pass­ing the market cap of Deutsche Bank in July 2016. It is val­ued to­day at .₹ 1.4 lakh crore. The stock ended 0.35% up at .₹ 770.30 on Thurs­day.

In­dia’s third-largest lender Axis Bank, whose stock price has surged over 21% in the past one year, ended on Thurs­day down 0.52% at .₹ 484.95. The lender, which had eclipsed Ko­tak Mahin­dra Bank’s market cap­i­tal­i­sa­tion in Au­gust last year, saw ero­sion in its val­u­a­tion and now stands at .₹ 1.15 lakh crore.

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