Pursuing Aggressive Strategy to Expand
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.