As market awaits Kotak Mahindra Bank's announcement today, speculations over a possible big buyout have sent some stocks -- including Axis Bank, Mahindra and Mahindra Financial Services and Shriram Transport Finance -- high up.
On Tuesday, the stock of these companies shot up by 3-5 percent in intraday trades amid expectations of a big buyout or merger announcement in the press conference which billionaire Uday Kotak, Promoter, Vice Chairman and Managing Director of Kotak Mahindra Bank will be holding at 3.30 pm today.
However, today all the above-mentioned stocks are down excepting Axis which is up by about 1 percent.
Kotak Bank has also called for a board meeting on Thursday to raise funds triggering another reason for an acquisition announcement.
Kotak Bank is flush with liquidity with a capital adequacy ratio of over 16 percent.
According to a filing by the bank with the stock exchanges, the board will decide on “raising of equity capital through rights issue, private placement, FPO (follow-on public offer), QIP (qualified institutional placement), GDR (global depositary receipt), ADR (American depositary receipt) or through any other permissible mode”.
However, market participants are awaiting the likely announcement by Kotak on Wednesday.
After IndusInd Bank said it was in talks to buy stake in Bharat Financial Inclusion, Kotak was also said to be eyeing stake in the microfinance firm.
Kotak has been actively looking to reduce his promoter stake from 33.61 percent (as on December 31, 2016) to 30 percent by June this year as mandated by the Reserve Bank of India.
Earlier this month, he sold 1.5 percent stake in the bank to two Canadian pension funds for an estimated Rs 2,255 crore through open market transactions.
At a panel discussion of a CNBC-TV18 event recently, Kotak said that the Indian market needed to see some hostile takeovers.
A buyout of Axis Bank may seem unlikely as the government is yet to announce the tender process for selling the 11.5 percent stake in Axis Bank held by Specified Undertaking of the Unit Trust of India (SUUTI).
Analysts say Kotak may look at buying a stake in one of the NBFCs (non banking financial company) which will help him trim his promoter stake in the bank.
According to reports a sales note by Macquarie said, Kotak may look to buy M&M’s 52 percent stake in M&M Financial as the company’s actual value is seen as being lower than the current market capitalisation.
M&M Financial’s consolidated net worth is Rs 6,700 crore. After deducting Rs 2,200 crore for current net non-performing loans and pegging the price to book at 3.5 times, Macquarie arrived at a value of Rs 15,800 crore for the firm against its market capitalisation of Rs 18,729 crore, it said in a note.
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