Uday Kotak exploring takeover of smaller rival IndusInd Financial institution

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Kotak Mahindra Financial institution, backed by Asia’s richest banker, is exploring a takeover of smaller Indian rival IndusInd Financial institution, individuals with data of the matter mentioned, a transfer that might create the nation’s eighth-largest monetary agency by property.

Uday Kotak, founder and chief govt officer of Kotak Mahindra, is taking a look at the potential for an all-stock acquisition, one of many individuals mentioned, asking to not be recognized because the talks are non-public. Uday Kotak and the Hinduja household have held preliminary talks over the proposal wherein the founders of IndusInd Financial institution might retain a stake within the lender after a deal, one other individual mentioned.

A deal would cement Kotak Mahindra’s place as one among India’s main non-public banks, boosting its property by about 83%. It could additionally throw a lifeline to IndusInd, which has seen its market worth drop 60% to $6 billion this 12 months after being hit by considerations over worsening asset high quality and an erosion of low-cost deposits. Kotak in 2014 acquired the native unit of ING Groep NV for 150 billion rupees ($2 billion) within the largest takeover of a lender in India.

Deliberations are at an early stage and talks might fall by means of, the individuals mentioned.

Kotak Mahindra’s spokesman declined to remark. IndusInd “utterly denies the mentioned rumor and considers it malicious, unfaithful and baseless,” the financial institution’s exterior spokesman mentioned in an e-mail, including the founders “reiterate their full help to IndusInd Financial institution, now and all the time.”

The UK-based Hinduja household started discussions for promoting management of the Mumbai-based lender following a dispute between the 4 brothers over the way forward for the household’s $11.2 billion fortune, one of many individuals mentioned.

India’s central financial institution earlier this 12 months pushed again on the Hinduja brothers’ plan to lift stake in IndusInd, individuals with data of the matter mentioned in June.

Kotak Mahindra’s 2.7 trillion rupee market capitalization makes it India’s third-largest lender by worth.

IndusInd’s shares have fallen 64% prior to now 12 months as buyers fretted over the founders borrowing cash in opposition to its shares, worsening asset high quality, and erosion of low-cost deposits. The brothers have since repaid the mortgage backed by shares of the financial institution.

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