Kotak-Axis merger in the works? Both banks say no

A top fund manager was quoted as saying that the largest consolidation in the banking sector is being explored by the shareholders of the two banks, according to a report in The Times of India.
Moneycontrol Bureau Amid stock market buzz about a possible merger between Kotak Mahindra   and Axis Bank   , the private lenders have denied that the biggest consolidation in the banking space is on the cards, according to a report in The Times of India. A merger between the two banks could be worth around Rs 2.5 lakh crore, which would make it the second most valuable Indian bank after HDFC Bank   .A top fund manager was quoted as saying that a merger deal is being explored by the shareholders of the two banks. He said a merger would unlock huge synergies, as Kotak Bank has a strong corporate banking franchise while Axis is strong on the retail front. But both banks issued denials.

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"Axis is one of the strongest financial institutions in the country with a large customer franchise,” an Axis Bank spokesperson told the paper. “We urge you to exercise extreme caution in dealing with this misinformation," Kotak Mahindra Bank spokesperson Rohit Rao said he would not comment on “rumour and speculation”.


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 A merger would also serve specific interests for both companies. Currently, the government holds 12 percent in Axis Bank through Specified Undertaking of the Unit Trust of India (SUUTI), which is worth about Rs 14,000 crore.

It holds an additional 18 percent stake in the bank through Life Insurance Corporation and other state-owned insurance companies. With a Rs 72,500-crore divestment target for next year that was announced in last week's Budget, the government will look to offload part of its stake.Other people in the know were quoted as saying that another private bank would be interested in picking up the government’s stake in Axis Bank. For Kotak Bank, its promoters need to need to pare their stake in the bank to 15 percent by 2020 from 33.6 percent in accordance with a Reserve Bank of India directive.

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Kotak Bank has a market capitalisation of Rs 1.4 lakh crore and Axis Bank is worth Rs 1.16 lakh crore.

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Source: money Control