Shares of Axis Bank, select NBFCs rally on buzz of deal with Kotak
MUMBAI: Shares of Axis Bank and non-banking finance companies (NBFCs) Mahindra & Mahindra Financial Services, Shriram Transport Finance and Bharat Financial Inclusion shot up as much as 6% intraday amid talk Uday Kotak may announce an acquisition of one of them at a press conference scheduled for Wednesday. A board meeting called by Kotak Mahindra Bank on Thursday to raise funds also helped trigger the speculative surge.
Axis Bank shares ended 3.2% higher at Rs 502.95 while M&M Financial rose 2.8% to Rs 329.30 and Shriram Transport Finance closed at Rs 1,073.85, up 5.3%.
Nearly 11.5 million shares of M&M Financial changed hands on Tuesday compared with the average volume of 1.9 million in the previous five days. Shares of Bharat Financial Inclusion ended 2.63% lower at Rs 834.60 after some large investors sold the stock in the last hour.
Kotak’s board will meet on Thursday to consider “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”, according to an exchange filing. Executive vice chairman Uday Kotak is to hold a “media briefing” on Wednesday, Kotak Mahindra Bank said.
Some of his recent statements had added to the speculation, especially a comment at a panel discussion that the Indian market needed to see some hostile takeovers. Still, it’s highly unlikely that any acquisition by Kotak would be in any way hostile in nature, analysts said. Spokespersons for Kotak Mahindra and M&M Financial declined to comment on ‘market speculation’. There was no response to emails sent to Shriram Transport Finance and Bharat Financial Inclusion.
The betting seemed to be on M&M Financial as a likely candidate with market participants ruling out any announcement related to Axis Bank as the government is yet to announce the tender process for selling the 11.5% stake in Axis Bank held by Specified Undertaking of the Unit Trust of India (SUUTI).
“M&M Financial could be one of the targets of Kotak Mahindra Bank, if they wanted to acquire any NBFCs as both promoters know each other well for many years,” said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services. “However, Kotak Mahindra Bank cannot acquire Axis Bank unless they go through the tender process.” Mahindra was one of the early investors in Uday Kotak’s financial services venture, as reflected in the bank’s name.
According to a sales note by Macquarie, Kotak may look to buy M&M’s 52% 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 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. M&M Financial posted a weak performance in the December quarter on slower net interest income (NII) growth, higher operating expenses and an increase in credit costs from non-performing assets (NPAs).
There is also the possibility that Kotak may acquire leading microfinance firm Bharat Financial Inclusion as the company’s shareholding is widely spread with no investor holding a controlling stake, said the Macquarie note.
Axis Bank shares ended 3.2% higher at Rs 502.95 while M&M Financial rose 2.8% to Rs 329.30 and Shriram Transport Finance closed at Rs 1,073.85, up 5.3%.
Nearly 11.5 million shares of M&M Financial changed hands on Tuesday compared with the average volume of 1.9 million in the previous five days. Shares of Bharat Financial Inclusion ended 2.63% lower at Rs 834.60 after some large investors sold the stock in the last hour.
Kotak’s board will meet on Thursday to consider “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”, according to an exchange filing. Executive vice chairman Uday Kotak is to hold a “media briefing” on Wednesday, Kotak Mahindra Bank said.
Some of his recent statements had added to the speculation, especially a comment at a panel discussion that the Indian market needed to see some hostile takeovers. Still, it’s highly unlikely that any acquisition by Kotak would be in any way hostile in nature, analysts said. Spokespersons for Kotak Mahindra and M&M Financial declined to comment on ‘market speculation’. There was no response to emails sent to Shriram Transport Finance and Bharat Financial Inclusion.
The betting seemed to be on M&M Financial as a likely candidate with market participants ruling out any announcement related to Axis Bank as the government is yet to announce the tender process for selling the 11.5% stake in Axis Bank held by Specified Undertaking of the Unit Trust of India (SUUTI).
“M&M Financial could be one of the targets of Kotak Mahindra Bank, if they wanted to acquire any NBFCs as both promoters know each other well for many years,” said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services. “However, Kotak Mahindra Bank cannot acquire Axis Bank unless they go through the tender process.” Mahindra was one of the early investors in Uday Kotak’s financial services venture, as reflected in the bank’s name.
According to a sales note by Macquarie, Kotak may look to buy M&M’s 52% 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 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. M&M Financial posted a weak performance in the December quarter on slower net interest income (NII) growth, higher operating expenses and an increase in credit costs from non-performing assets (NPAs).
There is also the possibility that Kotak may acquire leading microfinance firm Bharat Financial Inclusion as the company’s shareholding is widely spread with no investor holding a controlling stake, said the Macquarie note.
