A day after the Kotak Mahindra Bank Board re-designated Uday Kotak as the Managing Director and Chief Executive Officer (CEO), Uday refused to directly say anything on issue of merger talk with Axis Bank but indicated he was open for "inorganic growth". According to a CNBC TV 18 report, on rumours surrounding Axis Bank, Uday Kotak said he was "open to looking at inorganic growth as long as it is sensible".
The lender, embroiled in various controversies due to corporate bad loans, asset quality, and credit expenses, reported its first ever loss of Rs 2,188.74 crore since listing for the quarter ending March 31. Its CEO Shikha Sharma last month decided to cut short her fourth tenure till December 31. Kotak Mahindra Bank, on the other hand, posted 27 per cent rise in its profit, which makes the lender the best fit for seeking expansion.
On April 12, the Japanese brokerage firm Nomura in its report had said it was the perfect time for Kotak Bank to bid for Axis Bank. "With a very short time left in the CEO's term at Axis Bank, RBI's pressure on Axis Bank's management and with an asset quality clean-up exercise continuing, we believe this is the best opportunity for Kotak Bank to acquire or merge with Axis Bank," Nomura said in its report.
Apart from Kotak Mahindra, other private lenders, and state-owned insurance group LIC, have also reportedly shown interest in buying a stake in the bank. LIC and the government, through the Specified Undertaking of the Unit Trust of India (SUUTI), already own 14.49 per cent and 12.02 per cent stake in the lender, respectively.
Experts suggest it doesn't make sense for the government to push for a merger in the private banking space, which controls around 15 per cent of the deposits as well as advances in the sector. Axis Bank any day is a much better bank than any public sector bank, they suggest.
However, Kotak Bank has already proved its mettle after a big merger with southern bank ING Vysya, which was almost equal to its balance sheet size, and had a very good portfolio of SME, Agri and MNC clients. It remains to be seen how Kotak Bank cash in on Axis Bank's strengths if it gets a bigger piece of the pie.