Teji Mandi Explains: Will Kotak tread the same path as Axis and HDFC Bank?

Teji MandiUpdated: Thursday, April 07, 2022, 04:27 PM IST
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Axis Bank acquired US-based Citi Bank, while HDFC Limited and HDFC Bank merged just two days back. The first one is an acquisition, and the other is a merger. Will this push Kotak Mahindra Bank to follow the same path?

What’s Happening?

The top two Indian banks are acquiring assets to expand their reach in the post-COVID era. All eyes are now on the other Indian banks, especially Kotak Mahindra Bank (Kotak) since it had been in talks for a merger with Axis Bank in 2018 and IndusInd Bank in 2020. Even though the bank has denied any M&A deals, some feel that there are chances that Kotak could merge with Yes Bank, IDFC First Bank or Federal Bank. While the management has denied any such talks, it is also true that Kotak will have to increase its expansion, given that Axis Bank and HDFC Bank are already in that race.

Another theory could be that Kotak is waiting for state-run banks to get privatised and acquire one of its businesses. The government has already shown interest to privatise several public banks, so there’s a chance Kotak will gain from this. However, it would be essential to see if the synergy or the merger of Kotak and a public bank is worth the effort or not.

Should You Be Concerned?

Kotak runs with a traditional mindset, so there are also chances that they might not merge with any other bank since there are other areas where they can grow organically. The only big concern for the bank is the elevated cost ratios and promoter Uday Kotak’s retirement next year. After serving the bank for 20 years, Uday Kotak will complete his term in end of December 2023. However, he is the bank’s largest shareholder and might hold the non-executive position on the board post-retirement.

What Lies Ahead?

If Kotak merges with an Indian bank, it will be fascinating to see the fight between the banking stalwarts. Sooner or later, things will change in the banking sector, given the advancement of technology. Survival of the fittest will become imminent, and then Kotak will have to figure out a way to stay in the biz.

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