Following stock market buzz of prospects of a merger between two private banks Kotak Mahindra, and Axis Bank, both of them have strongly denied the rumours. "Axis is one of the strongest financial institutions in the country, with a large customer franchise. We urge you to exercise extreme caution in dealing with this misinformation," said an Axis Bank spokesperson. Kotak spokesperson Rohit Rao said, "We do not comment on rumours and speculation."
The government currently holds 12 per cent in Axis Bank through SUUTI (Specified Undertaking of the Unit Trust of India) which is worth about £1.40 billion. It holds an additional 18 per cent stake in the bank through LIC and other state-owned insurance companies. Kotak Bank currently has a market capitalisation of £14 billion and Axis Bank is worth £1..6 billion. "If the two are merged at current valuations, the holding of the Kotak family in the merged entity will come down to about 17.5 per cent," said a financial sector analyst.
"The synergies are huge. Kotak Bank has a very strong corporate banking franchise, while Axis is strong on the retail front," said a top fund manager. "The government, with a £7.25 billion divestment target for next year will took to offload part of its stake in blue chips it holds in SUUTI. Under RBI directive, Kotak Bank's promoters need to pare their stake in the bank to 15 per cent by 2020 from 33.6 per cent. A merger of the two could serve both these purposes," the fund manager said.
