Kotak Mahindra Bank, one of the leading private sector lenders, announced that it has considered and granted the approval for the amalgamation of ING Vysya Bank with Kotak Mahindra Bank.
The board has approved the share swap ratio of 725 equity of Rs 5 each of Kotak Mahindra Bank for every 1,000 equity shares of Rs 10 each held in ING Vysya Bank. Post amalgamation shareholders of ING Vysya Bank will receive shares of Kotak Mahindra Bank in the aforementioned ratio, resulting in change in shareholding of Kotak Mahindra Bank.
Commenting on the merger, Darpin Shah, HDFC Securities, said, ''We believe the deal is very lucrative from KMB's point of view given lower acquisition cost; almost doubling of its branch network without much of regional overlap; increased presence in southern markets; access to VYSB's forte segment of SME business; no concern on asset quality & capital adequacy; lower dilution risk in the near to medium term. However, the near term dent in return ratios and already expensive valuations would restrict a further rerating for KMB (Not Rated). We believe that from VSYB’s point of view, the parent ING could have commanded a much higher premium given high promoter holding in VYSB; strong ING brand; no drag on B/S; diversified loan book & high CASA proportion; expected revival in macros.''
On the other hand, Emkay Global Financial Services, said, ''We do not have coverage on either of the names however we believe deal is beneficial for both the shareholders as KMB to gain scale and product distribution to help leverage faster and VYSB has received good valuations even though the performance has been weak in recent quarters.''
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