M&M says won't invest more in RBL Bank unless it sees 'compelling strategic value'

M&M added that it has invested Rs 400 crore for a 3.5 percent stake in RBL Bank

Mahindra and Mahindra on August 4 said it does not expect to invest more in the private sector lender RBL Bank unless it sees “compelling strategic value". The automaker recently acquired a 3.53 percent stake for Rs 417 crore and said it may increase it further.

"While we have mentioned that we may consider increasing our stake to 9.9 percent, we do not expect to invest more unless we see compelling strategic value at some point in the future," the company said in a statement after reporting an impressive set of numbers for the June quarter of the current financial year.

The investment in RBL was based on a long-term view (7-10 years). "The primary purpose is to understand banking, which will enable us to enhance the value of our financial services business," it said.

On July 26, M&M confirmed acquiring a 3.53 percent stake RBL Bank and added "it may consider further investment subject to pricing, regulatory approvals and required procedures". However, "in no circumstance will it exceed 9.9 percent", the company said.

Two days later, M&M officials meet RBL Bank executives.

Post the stake buy, M&M shares nosedived 6 percent to Rs 1,450 at about 9:20 am on July 27 after six lakh crore shares changed hands on the NSE. This is the biggest single-day drop for M&M since February 2022.

Meanwhile, shares of RBL had reacted positively to the news as the stock has gained 3.4 percent at 10:25 am on July 27.

"The move is not welcomed by the market because banking is not a core business for M&M. Market expects them to deploy money in the core business especially when the company is doing well. Putting cash in a non-core business is against the company's philosophy," Varun Baxi, analyst at Antique Stock Broking told Moneycontrol. "RBL is anyway not a pristine asset to invest in."

On August 4, shares of M&M were trading 0.65 percent lower at Rs 1,458.75 apiece on BSE while RBL scrip was down 2.43 percent during late noon trading hours.