Kotak Bank lines up press conference tomorrow. Is Axis merger on the cards?

Kotak Mahindra Bank has been in the news for the past two months. Billionaire Uday Kotak, Executive Vice Chairman and Managing Director of the bank will also be making a big announcement on Wednesday.

Speculations are rife that the bank could be announcing a big acquisition in order to reduce Kotak's promoter stake in the bank.

The announcement is likely to be made around 3.30 pm, post market hours on Wednesday.

In the past few weeks, there have been strong rumours of Kotak approaching the government and looking at a stake buy in Axis Bank.

This, if it happens, could be a share-swap deal, experts say. In 2015, Kotak Bank acquired south-based ING Vysya for a share swap deal, one of the biggest mergers in the private banking sector industry.

Both Kotak and Axis Bank, however, have denied rumours about a possible merger. Kotak Bank's spokesperson Rohit Rao had said, "We do not comment on market speculations."

Axis Bank spokesperson said, "Axis is one of the strongest financial institutions in the county with a large customer franchise. We urge you to exercise extreme caution in dealing with this misinformation."

Axis Bank CEO and MD Shikha Sharma also strongly denied talks of such a merger. In an interview with Economic Times last month, she had said, “We haven’t been approached by anybody, and frankly for Axis at this point in time, there is so much to do,” she told the newspaper.

She had also added, "It is good to feel like a beautiful bride that everybody is aspiring for, but the point is that the beautiful bride is not putting up her hand for marriage."

Promoter's Stake

Kotak has been actively looking at reducing his promoter stake from the current 33.61 percent (as on December 31, 2016) to 30 percent by June this year as mandated by the Reserve Bank of India.

Earlier this month, he sold 1.5 percent stake in the bank to two Canadian pension funds for an estimated Rs 2,255 crore through open market transactions.

The fourth largest private sector lender on Monday informed stock exchanges that it will consider raising equity capital through qualified institutional placement (QIP) of shares, rights issue or private placement at a board meeting on Thursday. The bank may also look at a follow-on public offer.

The move to raise funds comes days after Yes Bank saw a good response to its qualified institutional placement (QIP).

While the announcement came post market hours, the stock had ended marginally lower on Monday at Rs 870.75 per share, down by Rs 7.75, or 0.88 percent.

Last week, Kotak Bank's market capitalisation surpassed that of ICICI Bank's to become the third most valued bank after HDFC Bank and State Bank of India.

In the past year, ICICI Bank shares rose over 14 percent, while Kotak Mahindra Bank posted a substantially higher gain at 32 percent.