ING Vysya Bank rallies 3%, hit 52-week high as shareholders approve merger

NEW DELHI: ING Vysya Bank rallied 3 percent in trade on Thursday to hit its fresh 52-week high of 905, after shareholders of ING Vysya Bank and Kotak Mahindra Bank approved the proposed merger between the two banks.

The extraordinary general meeting or EGM of the members of ING Vysya Bank was held in Bengaluru and for Kotak Mahindra Bank it was held in Mumbai for approving the $2.4-billion all stock deal, ET reported.

At 10:40 a.m.; ING Vysya Bank was trading 2.8 percent higher at Rs 903. It hit a low of Rs 888 and a 52-week high of Rs 905.

Kotak Mahindra Bank was trading 2.5 percent higher at Rs 1302. It hit a low of Rs 1287.50 and a high of Rs 1307.65 in trade today.

ING Vysya Bank's 10,591 employees may be under the Kotak fold, but about 4,000 of them who are under the union-controlled pay structure could face some issues since there hasn't been any promise, or road map on how they would be treated.

Kotak Mahindra Bank's acquisition of ING Vysya Bank will make Kotak the fourth-largest private bank in the country in terms of total business, but analysts at top brokerage firms also see couple of challenges in terms of integration and return ratio's.

"Deal appears accretive, but returns could potentially settle lower. The deal terms and both companies' 1HFY15 results imply the deal would be book value and EPS accretive for Kotak, which trades at 5.0X FY15E P/B (standalone), as compared to ING Vysya's 2.0X FY15E P/B," Goldman Sachs said in a report.

"However, Kotak's return ratios could be lower under the merged entity given lower profitability at ING Vysya. We maintain our Sell rating on Kotak Mahindra Bank and Buy rating on ING Vysya Bank," added the report.