ING Vysya merger with Kotak Mahindra Bank will fill many gaps for latter: Nomura

MUMBAI: The merger between Kotak Mahindra Bank and ING Vysya, if it happens, will be a happy marriage and strategically fill many gaps for Kotak.

Shares of Kotak Mahindra Bank and ING Vysya have hit all-time highs after ET Now reported quoting sources that Uday Kotak is close to snapping up ING Vysa in a deal that could value the combined entity at a whopping Rs 1 lakh crore.

Kotak Bank may merge ING Vysya Bank with self in the ratio of 2:2.5. The deal is likely to be announced before November end, sources told ET Now.

Kotak Promoters' stake will reduce by 7 per cent to 33 per cent post deal. ING may get 7 per cent stake in the combined entity post merger.

According to the brokerage, acquisition will increase Kotak’s number of branches from 600 branches in FY14 to ~1,200 branches.

Except for some metro locations, branch overlap will be very low with ING Vysya having 66 per cent of its branches in South India and Kotak having 68 per cent of its branches in West and North India.

The deal will also give Kotak Bank access to ING’s SME platform. ING Vysya’s key strength is in SME - approximately 38 per cent of loans.

“With Kotak trading at ~4x FY15F book, ING Vysya’s acquisition at ~2.2x will be highly EPS and book-accretive – at these valuations, the deal will be 7-8 per cent EPS-accretive and +10% book-accretive,” the Nomura report said.

The brokerage has ‘Neutral’ rating on the stock with target price of Rs 1,050.

At 10:30 a.m.; Kotak Mahindra Bank was at Rs 1139.75, up 5.68 per cent, on the BSE. It surged 7.56 per cent to touch an all-time high of Rs 1160.05.

ING Vysya was at Rs 809, up 6.47 per cent, on the BSE. It surged 6.97 per cent to touch an all-time high of Rs 812.85.