ING Vysya Bank, Kotak Bank hit 52-week high on merger reports

NEW DELHI: ING Vysya Bank and Kotak Mahindra Bank are on a roll on Dalal Street, having hit their respective 52-week highs on BSE in intraday trade on Thursday.

ET Now reports that Kotak Mahindra Bank is in final stages to acquire ING Vysya Bank in a ratio of 2:2.5. The deal values ING Vysya Bank at Rs 16,500 crore.

Reacting to the news, Kotak Mahindra Bank rallied as much as 7.57 per cent in intraday trade to hit its fresh 52-week high of Rs 1,159.15.

ING Vysya Bank also surged 12.58 per cent in trade to hit its fresh 52-week high of Rs 864.80.

At 12:40 p.m.; ING Vysya Bank was at Rs 838.00; up 10.28 per cent; while Kotak Mahindra Bank was at at Rs 1,151.80; up 6.80 per cent.

However, Kotak Mahindra Bank clarified to the exchange in the morning that that "no decision has been made by the bank in relation to any merger or acquisition transaction".

"If the bank takes a decision to undertake such a transaction, the same being unpublished price sensitive information, the bank shall make a disclosure in accordance with clause 36 of the listing agreement," the bank said in the filing.

Analysts at top brokerage firms remain positive on the merger announcement and see it as a big positive for Kotak Mahindra Bank as the merger will also give access to ING's SME platform.

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

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.