Shares of IndusInd Bank Ltd. rose as much as 4.2% in Mumbai on Monday while those of Kotak Mahindra Bank Ltd shares fell just under 1% after sources said Kotak was evaluating a buyout of smaller IndusInd Bank.
If successful, the takeover would make it the country's eighth-biggest financial group in terms of assets.
The deal might boost Kotak's assets by around 83% and solidify its presence in India's banking landscape - particularly in the retail segment. IndusInd's retail lending business is diversified and growing faster compared with Kotak Mahindra, the sources with knowledge of the deal said.
The deal is also expected to revive IndusInd, which has lost around 60%, or $6 billion, of its market value so far this year because of depleting asset quality and low-cost deposits.
In an emailed statement, a Kotak Bank representative said the bank couldn't comment on the deal, while IndusInd Bank chief executive officer Sumant Kathaplia said the bank's main participants had already contradicted it, Business Standard reported.
Sources, who asked not to be named, said the main players at Kotak Mahindra and their counterparts at IndusInd Bank had already held talks for a consolidation through a share-swap. The two are engaged in exploratory discussions and no final decision has been agreed.
A report by Bloomberg News, quoting the bank's external representative, said IndusInd "completely denies the said rumor and considers it malicious, untrue and baseless" and the founders "reiterate their full support to IndusInd Bank, now and always."
Kotak took over the local arm of ING Groep N.V. for $2 billion in 2014 in the biggest acquisition of a bank in India. The partnership talks come at a time when promoters of IndusInd Bank, the Hinduja family, are embroiled in a dispute over its $11 billion wealth.
IndusInd Bank has almost 2,000 branches serving more than 26 million clients. Kotak, in comparison, has 1,600 branches with 2,516 automated teller machines.
