Financial Daily from THE HINDU group of publications
Tuesday, Apr 16, 2002
Money & Banking - Mergers & Acquisitions
Kotak Mahindra to merge four arms with itself
Mr Uday Kotak
MUMBAI, April 15
KOTAK Mahindra Finance Ltd (KMFL) has decided to merge four of its investment firms with itself before converting into a bank.
KMFL's is one of the two proposals recently cleared by the Reserve Bank of India for setting up private sector banks. The other one is from Rabo Bank.
The KMFL board, which met today, approved the merger and conversion of KMFL - the non-banking finance company - into a bank. The promoters' holding in the bank will continue to be 60 per cent, the same as that in KMFL.
The merger of investment companies will enable the promoters of KMFL, Mr Uday Kotak and Mr Anand Mahindra, to be eligible to be Directors of the bank.
The existing subsidiaries of KMFL will continue to be subsidiaries of the bank. The bank will have an asset base of around Rs 1,500 crore.
Mr Uday S. Kotak, Vice-Chairman, KMFL, told newspersons today that as per the plan, the conversion of the NBFC into bank would take place by the last quarter of 2002. The name of the bank will be finalised later.
The consolidated net worth of KMFL group was to the tune of around Rs 1,000 crore as on March 31, 2001 while the net worth of KMFL alone was to the tune of Rs 500 crore, Mr Kotak said.
As per RBI norms, for a non-banking finance company to convert itself into a bank, a net worth of Rs 200 crore is required.
Of the four investment companies, Mr Kotak holds substantial stake in Scope Holdings Private Ltd, Twilight Holding Private Ltd, Mega Assets and Capital Management Private Ltd while Mr Mahindra holds substantial stake in Guldasta Investment and Trading Ltd.
Mr Kotak said the investment companies had no liabilities and their only investment was their holdings in KMFL. Consequent to the proposed merger, the shares of KMFL held by these companies will be cancelled and equal number of shares of the bank will be allotted to the shareholders of these merged companies. Mr Kotak and Mr Mahindra will hold 60 per cent stake in the merged entity, at 55 per cent and five per cent respectively. Mr Kotak said that in due course the promoters stake would have to be reduced to the mandatory 40 per cent and such a dilution would most probably take place through the issuance of fresh capital. KMFL subsidiaries, including the life insurance company, the investment banking services company, the broking firm, the AMC and the auto finance joint venture, would continue to be held by KMFL and will become subsidiaries of the bank.
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