Kotak Mahindra shares surge 4% at close on ING Vysya deal

Shares of Kotak Mahindra Bank on Friday ended nearly 4 per cent higher, after the private sector lender announced the acquisition of ING Vysya Bank in an all-stock deal valued at Rs 15,000 crore (Rs 150 billion). 

After surging 8.97 per cent to Rs 1,260.90 – their all-time high in intra-day trade at the BSE, shares of Kotak finally ended at Rs 1,199.65, up 3.68 per cent from previous close. 

Shares of ING rose by 0.32 per cent to end at Rs 816.80. In intra-day, it had gained 4.27 per cent to hit Rs 849. Profit-booking cut short the sharp early gains in these stocks. 

On the volume front, 5.94 lakh shares of Kotak Mahindra Bank changed hands at the BSE, while 5.29 lakh shares of ING were traded during the day. 

The deal was announced in post market hours on Thursday. Also in the previous session, both these stocks had gained over 7 per cent. 

Buying was also seen in other banking counters, with Yes Bank surging 4 per cent, Federal Bank (3.95 per cent), PNB (2.89 per cent), SBI (2.68 per cent), ICICI Bank (2.66 per cent), Axis Bank (2.17 per cent) and HDFC Bank (1.62 per cent). 

Smaller peers, like City Union Bank, DCB, Dhanlaxmi Bank, Federal Bank and Karnataka Bank, logged 2-5 per cent gains. The BSE banking index rose by 2.37 per cent to end at 20,683.54, the best gains among the 12 sectoral indices. 

Analysts said expectations of more merger and acquisitions (M&As) in the banking industry boosted had a rub-off effect. 

"For the shareholders of both Kotak Mahindra and ING Vysya, this deal may prove to be win-win in the medium to long term scenario. This deal may be particularly useful for ING Vysya bank as this will offer them to be part of much larger bank," said Jagannadham Thunuguntla, Head of Research, SMC Global Securities Limited. 

In India's biggest banking merger, private sector lender Kotak Mahindra Bank yesterday announced the buyout of ING Vysya Bank in an all-stock deal valued at Rs 15,000 crore, which is likely to set off consolidation moves ahead of the entry of new players. 

The all-stock deal values ING Vysya stock at Rs 790 a share, which is a 16 per cent premium to the 30-day stock price as of November 19, while pegging Kotak Bank at Rs 1,119 a share in similar manner. Accordingly, ING shareholders will get 725 Kotak Bank shares for 1000 shares of the Bangalore based lender. This values ING Vysya Bank at Rs 15,033 crore. 

Post-deal, INGNV will hold 6.5 per cent in the combined entity, while Kotak promoters stake will be diluted to 34 per cent from 40.12 per cent.