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Mahindra and Mahindra acquired stake in RBL bank


Mahindra and Mahindra, a Mumbai-based conglomerate that is one of the largest vehicle manufacturers by production in India, also has various other business domains running under its umbrella, like technology services, logistics, hospitality, renewable, etc., but it seems like the company has decided to foray into the formal banking sector. In a race to accomplish this, the company has acquired a 3.53% stake through secondary market transactions with a private lender, RBL Bank Ltd., for Rs. 417 crore. The interest shown by Mahindra and Mahindra in RBL Bank adds a new chapter to the bank's journey.

The intention of the company is not yet clear with the acquisition of a stake, whether it will only remain as a strategic investment opportunity on company books (like Zerodha Broking and CDC Group Plc) or if the company will move forward with taking control of the management of the RBL bank going forward.

The acquisition of a stake in RBL Bank presents an opportunity for Mahindra & Mahindra to strengthen its foothold in the banking sector and capitalise on the bank's potential for growth and profitability.

According to the document filed with the exchange, we have acquired a 3.53% stake in RBL Bank as an investment at a cost of Rs. 417 crore. We may consider further investment subject to pricing, regulatory approvals, and required procedures. However, under no circumstances will it exceed 9.9%.

So taking a controlling stake in a bank is not like walking in a company park. As per the Master Direction issues by the RBI (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023, any shareholder who wishes to acquire 5% or more of the shareholding of the bank is required to make an application to the Reserve Bank of India to seek their prior approval for such an acquisition.

In the past, the Internal Working Group of the RBI said that corporations may be allowed as promoter of bank. The group also said that well-run NBFCs, including those owned by corporate houses, should be considered for bank licenses. Given the history as of date, no big corporate house has gotten the license to operate a banking institution, so the RBI's stand on M&M-RBL stake will be crucially observed by the market participant. The timing and the opportunity are also interesting seeing the HDFC twin merger, as M&M holds a majority stake in its vehicle finance business.

Since the announcement was made, Mahindra's share has seen a fall of approximately 5%. A sudden reaction could be due to investors concern over the group’s over-diversification of capital.

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