M&M buys into RBL

In a sudden announcement, M&M has informed to have acquired 3.53% stake into RBL Bank.

  • Stake has been acquired from secondary market at a total value of Rs 417 cr.
    • Average acquisition price is estimated at around Rs 199 per share as against RBL’s current trading price of Rs 239/ share.
  • M&M has informed that it may consider further investment in RBL subject to pricing, regulatory approvals and required procedures. However, in no circumstance will the stake exceed 9.9%. Key notables in this regard –
    • After 5% stake, it would need RBI’s approval for further stake acquisition
    • As per existing RBI regulations
      • Non promoters are allowed to hold upto 15% if they are financial institutions and 10% for others
      • Promoters are allowed upto 26% but the regulator doesn’t allow corporates to promote banks.

M&M’s move to acquire stake in RBL bank is considered strategic with a long term plan around it’s listed NBFC subsidiary, Mahindra & Mahindra Financial Services Ltd (MMFSL).

However, it would be too early to read too much into this given the quantum of funds that have been invested as well as the long drawn process of discussions and approvals from the regulator (RBI) at every stage.

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