About Kotak Mahindra Bank

 Established in 1985, Kotak Mahindra Finance Capital Management Limited

started off as a non-banking financial services company, initially providing
financing for the purchase of automobiles
 In 2003 it became the first ever NBFC to be converted into a bank.
 Kotak Bank today is one of India’s fastest growing banks, which caters to wide
variety of banking needs of both individuals and corporates.
 It provides consumer banking services, commercial banking services,
investment banking services, and numerous other financial services
 With a portfolio of over 15 subsidiaries across India and the world and a few
joint ventures, Kotak has spread its businesses wide across the market and
country with over 600 operating branches
About ING Vysya Bank
 With roots as far back as the 1930s, ‘Vysya Bank’ comes with a long heritage
of banking in the trade communities of south India
 In 2002, it became the first ever Indian bank to merge with a foreign one,
when it officially announced its merger with the Dutch banking giant ING
Group, which took a controlling stake in the bank.
 The bank has over time grown a strong presence in south India with over 500
branches in the south
 It has also, because of its ties with the ING Group, grown its presence abroad
with a presence in over 5 countries.
 The bank majorly deals in retail, private and wholesale banking services.
What is Merger & Acquisition
 A merger occurs when two separate entities combine forces
to create a new, joint organization

 Acquisition refers to the takeover of one entity by another

- E.g. Kotak Mahindra Bank (KMB) and ING Vysya Bank
Merger Objectives

 Regulatory Requirement
RBI regulation to reduce promoter stake in Kotak
Mahindra Bank 20% (from 45.3% at that time) by
December 2018

 Expansion
Revenue synergies, complementarities and growth
potential, cost effectiveness over time
CHRONOLOGY OF EVENTS

Source:http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/ING_Bank_Merges_with_Kotak_Bank.pdf
 Deal Snapshot

Kotak Mahindra Bank Promoter Group: 40.02% , Public Shareholding: 59.98%

Limited FIIs: 36.85% , Mutual Funds/ UTI: 1.65%
Financial Institutions/ Banks: 0.21%
Share Holding before Foreign Banks: 4.25%, Foreign Bodies: 2.04%
Merger Bodies Corporate: 3.30%, Individuals: 10.27%
Others: 1.41%

ING Vysya Bank Promoter Group: 42.51% , Public Shareholding: 57.49%

Limited FIIs: 26.98% , Mutual funds/ UTI: 13.43%
Financial Institutions/ Banks: 1.76%
Share Holding before Bodies Corporate: 5.36% , Individuals: 8.14%
Merger Others: 1.82%

Kotak Mahindra Bank Promoter Group: 33.99%

Limited Public Shareholding: 66.01%
Post Merger ING Group: 6.48%
Shareholding FIIs: 33.58%
Domestic: 19.12%
FDI: 6.83%
Share Exchange Ratio Share Exchange Ratio: 0.725 : 1
725 shares of Kotak for every 1,000 share of ING Vysya

Merger announced on November 20, 2014

Complementary Network – Depth a Breach
Together
Branch and ATM Network
Particulars ING Vysya Kotak Kotak (Merged)
Branches (nos) 573 641 1214
ATMs (nos) 635 1159 1794
Employees (nos) 10951 29220 39811
Customers 2 8 10
(millions)
Summary Financials – Kotak (Merged Proforma)
Summary Ratios – Kotak (Merged Proforma)
Key P&L Items – Kotak (Merged Proforma)
Data analysis
Numbers of Deposits
Deposits
500000

400000

300000

200000

100000

0
2012 2013 2014 2015 2016

Table 1.1 Numbers of Deposits

Chart 1.1 No of Deposits

Loan advances
Loan advances
600000
500000
400000
300000
200000
100000
0
2012 2013 2014 2015 2016
Table 1.2 Loan advances
Chart 1.2 Loan advances
Data analysis
Current ratio
Current ratio (times)
2.5

1.5

0.5

0
2012 2013 2014 2015 2016

Table 1.3 Current ratio Chart 1.3 Current ratio

Debt to equity ratio

Debt to equity ratio (times)
2.5

1.5

0.5

0
2012 2013 2014 2015 2016

Table 1.4 Debt to equity ratio Chart 1.4 Debt to equity ratio
Data analysis
Net profit margin
Net profit margin
16
14
12
10
8
6
4
2
0
2012 2013 2014 2015 2016

Table 1.5 Net profit margin Chart 1.5 Net profit margin

Cash to current liabilities Cash to current liabilities (times)

1.2

0.8

0.6

0.4

0.2

0
2012 2013 2014 2015 2016

Table 1.6 Cash to current liabilities Chart 1.6 Cash to current liabilities
Challenges/Learnings
 The first learning is that you have to do our homework well. We did miss out on some
parts of the homework,” says Dipak Gupta, joint managing director, Kotak Mahindra,
“We took a huge pension hit of Rs 300 crore in the first quarter. We didn’t do our
homework well there
 For us, we did the unpeeling of the onions and I can tell you we went through very difficult
challenges between May and September (2016) because a lot of customer-related
issues and challenges came up post-technology integration,” says Uday Kotak,
executive vice chairman
 In a merger, you need to place your bets on people pretty early on, but we said we
will not decide. We took the easy way out and that was a wrong decision. You must kill
the uncertainty even if you have to take the pain very early on,” says Gupta
 Before the merger, we did an estimate of what we were buying into. About 21 months
later, the bottom line is the same. So, in hindsight, I don’t think anyone will say we
got it cheap,” says Jaimin Bhatt, CFO of the bank

 We also learnt quite a lot from their processes. For instance, their credit approval process
was linked to the ratings of the borrower, they also had a very healthy MNC book. We are
also taking learnings from their SME book as we go forward,” says CFO Bhatt
 Is the Merger a Success?
 Increase in Branch network
- The new combined entity is the 4th largest private bank in India, in terms of
branch network.

 Thrust to SME business

- Stronger SME loan book

 Access to International business

- The merged entity can leverage ING Group’s international expertise and
presence.

 Savings on Infrastructure overlapping

- Savings on branches and offices in Southern India

 Customer Satisfaction
- Enhanced product suite to serve the customers
- Wider distribution to serve customers
Thank You
Summary Financials – Kotak (Merged Proforma)
Summary Ratios – Kotak (Merged Proforma)
Key P&L Items – Kotak (Merged Proforma)
Shareholders – Significant Value Drivers in Place
 Significant room for growth without dilution
 CAR (ING Vysya)1: 14.99%; CAR (Kotak)1: 17.59%; CAR (Combined)1: 16.51%
 Significant foreign shareholding headroom when merged
 Provides significant trading flexibility to ING Vysya shareholders
 Kotak is an Index stock
 ING Group will be the largest non-promoter shareholder