The Banks Uday Kotak’s Billion Can Buy

Banking a billion would earn Uday Kotak just 4%. Maybe buying a bank will offer a higher return?

Uday Kotak, chairman of Kotak Mahindra Bank Ltd., at the TiE Global Entrepreneurs Summit in New Delhi, India. (Photographer: Udit Kulshrestha/Bloomberg)
Uday Kotak, chairman of Kotak Mahindra Bank Ltd., at the TiE Global Entrepreneurs Summit in New Delhi, India. (Photographer: Udit Kulshrestha/Bloomberg)

This is satire and should not be misconstrued as news of any banker buying a bank or any bank on sale.

It's not everyday that you have a billion-odd dollars in cash lying around to invest. But Uday Kotak does. A recent stake sake in his eponymous bank has netted him about $919 million or Rs 6,940 crore. What should he do with the money? Well, for one, keeping it in a savings bank account at Kotak Mahindra Bank Ltd. is inadvisable, given the lender now offers only 4% on savings bank deposits.

But buying a bank might offer higher returns. Particularly since a number of Indian lenders are available at bargain basement prices.

IF...IF...Kotak wanted to buy a bank, he can pretty much have his pick. No, he can't have HDFC Bank Ltd., ICICI Bank Ltd. or Axis Bank Ltd., but he can certainly move closer to those lenders in size if he decides to pick one of these banks.

RBL Bank: A Steal Of A Deal?

RBL Bank currently has a market capitalisation of Rs 6,465 crore. If Kotak wants, he can just about squeeze in an all-cash deal. The bank is trading at less than 1 times price-to-book, at 0.6 P/B. A bargain deal?

South Indian Play?

In case Kotak wants to build out a stronger presence in the south, he could pick up CSB Bank Ltd. for less than half of what he earned by selling just under 3% of his stake. That will cost him just Rs 2,280 crore.

Actually, throw in Karur Vysya Bank Ltd., with a market cap of Rs 1,958 crore and Kotak will still have some cash left over.

There is also Karnataka Bank available for about Rs 1,100 crore and South Indian Bank for just over a Rs 1,000 crore.

Wait, if you do math, he could actually buy them all.

Looking For A Challenge?

In case, Kotak is looking for a new challenge (as if everything that is going on isn't enough!), he can spend small money and get himself a big clean-up job.

The Lakshmi Vilas Bank Ltd., which would be happy for the capital, is going at Rs 425 crore. There's also Dhanalaxmi Bank for Rs 261 crore.

Take A Few Off The Governments Hands?

If Kotak is feeling benevolent and wants to take some trouble off the Indian government's hands, he could pick up a handful of state-owned lenders. Individually or collectively, Bank of Maharashtra (Rs 5,550 crore), Indian Bank (Rs 5,262 crore), Jammu and Kashmir Bank (Rs 877 crore) and Punjab & Sind Bank (Rs 991 crore) are within the budget.

Of course, this is all in jest. Buying a bank would put Mr. Kotak back in RBI’s crosshairs. Just as he got out of them.

So, here's wishing Mr. Kotak—happy shopping. Please place order online to ensure compliance with physical distancing rules.