Mahindra and Mahindra’s investment in RBL Bank was done with a view to understand more of the financial services and banking business and not with any specific intent of getting into the banking sector.
Last week, the company announced it was buying a 3.5 per cent stake in the bank for ₹417 crore, and in a stock exchange notification said it had no intent to take it beyond 9.99 per cent stake.
MD and CEO Anish Shah said there was no intent to raise the stake further than what it has already acquired. “We do not expect to go higher at this point.” He added that any decision to raise stake can be taken later, but said the company was not in discussions with the RBI to get approvals for this.
Explaining the rationale for the investment Shah said on Friday that the group had a large financial services business — M&M Financial Services — which was core for the group. The investment in RBL was to have a greater understanding of the banking business as well as the sector. Separately, he told businessline that the investment will also help in understanding the regulations applicable to the banking sector, as the RBI was pushing for stricter regulations of NBFCs.
As part of the investment the company will also be looking for synergies between the bank and its own NBFC subsidiary, in terms of some of the offerings, such as vehicle lease financing. RBL Bank had expressed interest in this, he said.
Shah also said RBL was a strong bank and it was available at a price to book value of less than 1, making it an attractive investment proposition. He added that the intent was not to take control of the bank in any way.
Any rise in stake would be done if there was a strong strategic incentive for it. There had to be a clear articulation of the capital allocation benefit from it, said Shah. He added that the investment in the bank was also expected to generate handsome returns over time and benefit the company’s shareholders.