Kotak Mahindra Bank weighs selling stake in its subsidiary in 2023: Kotak General Insurance; an attempt to diversify its business

Kotak Mahindra Bank backed by Uday Kotak has planned to sell a minority stake in its insurance unit. The matter was revealed by the people associated with it.

The private firm has been working with an advisor on the potential sale of a stake in Kotak Mahindra General Insurance. The sale of the stake could raise hundred million dollars. In addition, it can allow the private bank toon board potential strategic partners and financial investors.

The discussions are in the early stage. Not many details have been provided about the size and structure of the stake. Moreover, it is not assured if Kotak can proceed with the stake sale. When asked about the sell-off of the minority stakes of Kotak general insurance, the spokesperson did not comment.

If the deal proceeds, it would allow Kotak Mahindra bank to join hands with a number of Asian banks pursuing collaborations for their insurance services. Various Asian banks, like bank for investment, and Development of Vietnam JSC have been planning to revive their sale of the stakes in collaboration with Metlife Inc., and Indonesia’s P Astra International is searching for alternatives for a partial sale of its life insurance unit.
During last month, Dah Sing Financial Holdings Ltd. and Sun Life Financial Services announced a 15-year agreement in Hong Kong.

Kotak General Insurance was established in 2015, and it consists of 25 branches across India with a workforce of 1300 employees, accordng to the website. The subsidiary of Kotak Mahindra bank provides various insurance products like auto, health, and commercial insurance.

Previously, Kotak Mahindra Bank announced the acquisition of Sonata finance for a valuation of 537 crores INR to diversify its finance portfolio.

According to the financial lender, the acquisition was made to emphasize the company’s growth in the financial inclusion statement.

According to the bank, Kotak Mahindra Bank has proceeded with legally binding share purchase agreement to buy all of the shares of equity of sonata Finance from the company’s current shareholders. It complies with the RBI’s rules and approvals. Once the acceptance occurs and the transaction is finished, the latter will become a fully owned subsidiary of Kotak Mahindra Bank.

Sonata Finance presents an opportunity for the bank to establish as a key player in the financial inclusion market, the bank has stated in its main argument for the acquisition.

An attempt has been taken to empower the financially weaker sections of society.

Additionally, it has plans to broaden Sonata’s network to include a variety of products on the platform. According to Kotak Mahindra Bank’s president of commercial banking, the purchase was consistent with the company’s goals and tactics.

With a booking of 5300 crores INR, the bank acquired BCC Microfinance in 2017 and has since integrated other financial sectors while steadily growing in the financial inclusion sector.

The company has acquired a health and agricultural equipment finance portfolio, valued at 600 crores INR, according toan interview from Kotak Mahindra Bank. The amount of the agreement between the former and the Dutch lender DLL has not been made public.

According to the bank’s statements, the acquisition of the bank involves 69 crores in NPA and 582 crores in outstanding loans that are termed standard.

Kotak Mahindra Bank’s attempt to diversify its business and land on potential investors and strategic partners:

When IDBI bank announced the sale of the majority of the stake, Kotak Mahindra Bank has taken part in the array followed by many foreign banks attempting to purchase 60.72 percent of the stake of the bank.

Kotak Mahindra maintained a strong balance sheet in FY22, and it stands at 464784 crores INR, while that of INDBI bank stands at 306619 crores INR. However, it has not been made evident if Kotak will merge with IDBI bank or if the latter will be retained as an individual banking platform.

Consumer banks, who benefited from the formalization of the economy, fared better in the post-covid era. It has aided private banks in determining how much credit consumers need and in accelerating the pace of demand. The purchase of different businesses suggests that private-sector banks plans to assert dominance in suburban and rural areas where their dominance is less obvious.

edited and proofread by nikita sharma