Yes, I think the merger between Kotak Mahindra Bank and ING Vysya Bank would help the Indian banking industry for the following reasons: 1. It leads to consolidation in the banking sector by reducing the number of players. This helps strengthen the overall banking system by creating larger and more robust banks that are better able to withstand financial shocks. 2. The combined entity gains significant synergies from an expanded branch network, larger customer base, and greater resources. This allows it to offer more products and services to more customers across India. 3. Consolidation through mergers reduces unnecessary competition and helps banks improve their operational efficiencies through economies of scale. This can help lower costs and improve profitability over the

1. Presented by : RAVI
Title: Merger-Kotak Mahindra Bank & ING Vysya Bank
Affiliation: REVA UNIVERSITY

3. SUMMARY OF
THE CASE

4. Amalgamation of business entities is a world-wide phenomenon. One of the tools for this is mergers and acquisitions.
The question for growth and the ever-changing dynamic business environment make M&A a frequent phenomenon in
corporate circles. The M&A in financial sector of India are driven with the objective of leveraging the synergies
expected to arise out of the consolidation, with this context Kotak Mahindra Bank Ltd and ING Vysya Bank Ltd merged
to make fourth largest private banking the Indian banking industry.
The merger of two banks promises a lot in the Indian banking industry and is looked upon as a move towards
consolidation of the sector. Kotak Bank looking to increase its presence in the country especially in the western and
southern parts of the country where its presence is less as compared to other parts, the strategic rationale of merger
and its implication on the banking industry as a whole has to be looked upon.
The case deliberates the aspects of merger and acquisition and the history, objectives and challenges of the merger
to the organisation. In the light of available circumstances, this case delineates the real life issues and strategic
rationale of the merger and the benefits which can be derived from the merger. The case provides enough material to
discuss the dynamics and the mergers in the Indian banking industry. The case also provides enough material to
analyse and discuss the synergies and leverages of the merger deal of ING Vysya.

5. Transferee Bank Kotak Mahindra Bank Limited
Transferor Bank ING Vysya Bank Limited
Mode of Transaction
The deal was scheme of amalgamation merging
ING Vysya into Kotak.
Shareholding in
Kotak before the
Merger
Promoter Group: 40.02%
Public Shareholding: 59.98%
￭
FIIs: 36.85%
￭
￭
Foreign Banks: 4.25%￭
Foreign Bodies: 2.04%￭
￭ Others: 1.41%
Shareholding in
ING Vysya before
the Merger
Promoter Group: 42.51%
Public Shareholding: 57.49%
FIIs: 26.98%
￭
￭
Financial Institutions/ Banks: 1.76%￭
￭ Individuals: 8.14%
￭ Others: 1.82%
Post merger
shareholding in
Kotak
Promoter Group: 33.99%
Public Shareholding: 66.01%
￭ ING Group: 6.48%
￭ FIIs: 33.58%
￭ Domestic: 19.12%
￭ FDI: 6.83%
Consideration
As part of the amalgamation, 725 shares of Kotak were
issued in lieu of every 1000 shares of ING Vysya to
every shareholder of ING Vysya.
Uday - Kotak
Public
Kotak
40.02 %
59.98 %
Public
Merge
ING
Vysya
ING Group
Share Swap
725 : 1000
42.51 %
57.49 %
33.99 %
59.53 %
DEAL SNAPSHOT
PRE MERGER
POST MERGER
Uday - Kotak
ING
6.48 %
Public
￭
￭
￭

6. THE
PARTIES/CHARACTER
S

7. KOTAK MAHINDRA BANK LIMITED ING VYSYA BANK LIMITED

8. FACTS FILE

9. September 2013 : Reports of ING’s intention to sell its stake in
ING Vysya and Kotak being the front runner.
November 20, 2014 : Scheme is approved by the board of
directors of Kotak and ING respectively.
January 7, 2015 : The Scheme is approved by the Shareholders
of Kotak and ING respectively.
February 12, 2015 : Merger receives CCI approval.
April 1, 2015 : Appointed Date of the Scheme.
April 1, 2015 : Date on which RBI approved of the Scheme.
July 3, 2015 : Date of FIPB approval to increase the aggregate
foreign Investment in Kotak, pursuant to the
Deal.
September 30, 2015 : Long Stop Date.
CHRONOLOGY OF EVENTS:

10. OBJECTIVES

11. OBJECTIVES OF AMALGAMATION OBJECTIVES OF THE STUDY
The Primary
objectives are
Revenue synergy
and growth
potential.
To Enhance
product suite
to serve
their
customers.
Cost savings
on branch
expansion.
To Increase
ATM
network in
the country.
To Wider
distribution
to serve
customers.
To know the
challenges and
problems
related to
merger and
acquisition in
India.
To study the
main
purpose of
M&A in
banking
sector
To study
post merger
analysis of
customer
bases and
network.
To study
post merger
analysis of
financial
performance
To know
challenges &
problems
related to
M&A in
India.

12. PROBLEM
IDENTIFICATION

13. SHOT TERM
 Major problem is related to human resource
management: cultural deference's and employee
union strikes
 Difference in salary structure of employees
LONG TERM
 Different deposit SCHEMES
 Re-pricing of existing Vysya Bank savings account
deposits could negatively impact margins

14. SWOT ANALYSIS

15. 1. Larger Savings Account Balances : savings account interest rate of
5.5% to 6%, the merged entity is has larger savings account balances.
2. Capital Adequacy Ratio : The individual CAR for FY stood at 18.9%
and 16.76% for FY 2014 and this ratio was expected to be 17.6%
after the merger.
3. Increase in Branch network : The combined bank has 1,214branches,
with a wide-spread pan-India network . [ING VYSYA 573
KOTAK 641]
4. Large Customer base : The combined bank has 10 million customers,
[KOTAK has 8 million and ING has 2 million customers]
1. Differential deposit rates : The savings account interest rate of ING
was 4% and Kotak gives a savings return of 6%.
2. Pressure on profitability ratios : Profitability ratios like Return on
Equity (ROE) or Return on Net worth (RONW) measures the amount
of profit which the company generates on money invested by the
equity shareholders (i.e. share capital + reserves and surplus).
1. Make in India : “Make in India” opportunities that can be encashed
upon by the merged entity .
2. Focus on digital customer : “digital India/ digitization” opened up
the opportunities that can be encashed by the merged entity.
3. Financial inclusion : Kotak Mahindra bank can make use of the ING
Vysya bank’s presence in the SME sector.
1. Volatile market conditions : A paradigm shifting of customers and
expansion of businesses
2. Competition : Competition by other private and public sector banks
like ICICI,HDFC AXIS BANK YES BANK etc.
3. Handling customers, Information Technology : Handling customers,
Information Technology (IT) and process related changes due to the
merger—Both the banks have different regional and cultural
differences.

16. RECOMMENDATIONS
AND
SUGGESTIONS

17. 1. Re-pricing of existing Vysya Bank savings account deposits could negatively impact margins hence Kotak’s existing scheme
could be the best idea to achieve the expected returns.
2. upfront costs related to merger (stamp duty, re-branding, technology integration, etc) to be offset by slower branch
expansion as i see a lower need for KMB to grow organically post-acquisition.
3. Merged firm expect to see synergies to make RoA marginally accretive. However, I do not see RoA of the merged entity
reaching the levels of standalone Kotak Bank pre-merger in the near to medium term, hence it is recommended that the
Kotak has to liquidate NPA’s to maximise RoA.
4. The challenges in terms of integration of two different banking cultures of the 10,000 employees of Vysya Bank, around
3,000 are unionised and come under the wage structure of IBA (the Indian Banks Association) hence salary levels and
wage increment should be determined by negotiation with the unions.
5. it is suggested that the pending deal helps to reduce promoter stakes from 40% to 34%. Promoter stakes include Uday
Kotak (which has the largest stake, at 39.7%). This all share deal significantly contributes in moving towards this goal.
6. As per the analysis, factoring in a 100% coverage ratio for Vysya Bank’s un provided NPLs (non-performing loans,
incremental impact (Rs 0.85 bn) on the merged P&L (profit & loss account). Hence the management should take the
conservative route in estimating NPL costs.
7. Upfront costs of the merger (legal, rebranding, technology, etc.) should likely to weigh on near-term profitability with the
latter partly offset by a higher SA mix, if not it results in an adverse impact of 10 bp of assets—10% of Kotak Bank’s
earnings.

18. CONCLUSION

19. I conclude that there are various advantages of merger and acquisition in banking sector like
increase in customer base, increase in branches , increase in number of product and service offered,
increase in number of ATM network, increase in number of employees , benefits of expertise
employees, access to various region in the country, increase in deposit and advance amount. There
are also various challenges like difference in deposit rate and interest rate, difficulty in managing
nonperforming assets, difficulty in managing the employees because difference in salary structure,
etc. after analysis post merger financial performance we can say that after merger and acquisition,
there is increase in net interest income, increase in profitability, increase in number of customers,
improve liquidity, share price has been increased.

20. QUESTION AND ANSWER

21. 1. Do you think the merger between Kotak and Ing Vysya would help the
Indian banking industry? justify
The bank sector to begin coalescing around a few major players after the country's central bank in April
granted licences to set up two new banks. Deals, though, have been rare in a banking industry hampered by
restrictive regulation, reluctant investors and strong unions)
The Indian banking sector has witnessed many M&As in the recent past. The last decade saw some big players like the
ICICI bank and HDFC bank acquiring Bank of Rajasthan and Centurion Bank of Punjab. There is also a talk in the
business circles that 2 public sector banks, United Bank of India and Dena bank will be merged with bigger entities.
One of the prominent motives behind a takeover bid in the banking arena is to reap the benefits of economies of
scale. M&A help banks achieve significant growth in their operations and in minimizing expenses. For instance, M&As
help banks to save the costs that are incurred on opening of new bank branches. Competition is minimized when
there is less number of banks leading to an increased market share. M&A also helps better utilization of resources.
This study analyses the takeover deal of ING Vysya bank by Kotak Mahindra bank and the synergies gained by the
deal. This merger brings together two strong industry players to form a more robust and fundamentally sound bank.
ING Vysya Bank is a respected household name in the South Indian banking sector, with a legacy of eight decades.
Kotak Mahindra group has made its mark in financial services arena as a conglomerate addressing all customers’
needs under one banner. The merged entity ING Vysya Bank and Kotak Mahindra Bank Limited will definitely leave its
impact on the national banking scene.

22. Economies of scale and operations will arise out of the proposed merger resulting in benefits to shareholders,
employees and customers. The synergies e from the merger are listed below:
a. Increase in Branch network: Operationally, the deal offers multiple synergies. The new combined entity will be
the 4th largest private bank in India, in terms of branch network of 1,214 branches.
b. Capital Adequacy Ratio: The individual CAR for FY stood at 18.9% and 16.76% and this ratio was expected to
be 17.6% after the merger.
c. Customers and employees will benefit from the combined Kotak having a wider geographical spread,
expertise across customer segments, such as SME, HNI, Corporates, and on products such as private banking,
asset management, insurance, investment banking, NRI offerings etc.
d. Kotak’s strong capital position potentially avoids capital raising and attendant dilution in the near to medium
term for ING Vysya shareholders.
e. Additionally, with ING Vysya nearing the capital for foreign shareholding, the merger would yield more
liquidity with significant foreign headroom in Kotak even after merger, with foreign shareholding at 47%.
2. Discuss the synergies of the merger between ING Vysya and Kotak.

23. ADDITIONAL INFORMATION

24. Extraordinary General Meeting of the Members of Kotak Mahindra Bank Limited
on Wednesday, January 7, 2015at 4:00 p.m.

25. (L to R) Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank. C Jayaram, Joint Managing Director, Kotak
Mahindra Bank. Uday Kotak, Executive Vice Chairman and Managing Director, Kotak Mahindra Bank. Uday Sareen,
CEO & MD Designate, ING Vysya Bank. Shailendra Bhandari, CEO & MD.

26. Thank you