Mahindra & Mahindra has decided to sell its approximately 3.5% stake in RBL Bank for Rs 691 crore. The company made this investment in 2023. This deal will result in a profit of around Rs 274 crore for the company.
RBL Bank: Mahindra & Mahindra has decided to sell its entire stake in RBL Bank. The company holds approximately 3.5% stake in the bank. This stake will be sold for approximately Rs 691 crore through a block deal. Kotak Securities has been entrusted with the responsibility of completing this deal. Following this transaction, Mahindra will completely exit the bank. This move is considered significant because this deal is expected to bring substantial profit for Mahindra.
Significant Profit from Investment
Mahindra had invested approximately Rs 417 crore in RBL Bank in July 2023. At that time, the company had purchased a 3.5% stake in the bank. Now, as the company is going to sell the same stake for Rs 691 crore, this deal is expected to yield a profit of approximately Rs 274 crore. This means Mahindra is getting a return of more than 60% on its investment in slightly over two years. This is an example of a profitable investment strategy.
Block Deal Pricing
The company has set a floor price of Rs 317 per share for the sale of RBL Bank shares. This price is approximately 2.1% lower than the NSE closing price of Rs 323.8 on November 4. In a large block deal, the floor price is typically kept slightly lower to easily attract buyers. Approximately 2.12 crore equity shares will be sold in this deal, representing about 3.45% of the bank's total stake.
Share Status in the Market
In Tuesday's trading session, Mahindra & Mahindra's shares closed at Rs 3,581.55 on the BSE, indicating a gain of 0.93%. Meanwhile, RBL Bank's shares closed at Rs 324, showing a decline of 1.38%. This decline in RBL Bank's shares was observed immediately after the news broke, as it is common for the market to experience short-term pressure upon receiving news of a large stake sale.
Role of Foreign Investment in RBL Bank
While Mahindra is selling its stake, on the other hand, UAE's second-largest bank, Emirates NBD Bank PJSC, is preparing to increase its investment in RBL Bank. Last month, Emirates NBD announced an investment of Rs 26,580 crore to acquire a maximum stake in the bank. This investment will be made through a preferential allotment at Rs 280 per share. Following this investment, Emirates NBD could hold approximately 60% stake in the bank. This is expected to give new momentum to RBL Bank's business model.
Potential Impact on the Bank
The influx of foreign investment will strengthen the bank's capital position. Increased capital will enable the bank to enhance its lending capacity and better expand its new financial products and loan portfolio. This could mark a new phase of growth for the bank. Mahindra's exit will not have any negative impact on the bank's operational policies; instead, the bank can advance its goals with the new investor's strategy.
