M&M picks up 3.5% stake in RBL Bank for Rs 417 cr, eyes to acquire more

Company says it may consider further investment in the bank to raise its holding up to 9.9%

Diversified business conglomerate Mahindra and Mahindra (M&M) has picked up a 3.53 per cent stake in private sector lender RBL Bank for Rs. 417 crore.

“We may consider further investment, subject to pricing, regulatory approvals, and required procedures. However, in no circumstance will it exceed 9.9 per cent,” M&M said in an exchange notification on Wednesday.

Shares of RBL Bank jumped 7.1 per cent to settle at Rs. 238.8 apiece on the BSE on Wednesday, close to their 52-week high of Rs. 242.1.

The Reserve Bank of India’s (RBI’s) norms cap non-promoter shareholding, (except supranational institutions, public sector undertaking or government) either natural persons or non-financial institutions, in a bank at 10 per cent.

However, non-promoters need prior approval from

the regulator to increase stake to 5 per cent or more. Moreover, business houses that have more than 40 per cent of their income or

revenue from non-financial activities are not allowed to become a bank.

The rationale behind M&M’s investment in RBL Bank is not known. An email sent to an M&M spokesperson in this regard did not elicit a response. RBL Bank, too, did not respond to queries on M&M’s move to acquire a stake in the bank.

The Mahindra group is in the financial services sector primarily through its arm Mahindra & Mahindra Financial Services – a non-banking finance company.

RBL Bank came under the regulatory glare about a year and half ago after the then MD & CEO Vishwavir Ahuja’s term was not extended. Ahuja was credited for turning a sleepy Kolhapur-based Ratnakar Bank into a new-age, tech-driven private sector bank.

Ahuja stepped down in December 2021 and Rajeev Ahuja was appointed interim CEO. In June 2022, R Subramaniakumar, a veteran banker with 40 years of experience, took charge as its MD and CEO. Subramaniakumar was the MD & CEO of Indian Overseas Bank earlier.

Subramaniakumar steadied the ship as the bank went on to deliver strong profitability. In the first quarter of FY24, RBL Bank reported 43 per cent growth in its net profit at Rs. 288 crore. The loan book of the bank grew 21 per cent year-on-year to Rs. 73,987 crore as on June 30 while deposits grew by 8 per cent to Rs. 85,636 crore.