MUMBAI: Kotak Mahindra Bank on Wednesday sought to play down reports of it planning to acquire a non-banking financial company as ‘speculative’, but hinted it’s interested in consolidation drive and termed the pile of stressed assets in the system as a growth area.
Kotak Mahindra Bank vice-chairman Uday Kotak said that banks need $100 billion in fresh capital to come out of the present stressed balance-sheet as the bad loans have crossed Rs 14 lakh crore, or 9.3 per cent of the system.
Over time, there will be significant consolidation in different shapes and forms. “And at that time, you must be in a position to be a significant player of relevance,” Kotak replied to a question on acquisition plans.
He said the KMB board will be meeting on Thursday to consider capital-raising plans, but declined to spell out contours of the same. But, reports in a section of the media on Wednesday said the private lender was planning to raise close to $2 billion through a QIP issue.
He said for his bank, stressed asset management is a key growth opportunity.
“We’re seeing a significant opportunity coming with the challenges on the levels of stress that needs to be resolved. We believe the future is in significant consolidation,” Kotak said, without spelling out whether the bank will be pumping more money into its ARC arm or starting a new asset management company.
Kotak Mahindra has a subsidiary in the ARC space, a special situations fund, and also buys distressed assets directly onto its books.
Kotak said the banking system is saddled with Rs 14 lakh crore of dud loans which include net non-performing assets, restructured accounts, and SDR and S4A accounts, and is staring at providing a whopping Rs 4 lakh crore for these assets.
This is 50 per cent of the entire equity capital of the system - that is Rs 8 lakh crore, he added. The remaining Rs 10 lakh crore will need a capital infusion of Rs 2.5 lakh crore into the ARCs to resolve the stress, he said.
Clarifying on his recent remarks on takeovers, he said the reference to hostile buyouts was in reference to capital market reforms and protection of minority shareholders, and did not reflect his bank’s strategies.