M&M planning to acquire upto 9.9% stake in RBL bank after its 3.53% stake purchase

M&M, the conglomerate, with expertise in technology and tractors has recently invested Rs 417 crore ($50 million) to acquire a 3.53% stake in RBL Bank. This move indicates their interest in venturing into the formal banking sector. However, it’s worth noting that any plans for increasing their stake beyond 10% would require approval from the Reserve Bank of India (RBI) as RBL Bank follows regulations that mandate RBI approval, for acquisitions exceeding 5%.

Mahindra & Mahindra (M&M), the well-known tech-to-tractor conglomerate in India, recently made a strategic move by acquiring a 3.53% stake in RBL Bank for Rs 417 crore ($50 million), as reported in an exchange filing. But their ambitions don’t end there; M&M stated that they might consider increasing their stake in the private lender up to 10%, subject to pricing, regulatory approvals, and necessary procedures. However, they are firm in ensuring that their ownership does not surpass 9.9%.

As a result of this acquisition, M&M’s shares experienced a decline of 5.6%, trading at Rs 1,458 per share during the afternoon on Thursday. Meanwhile, RBL Bank’s shares also saw a 3% dip, trading at Rs 232 per share.

If Mahindra & Mahindra succeeds in acquiring a 9.9% stake in RBL Bank, it will emerge as the largest shareholder alongside Maple, as reported by various media outlets. This move underscores M&M’s growing interest in expanding its presence in the formal banking sector. It is noteworthy that M&M already owns the non-banking financial company, Mahindra and Mahindra Financial.

Acquiring a stake in an Indian lender requires approval from India’s Reserve Bank. Media reports had suggested that M&M was close to acquiring a 5% stake in RBL Bank, which prompted a response from the bank. RBL Bank clarified that being a listed company, there is no pre-approval needed from the bank for trading in its shares. However, the RBI requires any shareholder seeking to acquire 5% or more of the bank’s shareholding to apply for prior approval. To date, RBL Bank has not received any such application from Mahindra & Mahindra.