Won't increase stake in RBL unless the reasons are compelling enough: Mahindra Group MD & CEO

economictimes.indiatimes.com:

Mahindra & Mahindra is unlikely to increase its stake in RBL Bank unless there’s a compelling reason to do so in line with the company’s capital allocation guidelines, the company’s top official said, seeking to assuage investor concerns on the tractor- to-technology conglomerate straying on the path to fiscal discipline, it embarked upon a couple of years ago. Since the announcement of the stake purchase by the company, M&M investors have lost Rs 1,32,00 crore.

Addressing the reporters after the company’s first quarter earnings, Anish Shah, Group MD and CEO Mahindra said that the recent investment of Rs400 crore for a 3.5% stake in RBL Bank is based on a long-term view – seven to ten years. The primary purpose is to understand banking, which would enable Mahindra to enhance the value of its financial services business, Mahindra Financial Services.

“This investment is for us to understand banking in a lot more detail with a very long-term view. There are no intentions of going beyond this at this point.

It helps us to understand the sector a lot better, to enhance the value of a business that has a market capitalization of nearly Rs40,000 crore,” said Shah. RBL Bank has a strong management and is well run and was available at a price to book that was less than 1.

This was a great investment opportunity that came together with our desire to understand the sector,” explaining the rationale behind choosing RBL for the investment, Shah said. On whether M&M will be open to more such stake purchases if they are available at an attractive price, Shah said there are no such plans as of now.