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What should be your position on Kotak Mahindra Bank stock after Zurich’s 70% stake buy ?

This development follows Zurich Insurance’s prior announcement of an initial acquisition of 51%, with the remaining 19% planned over the next three years.

In a regulatory filing to the stock exchanges on Friday, Kotak Mahindra Bank confirmed that Zurich Insurance Company is set to acquire a 70% stake in Kotak General Insurance Company Limited for Rs 5,560 crore in a single tranche.

This development follows Zurich Insurance’s prior announcement of an initial acquisition of 51%, with the remaining 19% planned over the next three years. Kotak Mahindra Bank emphasized that the other terms of the transaction remain unchanged.

The disclosure referred to a previous announcement made on November 2, 2023, outlining the acquisition strategy. Kotak Mahindra Bank stated, “We refer to our disclosure dated November 2, 2023, in respect of the proposed acquisition of the shares of Kotak Mahindra General Insurance Company Limited by Zurich Insurance Company Ltd, by way of an initial acquisition of 51% of the share capital through a combination of capital infusion and share purchase, followed by a subsequent acquisition of an additional stake of 19% within a period of three years from the initial acquisition to take Zurich’s shareholding to 70% of the share capital of Kotak General.”

The successful completion of the proposed 70% acquisition is contingent upon meeting customary conditions precedent, including regulatory approvals from the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI), according to Kotak Mahindra Bank.

On February 6, the Competition Commission of India (CCI) granted approval for the acquisition, confirming Zurich Insurance’s acquisition of a 70% stake in Kotak Mahindra General Insurance Company. It’s noteworthy that Kotak Mahindra General Insurance Company operates as a 100% subsidiary of Kotak Mahindra Bank.

In its financial results for Q3FY24, Kotak Mahindra Bank reported a notable 7.6% rise in net profit, reaching Rs 3,005 crore for the quarter ended December 2023. During the reporting period, the net interest income (NII) surged to Rs 6,554 crore compared to Rs 5,653 crore a year ago. The net interest margin (NIM) for Q3FY24 stood at 5.22%, showing a slight decline from 5.47%. Notably, the company’s gross non-performing assets (NPAs) decreased to 1.73% from 1.91%, and the net NPA improved to 0.34% from 0.48%.

Here is how stock has performed in last one year 

Over the past few time frames, Kotak Mahindra Bank’s stock has witnessed a series of declines. In the last 5 days, the stock showed a decline of 1%, signaling a short-term negative trend. The negative momentum extended over the last one month, with the stock dipping by 5.65%. 

This downward trajectory continued over the last 6 months, where the stock was down by almost 4%. Year-to-date (YTD) returns revealed a notable decrease of 10%, indicating a challenging start for investors in 2024. Additionally, the stock has seen marginal erosion over the last one year, with returns standing nearly flat and down by 1%.

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