Mahindra & Mahindra on Friday said its stake purchase in RBL Bank is based on a long-term view and that it does not expect to invest more unless there is a compelling ‘strategic value’.
The homegrown auto major had surprised the Street recently when it invested Rs 400 crore for a 3.5 per cent stake in RBL Bank. M&M had then said that while it may raise this stake in the private sector lender it will not take it beyond 9.9 per cent.
Commenting on its capital allocation policy while announcing results for the first quarter ended June 30, M&M said that financial services is a core area for the group with Mahindra Finance having a valuation of around Rs 40,000 crore.
It pointed out that the investment in RBL Bank is based on a long-term view of 7-10 years and that the primary purpose is to “understand banking’’, which will it to enhance the value of its financial services business.
“We saw an opportunity with an attractive valuation at less than 1x P/B (price to book) for a very solid bank with a strong management team,” M&M said while admitting that it will explore potential for synergies as well. The company added that while it has disclosed that the stake may be increased to 9.9 per cent, “we do not expect to invest more unless we see compelling strategic value at some point in the future’’.
Meanwhile, M&M reported a 98 per cent rise in standalone net profit for the first quarter ended June 30. Net profits rose to Rs 2,774 crore from Rs 1,404 crore in the same period of the previous year.
This came on the back of its revenues increasing 23 per cent to Rs 24,368 crore from Rs 19,813 crore in the year-ago period. On a consolidated basis, its profits grew 60 per cent to Rs 3,508 crore, while revenues were up 19 per cent to Rs 33,892 crore.
“During the first quarter, our businesses across auto, farm and services delivered a strong performance. Auto led the way by strengthening its market leadership position and doubling its operating profit.
“Farm continues to increase market share quarter on quarter and deliver a double-digit profit improvements,” said Anish Shah, managing director & CEO, M&M Ltd, said.
