'Need to see compelling strategic value': M&M on investing further in RBL Bank

Mahindra & Mahindra Limited on Friday said that it does not expect to invest more in RBL Bank unless it sees “compelling strategic value". Speaking at a press conference after Mahindra and Mahindra declared its Q1FY24 results, Anish Shah, Managing Director and CEO of Mahindra & Mahindra Limited, said, "RBL Bank investment is for us to understand banking in a greater detail. At this stage, we will not raise further stake in RBL Bank."

In a statement issued after declaring its financial results, M&M said that its capital allocation framework will remain unchanged.

Last week, Mahindra & Mahindra said it acquired a 3.53 per cent stake in RBL Bank Ltd for Rs 417 crore.

"This investment is based on a long-term view (7-10 years). The primary purpose is to understand banking, which will enable us to enhance the value of our financial services business. We saw an opportunity with an attractive valuation at less than 1x P/B for a very solid bank with a strong management team. We will explore potential for synergies as well," Mahindra and Mahindra noted in its Q1 FY24 results.

M&M said it will consider further investment subjected to regulatory nods and required procedures but won't acquire more than 9.9 per cent stake.

“While we have mentioned that we may consider increasing our stake to 9.9%, we do not expect to invest more unless we see compelling strategic value at some point in the future,” M&M said in its Q1 report.

At 2.20 PM, shares of Mahindra & Mahindra were trading at Rs 1,466.70 apiece, down by 0.17 per cent. While RBL shares were trading at Rs 217.25, down by 1.79 per cent.

On Friday, M&M said its consolidated net profit surged 59.79 per cent year-on-year (YoY) to Rs 3,508.41 crore for the June quarter compared with Rs 2,195.54 crore in the same quarter last year.

Revenue from operations jumped 17.57 per cent YoY to Rs 33,406.44 crore for the June quarter compared with 28,412.38 in the corresponding quarter last year.

Operating leverage drove improvement in profits by 2.2 times in the automotive segment, 58 per cent in MMFSL and 21 per cent in the farm segment. This coupled with capital allocation actions and monetisation resulted in significant step up in the group’s profitability, M&M said in a press release.

On July 22, RBL Bank said its net profit rose by 43 per cent YoY to Rs 288 crore in the first quarter of FY24 against Rs 201 crore in Q1FY23. RBL Bank's net profit increased by 6.2 per cent sequentially from Rs. 271.05 crore in the fourth quarter of previous financial year (Q4FY23).Private lender's non-interest income increased significantly to Rs 685.41 crores from Rs 613.57 crore.

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