Axis has a loan book more than twice in size to that of Kotak Mahindra Bank, which is led by billionaire Uday Kotak.
The brokerage's observation comes in the aftermath of Axis Bank's board cutting short its CEO Shikha Sharma's fourth term to the end of 2018 after the Reserve Bank of India reportedly did not approve her re-appointment. The board had past year approved a new term for Sharma.
"From Axis Bank's perspective, we believe there would be limited pushback this time for any merger", Nomura said.
"In case of M&A, the deal would be highly earnings per share-accretive for Kotak Bank even after paying a meaningful premium to Axis Bank shareholders", the brokerage added. "(Also) since the time of the last merger talks, Kotak Bank's stock has outperformed Axis Bank's by around 30 per cent, making the acquisition more reasonable", Parasrampuria and Nanavati said in the report. Uday Kotak and his family now hold 30.06 per cent stake in the company. ICICI Bank has 4,860 branches.
The acquisition would help Kotak increase its total deposits five times to Rs 5.97 lakh crore from Rs 1.80 lakh crore and improve its CASA ratio from 47 per cent to 49 per cent, just a shade lower than the 50 per cent CASA of ICICI. Intra-day, it jumped 6.10% to Rs 549.50. Kotak had sold less than 1 per cent stake in his bank in secondary market transactions in May previous year to comply with the regulator's direction to cut it to 30 per cent by end-June. The central bank has allowed Kotak Bank's promoter Uday Kotak to bring down his holding in the bank to 15 per cent by March 2020.