Japan’s SMBC to take stake in Indian lender

This file photo shows founder of of Kotak Mahindra Bank, Uday Kotak, during a press conference in Mumbai. Japan's Sumitomo Mitsui Banking Corp. (SMBC) is set to become the country's first lender to invest in an Indian peer after it said Wednesday it will buy a stake in Kotak Mahindra Bank. (AFP/File/Rob Elliott)

TOKYO (AFP) – Japan’s Sumitomo Mitsui Banking Corp. (SMBC) is set to become the country’s first lender to invest in an Indian peer after it said Wednesday it will buy a stake in Kotak Mahindra Bank.

SMBC will purchase 4.5 percent of Kotak Mahindra, India’s fourth-largest private sector bank by market capitalisation, for 13.66 billion rupees (293 million dollars) as it presses ahead with expansion in Asia.

SMBC, which has been seeking to enlarge its foreign customer base amid tepid domestic growth prospects, said it wished to pursue investment opportunities in Asia’s third-largest economy.

“SMBC intends to cooperate with Kotak to develop new cross-border business opportunities in India, in areas such as asset management, alternate assets, securities and investment banking,” Japan’s number three bank said in a statement.

The announcement comes as several foreign lenders have moved to establish operations in India to tap corporate lending and other investment avenues in the fast-growing economy.

“We welcome a reputed global financial institution like Sumitomo as our shareholder as India’s financial services industry continues its high-growth trajectory,” Kotak executive vice-chairman Uday Kotak said in a statement.

The deal is slated to be completed in two months.

Sumitomo will become the second-largest foreign investor in Kotak, owner of India’s biggest securities firm, after private equity Warburg Pincus which holds around a nine percent stake.

Sumitomo, part of the Sumitomo Mitsui Financial Group (SMFG), already has tie-ups with local banks in Hong Kong, South Korea, Indonesia and other Asian markets.

Sumitomo Bank “is looking to expand its overseas operations through this partnership,” said Abhijit Majumder, senior banking analyst at Mumbai’s Prabhudas Lilladher Ltd.

Kotak shares rose 2.67 percent to 766.55 rupees in Wednesday morning trade after the announcement.

Dutch lender Rabobank and the ANZ banking group have been gearing up to enter the Indian market, while Goldman Sachs has applied for a banking licence in the country.

Last month, Britain’s Standard Chartered Bank raised 530 million dollars through Indian Depository Receipts in a move to give local investors a chance to own a stake in a foreign company while boosting its brand in the country. — AFP