M&M tanks 6% as RBL stake buy disappoints street

Mahindra and Mahindra shares nosedived 6 percent to Rs 1,450 at about 9:20 am on July 27 after six lakh crore shares changed hands on the NSE. This is the biggest single-day drop for M&M since February 2022. The decline comes after the company, on July 26, confirmed that it has acquired a stake of 3.53 percent in private lender RBL Bank for Rs 417 crore.

“We may consider further investment subject to pricing, regulatory approvals and required procedures. However, in no circumstance will it exceed 9.9 percent,” the automobile major said in a disclosure to the exchanges.

Meanwhile, shares of RBL have reacted positively to the news as the stock has gained 3.4 percent at 10:25 am.

“The move is not welcomed by the market because banking is not a core business for M&M. Market expects them to deploy money in the core business especially when the company is doing well. Putting cash in a non-core business is against the company’s philosophy,” Varun Baxi, analyst at Antique Stock Broking told Moneycontrol. “RBL is anyway not a pristine asset to invest in.”

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The Mahindra Group’s investment in the financial services sector is primarily done via its group company, Mahindra & Mahindra Financial Services.

RBL Bank has had a tough time in the last couple of years. Vishwavir Ahuja stepped down as its MD & CEO in December 2021 as the Reserve Bank of India (RBI) did not extend his term. The central bank, during the same month, had appointed its own official on the bank’s board.

Additionally, the bank informed that its voting rights in Carnot Technologies Private Limited has increased from 69.6 percent to 72 percent. RBL Bank holds 52.69 percent of the paid-up equity share capital of Carnot Technologies.

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