Mahindra and Mahindra (M&M) loses 6 percent in trade on July 27 morning after it announced that it acquired a 3.53 percent stake in RBL Bank as an investment at a cost of Rs 417 crores.
The company said in a press release to the stock exchanges, "We may consider further investment subject to pricing, regulatory approvals and required procedures. However, in no circumstance will it exceed 9.9 percent."
This is a non core investment for the auto giant. The Street is disappointed as there are concerns being raised on its capital allocation policy.
M&M had earlier addressed their capital allocation policy in detail, wherein the company had a target to achieve 18 percent return on equity overall for all businesses. In line with this, M&M has grouped each of its businesses into 'A', 'B', 'C' categories and exited businesses which could not deliver 18 percent return on equity. With the recent announcement of buying stake in RBL bank, the Street will question the capital allocation policy.
M&M shall hold a Board meeting on August 4 to consider and approve its first quarter results. The stock has given up all its gains for this week and is trading at Rs 1,446 per share. The shares gained 14 percent since the start of this calendar year.
On the contrary, RBL bank shares are trading nearly 3 percent higher on July 27 morning.
First Published: Jul 27, 2023 10:27 AM IST
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