Punters think DCB, Karnataka, LVB, City Union Bank may be next M&A targets

The announcement of the Kotak Mahindra Bank-ING Bank merger on 19 November was preceded by a fairly strong run-up in the BSE Bankex and some key private bank shares.

While the Sensex rose about 6 percent in the month to 19 Noverber, the Bankex rose 8.44 percent. Banks - especially private banks - clearly are becoming the flavour of the month, if not the season.

A close look at the price changes in key private bank shares shows which ones have caught the speculators’ fancy. The ones rising faster are broadly the ones most likely to be gobbled up for reasons of their relatively small size.

DCB Bank was up 20.74 percent, Karnataka Bank 16.92 percent, Lakshmi Vilas Bank 12.11 percent and City Union Bank 11.57 percent - well above the Bankex rise.

More from Data

A 34-year wait? India to rise as an Asia-Pacific power by 2050, says UN report Why WPI inflation will continue to play dead till at least early 2016

IndusInd Bank (up 7.42 percent) is owned by the Hindujas and thus unlikely to be on offer for all comers, so its rise can only be explained by its improved performance under the leadership of Romesh Sobti.

Few punters apparently think Federal Bank (3.21 percent), South Indian Bank (0.19 percent), Dhanlaxmi Bank (-1.46 percent), and Karur Vysya Bank (-2.51 percent) will be among the next hot bank scrips.

Yes Bank (up 11 percent) should also be up for grabs, but its market cap of over Rs 29,000 crore means that it is too big to target. You have to be a bank of the size of HDFC or ICICI Bank to swallow Yes Bank.

What the data suggest is that DCB, Karnataka Bank, City Union Bank, and Lakshmi Vilas Bank may be the most likely future targets because they are easier to swallow - with market valuations of a manageable Rs 2,693 crore, Rs 2,696 crore, Rs 5,567 crore and Rs 1,524 crore respectively.

These may be the scrips to watch.