Billionaire banker Uday Kotak sold 2.83% of his holding in Kotak Mahindra Bank today, bringing his shareholding to 26.1% from 28.93%, closer to what was agreed with the Reserve Bank of India (RBI) earlier this year. Uday Kotak raised Rs 6,940 crore, by selling close to 5.5 crore shares at the upper price limit of Rs 1,240 per share, according to Bloomberg news. The stake dilution was carried out through a private placement by way of a block deal on June 2. Shares of Kotak Mahindra Bank surged over 7% on BSE Sensex on Tuesday morning to trade at Rs 1,330 per share.
The stake sale comes just a day after Kotak Mahindra Bank successfully raised Rs 7,442 crore by issuing 65 million shares of the lender at a discounted price of Rs 1,145 per share via a Qualified Institutional Placement (QIP). The QIP saw marquee investors such as Invesco Oppenheimer buy 52 lakh shares, followed by Canada Pension Plan Investment Board, picking up 46 lakh shares, and ICICI Prudential Mutual Fund getting hands-on close to 41 lakh shares. Uday Kotak’s decision to pare-off shareholding is in line with the approval granted by the Reserve Bank of India earlier this year.
In January, Kotak Mahindra Bank had informed the market regulator that the central bank had granted in-principle approval for an offer to cap promoters voting rights in the lender to 20% of paid-up voting equity share capital (PUVESC) until March 31, 2020. “Promoters’ voting rights in the Bank to be capped to 15% of PUVESC from April 1, 2020, onwards,” the bank had said in January.
Kotak Mahindra Bank was asked by the RBI to cut promoters shareholding to 20% of paid-up capital by December 31, 2018, and to cut it further to 15% by March 31, 2020. The lender followed-up with a proposal to cut promoter holding to 19.70%, which was rejected by the central bank. Kotak Mahindra Bank had challenged the RBI in relation to this matter in the Bombay High Court. RBI’s bank licensing rules ask private banks to pare promoter holdings to 40% within three years, 20% within the ten years, and 15% in 15 years. The court case was withdrawn by the bank in February.
Currently, Kotak Mahindra Bank shares have jumped 20% from March lows and is one of the most expensive bank stocks in the Indian equity market. The stock however has a hold rating from Emkay Global which highlighted that the QIP is likely to result in subdued Return on Equity. Motilal Oswal has a neutral rating on the stock.
Eqwires Research Analyst
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