Kotak Bank gets shareholder nod to raise ~5,700 cr

Investment bankers say QIP route likely; capital adequacy ratio will rise to about 20% after the capital raising

Kotak Mahindra Bank said it had got its shareholders’ approval at an Extraordinary General Meeting (EGM) on Tuesday to raise its equity capital by issuing up to 62 million more shares.

At Thursday's closing price of ~926.45 a share on the BSE exchange, this would amount to ~5,744 crore. Investment banking sources say that KMB would raise this through a Qualified Institutional Placement (QIP).

On queries about the bank’s capital raising plan, Rohit Rao, spokesperson, Kotak Mahindra Bank, said, “At the bank’s EGM held on May 9, shareholders have approved the capital issuance of up to 62 million shares. Thereafter, the bank has not taken any decision on the specifics of the same.”

Shareholder approval was to raise the capital through a public issue, rights issue or a private placement, including a QIP, and in one or more tranches. By a Reserve Bank of India (RBI) directive, this has to take place before June 30.

The central bank had said Uday Kotak, executive vicechairman, would need to reduce his stake to 30 per cent by end-June and to 20 per cent by end-December 2018. At present, he has 31.8 per cent.

The proposed capital dilution works out to 3.37 per cent on the current equity base.

After the capital raising, the bank's capital adequacy ratio (CAR) would rise to about 20 per cent, Jaimin Bhatt, president and group chief financial officer, had said in March when the board of directors had approved the fund raising. Its CAR was 16.8 per cent at a consolidated level in the March quarter.

The funds raised would go on consolidation opportunities in the banking and financial services sector or capitalisation of opportunities available in acquisition and resolution of stressed assets in the banking sector, including participation in the proposed ‘bad bank’ plan.

The EGM notice said the funds raised could also be deployed for supplementing additional avenues of organic growth, such as opportunities in digital expansion, domestic and international lending and so on. The capital raised might also be invested in the growth of its subsidiaries. It said the amount to be raised had been assessed on the bank’s requirements and for maintaining key performance parameters in the medium and long term, in the interest of all shareholders.

The bank also got the shareholders' approval to increase the ceiling of foreign institutional and portfolio investment up to 49 per cent of the paid-up capital. The bank’s current foreign investors’ limit is 42 per cent of the capital, as approved by shareholders and RBI. At the end of March, foreign investors held 38.56 per cent.

Shares of KMB gained 2.1 per cent on the BSE on Wednesday.