RBI Tells Kotak to Cut Promoter Stake in Bank to 40% by Sept
Promoter holding in bank at 43.58%; Uday Kotak directly holds 39.76%
The Reserve Bank of India has directed Kotak Mahindra Bank’s promoter Uday Kotak to pare the holding of promoters to 40% by September. “The RBI has directed the bank to bring down its promoter shareholding to 40% by September 30, 2014, as per estimates provided by the bank. The next estimate is 30% by December 31, 2016,” the bank said in a statement to the stock exchange. The promoter holding in the bank is 43.58%; Uday Kotak directly holds 39.76%. An email query sent to the private sector lender remained unanswered. The cap on promoter’s holding in the bank is a point of contention. The declared policy is that no promoter should hold more than 10%. Recently, the PJ Nayak committee on governance in banks proposed that promoters be allowed to retain up to 25% equity stake in banks. Kotak Mahindra Bank was giv- en a banking licence by RBI in 2003. The bank has maintained that the condition of the licence was the promoter’s contribution would be a minimum of 49%, which was locked in for a minimum of five years. This required the promoters to hold 49% till at least 2008. The bank has in the past said there was no requirement to dilute promoter holding to below 49%. This is contrary to what is being proposed now for new bank licences. Subsequent to 2003 and the licence, RBI has announced policy changes on this subject from time to time. Promoter Uday Kotak cut the stake to 39.76% from 63% at the time of acquiring the licence, but it is still more than the currently prescribed limit. According to the road map discussed with the regulator, the promoter’s stake will have to be pared to 20% by March 31, 2018. “The long-term objective of the bank is to broad-base the shareholding in a non-disruptive manner, keeping in mind the interests of all stakeholders,” the bank has said in the past. “The bank continues to be in dialogue with RBI for a feasible road map for further dilution. The bank is committed to follow the statutory directions of RBI,” it had said. With a capital adequacy ratio of 19.1%, the bank was in no hurry to raise capital, analysts said. Uday Kotak could look at a combination of tapping the markets or an inorganic growth option, a banking consultant with a domestic audit and consultancy firm said on the condition of anonymity. “Tapping the equity market may not be good for existing shareholders, so it is possible he could look at getting in a strategic investor. However, in the long-term, the bank could look at the inorganic growth option, which would help dilute promoter holding and add scale,” the consultant said,.