As deadline looms, Kotak Mahindra Bank weighs options to pare promoter stake
Lender will benefit from stake sale to private equity players: experts
With just over 20 days left for the promoter group of Kotak Mahindra Bank to bring its holding below 20 per cent, the Uday Kotak-led bank is looking at multiple options, including selling stake to private equity players.
According to sources tracking the bank, the promoter group may look at selling Uday Kotak’s stake partially and issuing preferential share to bring down holdings by 10 per cent.
As on September 30, the promoter group held a 30.02 per cent stake in Kotak Mahindra Bank, including the 29.73 per cent held by Uday Kotak, Managing Director and CEO.The Reserve Bank of India wants the lender to lower the promoter holding to less than 20 per cent by this monthend. It has to be further reduced to 15 per cent by March 2020.
Talks with Berkshire?
Market sources indicated that the bank may have already initiated talks with Berkshire Hathway although Kotak Mahindra Bank, in a statement to the stock exchange on Friday, said it is unaware of any such move. But banking industry sources said that the possibility of Berkshire Hathway picking up stake in the bank is high.
The other option could be seeking an extension from the RBI. But the central bank is Uday Kotak, Managing Director and CEO, has 29.73 per cent stake
unlikely to oblige as it had taken to task other private lenders like Bandhan Bank on the same issue earlier.
Kotak Mahindra Bank believes it has met the norms on the issuance of the non-convertible perpetual non-cumulative preference shares on a private placement basis in August. But the RBI had said the bank did not meet the requirements
for dilution promoter holding.
The RBI, in its revised guidelines on ownership and shareholding in private sector banks, in May 2016 had permitted “regulated, well diversified and listed and supranational institution or public sector undertaking or government” to hold up to 40 per cent stake in such lenders. Significantly, of the Prem Watsaowned Fairfax India Holdings picked up 51 per cent stake in Catholic Syrian Bank earlier this year.
Ashutosh Mishra, Head of Research at Ashika Stock Broking, said, “The best option for Kotak Bank is to sell stake to some marquee investor like Berkshire Hathway. But it is again to be seen whether Uday Kotak will sell his stake or will issue some preferential shares. Either way, he will face some disadvantages, but the advantages are more. The probability of Hathway picking up stake is high.”
Stocks of the bank jumped 14 per cent in intra-day trade on Friday and closed 8.53 per cent higher at ₹1,282.25 apiece on the BSE, primarily driven by news of a possible deal with Berkshire Hathway.