As dead­line looms, Ko­tak Mahin­dra Bank weighs op­tions to pare pro­moter stake

Lender will ben­e­fit from stake sale to pri­vate eq­uity play­ers: ex­perts

The Hindu Business Line - - FRONT PAGE -

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.

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