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Kotak Mahindra Bank to raise Rs5,370 crore by diluting 3.37% equity base

LiveMint logoLiveMint 30-03-2017 Ravindra N. Sonavane

Mumbai: Private sector lender, Kotak Mahindra Bank Ltd, on Thursday said its board has approved issue of 6.20 crore shares to raise approximately Rs5,370 crore. The fund raising will see the bank’s equity base diluted by 3.37%.

In a notice to BSE, Kotak Mahindra Bank said that it will raise funds through various options including rights issue, private placement, follow-on public offering, institutions placement and depository receipts.

“The board has arrived at the above decision based on its review of the Reserve Bank of India’s communication to the company regarding shareholding limits and having taken note of the sale of shares undertaken by the promoter,” the bank added.

The funds will also help the promoters pare their stake.

At the end of December, Uday Kotak along with his family owned 33.61% stake in the bank out of which 33.3% is held by Kotak in his personal capacity, according to BSE shareholding data.

On 1 February, RBI extended the deadline for the Kotak family to reduce its promoter stake by another six months.

Also Read| Canadian pension fund CPDQ looks to buy stake in Kotak Mahindra Bank

According to the RBI order, Uday Kotak has to cut its stake to 30% by June 2017 and 20% by December 2018. The bank also has to bring down promoter holdings to 15% by March 2020, according to the guidelines for new bank licences released in 2014.

After the current round of dilution, the promoter stake would come down to 31%. On 8 March, the promoter sold 1.5% stake to two Canadian pension funds --Canada Pension Plan Investment Board and Casse de Depot et Placement du Quebec—for Rs2,255 crore via open market transactions.

The purpose of raising funds to purse consolidation opportunities in the Indian banking and financial services space and acquisition of banks stressed assets through participating in ‘bad bank’, said a statement from Kotak Mahindra Bank.

On Thursday, Mint reported quoting Uday Kotak that the bank will focus on building its stressed asset resolution and turnaround business in the coming years. Kotak said that the large opportunity in the stressed asset space in Indian banking would prove to be a good business opportunity for his group, but he did not divulge any details about a structure that the group may choose.

Kotak Mahindra Bank presently promotes Phoenix Asset Reconstruction Co. Ltd, which is one of the largest asset reconstruction firms in India.

At 1.50pm, shares of Kotak Mahindra Bank Ltd was trading at Rs 865.85 on BSE, up 0.8% from previous close while India’s benchmark Sensex Index rose 0.07% to 29,553.30 points.

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