According to regulatory filings, buyers of the shares included The Regents of the University of California (Rs. 680.75 crore), Oppenheimer Developing Market Fund (Rs. 662.92 crore), SBI Mutual Fund (Rs. 408.46 crore), JP Morgan Securities Ltd. (Rs. 506.91 crore), Aditya Birla SUN Life Mutual Fund (Rs.385.77 crore), Canada Pension Plan Investment Board (Rs.378.33 crore), Fidelity-owned funds (Rs. 350.21 crore), Stitching Depository APG Emerging Markets Equity Pool (Rs. 297.95 crore), Aberdeen Asset Management Asia Ltd. (Rs.287.43 crore), T. Rowe Price International Inc. (Rs. 204.36 crore), Government of Singapore Investment Corp. Pte Ltd. (Rs.204.36 crore), Axis Mutual Fund (Rs. 204.23 crore), Europacific Growth Fund (Rs. 174.20 crore), ICICI Prudential Life Insurance Co. Ltd. (Rs. 151.28 crore) and so on.
Kotak, who had a prolonged disagreement with the central bank over his personal holding in the private lender, had moved the Bombay High Court in December 2018 against an RBI’s diktat on promoter holding in banks.
Tuesday’s block deal will help Kotak sell 2.83% stake in the bank in the secondary market, ending the stalemate between the central bank and the private bank’s promoter.
Even though the stake sale was supposed to happen at a price band of ₹1,215-1,240 per share, on Tuesday, the exchange data showed that all the shares of Kotak were sold at the upper end of the price band at Rs. 1240 each.
The placement agents for this deal are Kotak Securities Ltd, Morgan Stanley India Company Pvt Ltd and Goldman Sachs (India) Securities Pvt Ltd.
Kotak, the richest banker in Asia, is the managing director of Kotak Mahindra Bank, the fourth largest private sector lender in the country.
In February, the bank and RBI had reached an agreement under which Kotak had agreed to reduce his stake over a period of time. Under the agreement, the promoter stake was to be reduced to 26% by August end. The promoter stake in the bank stood at 28.93% before Tuesday’s block deal.
In February, the bank and RBI had reached an agreement under which Kotak had agreed to reduce his stake over a period of time. Under the agreement, the promoter stake was to be brought down to 26% by August end. The promoter stake in the bank stood at 28.93% before Tuesday’s block deal.
Uday Kotak will still have to trim another 0.1% in the bank to comply with RBI guidelines.
Earlier, RBI had asked the bank to cut its promoters’ shareholding to 20% by 31 December, 2018, and to 15% percent by 31 March, 2020. But, fresh negotiations with RBI in January made things easier for Uday Kotak.
“Further to our intimation dated 30 January 2020,…the Reserve Bank of India has granted its final approval vide its letter dated 18 February 2020 in the matter relating to dilution of promoters” shareholding in the bank,” said the bank in a regulatory filing.
Earlier, in August 2018, in order to dilute his promoter holding in the bank Kotak had proposed an issuance of perpetual non-cumulative preference shares (PNCPS) to cut promoter stake to 19.7%, which was disapproved by RBI.
The bank had then challenged the RBI’s contention in the Bombay High Court.
The RBI’s bank licensing rules mandate that a private bank’s promoter will need to pare holding to 40% within three years, 20% within 10 years and to 15% within 15 years.
On Tuesday, the bank’s stock closed up 7.52%, cheering the block deal carried out by the promoter. Shares of Kotak Mahindra Bank has been on a steady uptrend over the past fortnight. Since 18 May, the bank’s stock has been risen from Rs. 1,113.45 to Rs. 1343.20 per share on BSE.
Market resilience for the stock is evident from the past two deals involving the sale of Kotak Mahindra Bank’s shares. On Saturday, Kotak Mahindra raised at least Rs. 7,442.5 crore via issuance of 65 million shares in a qualified institutional placement (QIP).
Following a board meeting, the bank had said that shares have been offered to investors at Rs. 1145 apiece, which was at a discount of 6.43% to the market price of Rs. 1,223.70 then. Kotak Mahindra bank had said on 26 May that it had set a floor price of Rs1,147.75 per share for the offering. As per Sebi norms, the bank was allowed to offer a maximum discount of up to 5% on the floor price to investors.
Institutional investors including Invesco Oppenheimer Developing markets Fund, Canada Pension Plan Investment Board (CPPIB) and ICICI Prudential Asset Management Co. Ltd. have been allotted 8.02%, 7.12% and 6.30% of the total offer size respectively.
ICICI Mutual fund bought shares through 18 of its MF schemes in the QIP, which was opened on 26 May and closed on 29 May.
On 22 April, the bank had announced its plan raise capital by selling fresh equity shares through a QIP.
Like many other Indian banks, Kotak Mahindra Bank will use the proceeds of the QIP primarily to bolster its balance sheet and strengthen its capital buffers as the lockdown caused by covid-19 pandemic is expected to lead to potentially higher slippages in the coming quarters. The bank may also use the capital to tap opportunities arising out of the crisis.
The bank’s capital adequacy ratio is around 18% at present. Banks are currently required to maintain a capital adequacy ratio (CAR) of 9%. CAR is the ratio of a lender’s capital as compared to its risk weighted assets (cash, loans, investments etc.) and current liabilities (taxes, interests, expenses, deposits etc.)