SWFs, pension funds line up for a stake in Kotak Mahindra Bank
Udak Kotak | Photo Credit: Reuters

Uday Kotak, the promoter and single-largest shareholder of Kotak Mahindra Bank Ltd, sold a 2.8% stake in the private-sector lender on Tuesday to comply with regulatory guidelines.

The billionaire sold nearly 55.21 million shares of the bank at Rs 1,240 apiece to fetch a total of Rs 6,845 crore ($911.45 million). The block deal saw a huge demand from a set of existing and new institutional investors.

The stake sale comes after the bank raised Rs 7,442.5 crore via a qualified institutional placement (QIP) last week. India’s fourth-largest private-sector bank issued 6.5 crore shares to some existing shareholders such as Canada Pension Plan Investment Board (CPPIB) and Invesco Oppenheimer Developing Markets Fund.

On Tuesday, the University of California’s endowment fund acquired the most number of shares; it purchased 5.48 million shares for roughly Rs 681 crore.

Others buyers include Oppenheimer Developing Market Fund (Rs 663 crore) and Scottish asset manager Aberdeen Asset Management (Rs 231.8 crore),

Canada Pension Plan Investment Board bought shares worth Rs 305 crore while its compatriot CDPQ purchased stock worth Rs 8.56 crore. CPPIB had also bought shares worth almost Rs 530 crore as part of the bank's QIP.

The sovereign wealth funds of Singapore, Kuwait and Abu Dhabi also invested. Singapore’s GIC Pte Ltd put in Rs 165 crore, Kuwait Investment Authority Rs 101 crore and the Abu Dhabi Investment Authority Rs 47.4 crore.

Goldman Sachs, Fidelity, Societe Generale, Morgan Stanley and Citigroup were among the other foreign institutional investors that bought the bank’s shares.

Kotak has to bring his stake down to 26% or below as per Reserve Bank of India (RBI) regulations to strengthen corporate governance across Indian public and private banks. He owned a 29.63% stake at the end of March 2020. This will now come down to roughly 26.1% after Tuesday’s block deal and last week’s QIP.

The Banking Regulation Act restricts voting rights in a bank up to a maximum limit of 26%. But according to the RBI’s bank licence norms, a private-sector bank’s promoters must cut their holding to 40% within three years, 20% within 10 years and to 15% within 15 years. Kotak Mahindra Group had received a banking licence in 2003.

Shares of Kotak Mahindra Bank surged 7.52% on the BSE on Tuesday to close at Rs 1,343.20 apiece. The stock has touched a high of Rs 1,739.95 and low of Rs 1,000.35 in the last 52 weeks.

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