CPP Investment Board, formerly known as Canada Pension Plan Investment Board, has bought just under 1 per cent additional stake in India's fourth-largest private lender Kotak Mahindra Bank from Japan's Sumitomo Mitsui Banking Corporation for Rs 1,151 crore ($170 million).
This marks the second such follow-on investment in an Indian portfolio firm by CPPIB, which had assets worth C$282.6 billion as of December 31, 2015.
Last month, it teamed up with other co-investors—PE firm Multiples Alternate Asset Management, Dutch pension fund PGGM and the UK's CDC--to pick up an additional 2.6 per cent stake in PVR Ltd. In June last year, these investors had agreed to invest Rs 350 crore ($54.8 million) in India's largest multiplex chain operator.
In the latest transaction, CPPIB acquired 18.1 million shares of Kotak Mahindra Bank from the Japanese financial services firm for Rs 636.25 a share. This takes its total holding to 4.9 per cent.
A foreign financial investor can own no more than 5 per cent of an Indian bank, although the overall foreign investment limit is higher.
CPPIB had originally bought a 1.41 per cent stake in Kotak Mahindra Bank in mid-2013. A year later, the Uday Kotak-led promoter group sold a 3.24 per cent stake in the lender for Rs 2,200 crore ($372 million then) to CPPIB. This deal was to reduce promoter holding in the firm as per a diktat from the Reserve Bank of India.
The RBI had asked the private-sector bank to cut promoter holding to 40 per cent by September 2014 from 43.58 per cent then and thereafter to 30 per cent by December 31, 2016. Promoter holding in the bank is now 33.7 per cent.
CPPIB's holding had earlier shrunk from 4.65 per cent to 3.91 per cent after Kotak Mahindra acquired ING Vysya Bank through an all-stock merger. The latest deal increases the stake again.
CPPIB, which opened its first India office in Mumbai last October, has been looking to grow its team to increase its exposure to the country. “We will be in a country where we get the best risk-adjusted returns and right now India is one of them,” Mark Wiseman, president and CEO at CPPIB, had said at the time.
The pension fund, which has 1,250 employees globally, has not formally named an India head. It has invested around $2 billion in India over the past five years and is open to investing in large companies along with PE firms.
Vikram Gandhi, founder and CEO at VSG Capital Advisors Pvt Ltd, helped set up the Mumbai office for CPPIB. He is a leading consultant for the pension board on all the major investments in India.
The pension fund has also backed firms like L&T Infrastructure Development Projects and has formed joint investment platforms with Piramal Enterprises and Shapoorji Pallonji Group, besides investing in third-party PE funds as a Limited Partner (LP). Its Indian LP portfolio includes investments in Multiples Alternate Asset Management and India Value Fund Advisors.
Meanwhile, Sumitomo Mitsui Banking Corporation, which held a 3.58 per cent stake in Kotak Mahindra Bank as of December 31, 2015, separately sold another 0.8 per cent stake in the bank for Rs 917 crore ($135 million) through a bulk deal on Tuesday. The buyer’s name was not disclosed.
The Japanese investor has encashed around $305 million in the process. Its remaining stake in the Indian lender is pegged at Rs 2,092 crore.
Singapore's sovereign fund GIC is also an institutional investor in Kotak Mahindra Bank.