ING trims holding in Kotak Mahindra Bank; CPPIB invests $189 mn more

Dutch financial services firm ING Group sold more than a third of its holding in Kotak Mahindra Bank on Thursday, nearly two years after acquiring the stake as part of an all-stock merger between its local banking venture and the Indian lender.

ING sold 2.5% of Kotak Mahindra Bank for Rs 3,653 crore ($543 million) in an open-market transaction. The sale reduces ING’s stake in India's fourth-largest private-sector lender to 3.9% from 6.4%, it said in a statement.

The Dutch firm sold the shares at Rs 782.32 each. Shares of Kotak Mahindra Bank closed at Rs 772.45 apiece on the BSE on Thursday.

Buyers included Canada’s CPPIB, an existing investor in Kotak Mahindra Bank; it increased its holding in the Indian lender by purchasing a 0.6% stake.

This is the first stake sale by ING after its local unit merged with Kotak Mahindra Bank in November 2014 in an all-stock transaction worth $2.4 billion.

The merger gave ING a 6.4% stake in the combined entity, making it the largest non-promoter shareholder, which was effective from 1 April 2015. The lock-in period for its shares ended on 1 April 2016, according to a report by The Economic Times earlier today.

According to ING’s statement, the partial stake sale transaction is likely to be settled on 4 October. Its remaining stake in Kotak will be subject to a 90-day lock-up thereafter, the statement said. It added that gross proceeds to ING from the offering amount to about 490 million euros.

For CPPIB, the stake sale by ING comes as an opportunity to increase its holding in the bank.

Previously known as the Canadian Pension Plan Investment Board, CPPIB initially picked up a 1.41% stake in Kotak Mahindra Bank in mid-2013. A year later, the Uday Kotak-led promoter group sold a 3.24% stake in Kotak Mahindra for Rs 2,200 crore to CPPIB after a directive from the Reserve Bank of India to reduce promoter holding.

The Canadian firm’s stake dropped to 3.91% stake after Kotak Mahindra merged with ING Vysya Bank in November 2014.

It increased its stake in Kotak Mahindra Bank in March this year when it acquired a little less than 1% from Japan's Sumitomo Mitsui Banking Corporation for Rs 1,151 crore. At the end of June, CPPIPB had a 4.89% stake in Kotak Mahindra.

The latest purchase takes CPPIB’s stake in Kotak Mahindra above the 5% cap that the Reserve Bank of India has set for foreign investors’ holding in Indian banks. However, the RBI last month allowed CPPIB to own more than 5% but less than 10% of Kotak Mahindra, according to a stock-exchange filing by the bank on 30 August. CPPIB declined to comment.

Toronto-headquartered CPPIB, which opened its seventh global office and only the second in Asia in Mumbai last October, has also invested in L&T Infrastructure Development Projects and multiplex operator PVR Ltd. It has also formed joint investment platforms with Piramal Enterprises and Shapoorji Pallonji Group.

Besides its direct investments in India, it also invests 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.

Globally, CPPIB’s assets under management stood at $278.9 billion with investments across asset classes such as public equities, private equities, bonds, private debt, real estate, infrastructure, agriculture, resources and other areas.

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