Kotak Mahindra Bank Ltd and the Reserve Bank of India have reached an agreement on reducing billionaire Uday Kotak’s stake in the private-sector lender, ending a year-long legal battle.
The lender has also withdrawn a court case against the central bank, it said in a stock-exchange filing on Thursday.
The bank had filed the case in the Bombay High Court in December 2018 after the RBI disallowed it from issuing preference shares to reduce the promoters’ stake.
The private-sector lender had issued perpetual non-convertible preference shares in August 2018 to comply with the RBI’s promoter stake rules. However, the central bank said that the issue did not meet official requirements.
On Thursday, Kotak also said that promoter shareholding will be reduced to 26% within six months of the RBI giving its final approval to the agreement.
Previously, the promoters were required to cut their stake in the bank to 20% by December 2018 and 15% by March 31, 2020. The promoters currently own almost 30% of the bank.
After reducing their stake, the bank’s promoters will not purchase any more paid-up voting equity shares till their holding reaches 15% of the total capital.
While the stake sale will take longer than initially required, the promoters have meanwhile agreed to cap their voting rights in the bank at 20% until the end of March. The voting rights will be reduced to 15% from April.