India’s Kotak Mahindra Bank Ltd is selling new shares worth as much as Rs 5,800 crore ($900 million) to boost its capital strength and raise funds for potential acquisitions.
The fund-raising comes amid speculation Kotak Mahindra is looking to buy a bigger rival and the issue of new shares will also dilute the almost 32% stake held by the bank’s founder Uday Kotak.
The billionaire has been ordered by the central bank to cut his stake in the lender, which has a market value of nearly $27 billion, to 30% by the end of June and to 20% by December 2018.
Kotak Mahindra, the fourth-biggest Indian bank by market capitalisation, is selling up to 62 million new shares with a price range of Rs 930 to 936 apiece, according to a deal term sheet.
The price range offers just a 0.1% to 0.7% discount to the stock’s closing price of Rs 936.80 on the National Stock Exchange on Thursday.
In a regulatory filing, the bank said it intended to use the net proceeds to boost its Tier 1 capital ratio, which stood at 15.9% at the end of March, and for possible acquisitions.
“The funds raised would enable the bank to capitalise on inorganic opportunities, including acquisition and resolution of stressed assets through, amongst others, potentially participating in a ‘Bad Bank’,” Kotak Mahindra said in the filing.
Morgan Stanley, Bank of America Merrill Lynch and Kotak Mahindra’s investment banking division are the bankers for the placement of shares with qualified institutions. The sale will close early on Friday.
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