Singapore’s GIC to pick up 2.6% stake in Kotak Mahindra Bank for $239M

Private sector lender Kotak Mahindra Bank is raising Rs 1,296 crore or $239 million from GIC Singapore, one of the world’s largest sovereign wealth funds. The bank is selling 2.6 per cent stake to Heliconia Pte Ltd, an affiliate of GIC, on a preferential basis.

GIC will buy 20 million shares of Kotak Mahindra Bank at Rs 648 per unit, 3 per cent premium to its closing price of Rs 628.7 on Thursday. Shares of Kotak Mahindra Bank were up 0.94 per cent to Rs 634.6 at 10:25 am on the Bombay Stock Exchange on Friday.

The preferential equity issue is subject to shareholders’ approval, as well as other regulatory approvals.

“This transaction augments the Tier I capital of the bank for pursuit of growth opportunities. It will also be a step towards dilution of promoter stake in the bank,” a statement said.

As of Dec 31, 2012, consolidated net worth of the Kotak Group is Rs 14,568 crore and Capital Adequacy ratio for the bank (standalone) stands at 15.6 per cent with Tier I at 14.2 per cent.

Kotak Investment Banking acted as the exclusive financial advisor to the transaction.

Kotak Mahindra has been an attractive bet for private equity investors in the past. Private equity major Warburg Pincus completed its exit from the Uday Kotak-led bank last year, making around 4x returns in the process.

Another investor in Kotak Mahindra Bank now is Japan’s Sumitomo Mitsui Banking Corporation, which bought 4.5 per cent stake for $294 million (Rs 1,366 crore) in 2010. One of the largest banks in Japan, the firm bought shares at Rs 416 per unit and is sitting on over 50 per cent gains.

For Q3 FY13, Kotak Mahindra Bank reported 25 per cent increase in consolidated profit after tax to Rs 577 crore with total assets up 28 per cent to Rs 113,545 crore, compared to the same period last year.

Banking continues to be an attractive bet for PEs and earlier this week, Kolhapur-based Ratnakar Bank also closed a round of $60 million from a clutch of PE investors.

GIC betting big on public equities

GIC has been a fairly aggressive investor in India, especially in public equities, over the past 3-4 months and it has deployed nearly $600 million. The firm seems to be picking up assets primarily in the beaten-down sectors like infrastructure and real estate.

It recently mopped up the $187 million issue of the state-run power utility NTPC and also invested in building products maker Sintex Industries and real estate firm Prestige Estates. It also made $151 million investment in London-listed Greenko Group plc, which has the largest renewable energy assets.

Some of GIC’s investments in the Indian financial services sector include ICICI Bank and HDFC Bank.


Kotak Mahindra Bank acquires the business loan portfolio of Barclays in India

(Edited by Sanghamitra Mandal)

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