Private equity major Warburg Pincus has started exiting private sector lender Kotak Mahindra Bank Ltd by selling 2.28 per cent stake over the last two months. The share sale has fetched Warburg Pincus Rs 768 crore.

The shares were sold by two Warburg Pincus entities – Madison and Melany Holdings – in block deals on the NSE and the BSE, with the share prices ranging between Rs 445 and Rs 490 per scrip. The share price of Kotak Mahindra had peaked last year, reaching Rs 520-Rs 530 range (after the stock split).

The PE firm had first invested in the bank way back in 2004.

Warburg Pincus held 9.28 per cent stake in Kotak Mahindra as of March, 2011, and has now reduced its stake to 6.98 per cent. On the other hand, Capital Group’s Europacific Growth Fund (whose largest investments include Latin America’s largest cell firm America Movil and Korean electronics major Samsung) has increased its stake from 1.55 per cent to 3.58 per cent during the same period.

The share price of Kotak Mahindra Bank was down 2.15 per cent on Thursday (July 21), trading at Rs 479.95 per scrip at 2 pm. Incidentally, the bank has posted its Q1FY12 results where it has reported 27 per cent growth in consolidated net profit to Rs 416 crore, with its net interest income (NII) growing at the same rate to Rs 920 crore.

Kotak Mahindra Bank is a new-generation entity which got the licence for banking business from the Reserve Bank of India in February, 2003. In fact, Kotak Mahindra Finance Ltd became the first NBFC to be converted into a bank. Another player which got banking approval at the same time was Yes Bank, which also gave multi-bagger returns to its early PE investors like ChrysCapital, Citi Venture Capital and AIF Capital.

Warburg Pincus, which has more than $30 billion in assets under management, had initially picked up 2.75 per cent stake in Kotak Mahindra Bank in late 2004 for Rs 75.9 crore, through a fresh issue of share. And it continued to acquire shares in the bank through market transactions as the Uday Kotak-led promoter group was shedding its stake to meet RBI norms. Warburg Pincus also got RBI permission in 2005 to increase its stake in the bank up to 10 per cent.

Although the exact investment by Warburg in Kotak Mahindra Bank could not be ascertained, Warburg could have reportedly made anywhere between 4x-5x on its investment. According to the closing price of Rs 490.5 per scrip on July 20, the remaining stake held by Warburg Pincus is worth Rs 2,528 crore.

Warburg Pincus has also exited some other investments like Vaibhav Gems and Amtek Auto since last year. One of the oldest international PE firms operating in India, it has also started exiting its holdings in Analjit Singh-promoted Max India.

Warburg, which is reportedly targeting $12 billion for a new fund, has been a fairly prolific deal-maker since June, 2010, committing over $500 million across half-a-dozen companies.

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