Uday Kotak to sell up to 56 million Kotak Mahindra Bank shares

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June 02, 2020 4:00 AM

The size of the deal is expected to range between Rs 6,804 crore and Rs 6,944 crore, and it will help comply with regulatory norms by bringing down the promoter stake in the bank to 26.1%.

Kotak Mahindra Bank (KMB) promoter Uday Kotak is set to sell up to 56 million shares of the bank, equivalent to a 2.83% stake, in the secondary market on Tuesday, sources aware of the development said. On Monday, shares of KMB ended at Rs 1,249.25, up 2.09% than their previous close on the BSE.

Kotak Mahindra Bank (KMB) promoter Uday Kotak is set to sell up to 56 million shares of the bank, equivalent to a 2.83% stake, in the secondary market on Tuesday, sources aware of the development said. The size of the deal is expected to range between Rs 6,804 crore and Rs 6,944 crore, and it will help comply with regulatory norms by bringing down the promoter stake in the bank to 26.1%.

On Monday, shares of KMB ended at Rs 1,249.25, up 2.09% than their previous close on the BSE. An email sent to KMB seeking their comment for this story remained unanswered.

“With this block deal, Kotak’s stake will come down to around 26.1% and whatever minuscule shareholding remains is likely to be offloaded in the next couple of months,” a source told FE. Kotak Securities, Morgan Stanley India and Goldman Sachs (India) Securities are understood to be the placement agents for the block deal.

The move to sell shares in the secondary market is in line with the promoter’s bid to reduce his stake in line with regulatory guidelines. Last week, KMB raised at least Rs 7,442.5 crore by issuing 65 million shares in a qualified institutional placement (QIP), which brought down Kotak’s stake in the bank to 28.93%. Among the largest subscribers to the QIP were Invesco Oppenheimer Developing Markets Fund, which was allotted 8.02% of the total issue size, Canada Pension Plan Development Board (7.12%) and ICICI Prudential Mutual Fund (6.3%).

On February 18, the Reserve Bank of India (RBI) had allowed KMB a six-month timeline to reduce promoter shareholding to 26%. At the end of March, the promoter stake in the bank stood at 29.92%.

Of late, KMB has turned into a top pick for investors in the Indian banking space. Christopher Wood, global head of equity strategy at investment bank Jefferies said in a recent note that it was removing HDFC Bank and ICICI Bank from its portfolio while increasing KMB’s weightage.

“For reasons of sentiment more than logic, Greed and Fear will maintain one bank. But this will be the bank which has the best history of growing through past negative credit cycles and, in an interesting move, raised equity capital … presumably to prepare for troubled times ahead,” Wood wrote in a reference to KMB.

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