Kotak Bank gets nod for ₹5,000-cr stake-sale

Kotak Mahindra Bank is seeking to kill two birds with one stone — bringing down promoter shareholding according to RBI requirement and building a war chest for possible acquisition of either a bank or an NBFC — through the proposed issuance of up to 6.20 crore equity shares aggregating to over ₹5,000 crore.

The private sector bank’s board on Thursday accorded its approval for raising capital through issue of equity shares, Global Depository Receipts, American Depository Receipts and/ or other permissible securities up to an aggregate issuance of 6.20 crore equity shares of ₹5 each.

This is subject to shareholder and other regulatory/ statutory approvals.

At Thursday’s closing price of ₹865 a share, the issuance of 6.20 crore shares could fetch the bank ₹5,363 crore.

Kotak Mahindra Bank (KMB), India’s fourth-largest private sector lender by assets, said the purpose of raising equity capital, among others, is to pursue consolidation opportunities in the banking and financial services space and capitalise on unprecedented opportunities in acquisition and resolution of stressed assets in the banking sector, including participation in a “Bad Bank”.

There has been a buzz in the market that KMB and Axis Bank may be working on an amalgamation exercise. While KMB said it does not comment on speculation, Axis Bank termed reports of a merger as baseless and unsubstantiated.

On February 1, KMB said it has received a communication from the RBI to bring down its promoter shareholding to 30 per cent by June 30, 2017, 20 per cent by December 31, 2018, and 15 per cent by March 31, 2020.

Dipak Gupta, JMD, KMB, said post the equity issuance, promoter shareholding will come come down by about 1 per cent. Further, the capital adequacy ratio will increase to over 19 per cent from the current 16 per cent.

He said, “If you look at pure lending itself, I don’t think we are short of capital. We have sufficient capital to meet the requirement for growing assets. I don’t think there is any problem on that front.”

Gupta’s statement probably gives an indication that a chunk of the proposed equity issuance may be for making an acquisition or investing in a “bad bank”.

When asked whether the bank is ready for another acquisition just two years after it acquired ING Vysya Bank, he said, “…We have been through an experience (of acquiring ING Vysya Bank). So, if and when something else should arise, then we would be better prepared. Evaluation of such (acquisition) opportunities is an ongoing process.”