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Kotak Bank: Analysts await promoter’s next move

Our Bureau Mumbai | Updated on August 17, 2018 Published on August 16, 2018

Uday Kotak

Analysts and investors are awaiting the next step by private sector lender Kotak Mahindra Bank after the RBI said its preference share allotment does not meet promoter dilution norms.

The private sector lender could possibly have to seek an extension from the RBI to dilute its promoter equity from the December deadline even though the lender has said it will “engage” with the central bank on the issue.

The bank’s scrip fell 3.62 per cent to end at ₹1,244.90 apiece on Thursday on the BSE.

Under RBI norms, the bank is mandated to cut down the holding of its founder and promoter Uday Kotak to less than 20 per cent by December this year and to 15 per cent by March 2020.

Accordingly, the lender had on August 2 issued non-convertible PNCPS on private placement basis to raise ₹500 crore, following which its paid-up capital had increased to ₹1,453.15 from ₹953.16 crore. With this, Uday Kotak’s stake in the lender also came down to 19.7 per cent from about 29.74 per cent.

“While there was legally nothing wrong with the transaction but as the regulator, whether the RBI could have allowed such a way to dilute promoter holding was the main issue. It seems clear now that the RBI’s regulations must be followed in letter as well as spirit,” noted a former public sector bank chief, who did not wish to be named.

Analysts are also waiting to see how the issue is resolved. In a report, Citi said it expects Kotak to raise primary capital or Uday Kotak could look to sell a part of his holding in the secondary market.

Published on August 16, 2018

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