Analysts and investors have given a thumbs up to the agreement reached between Kotak Mahindra Bank and the Reserve Bank of India on dilution in promoter shareholding, as it removes concerns on the private sector lender.
“RBI has achieved its way of getting the bank to adhere to its norms albeit in a delayed manner,” noted Shriram Subramanian, Founder and MD, InGovern, a proxy advisory services firm, while calling it a positive development.
“An agreement between the regulator and the promoter of the bank will put an end to the overhang on the stock. This brings big relief from the bank’s perspective, as a reduction in stake from 29.96 per cent is moderated to 26 per cent with a new time frame of six months after approval of the regulator. Further, time-bound overhang on reduction of stake to 15 per cent has been done away with. In our view, this is a key positive for the bank,” said ICICI Securities in a note on Friday.
As capital adequacy stays healthy with Tier I capital at 17.7 per cent, we rule out additional capital raising, it said, adding that further reduction in promoter holding will be gradual and linked to balance sheet growth.
On Friday, the shares of Kotak Mahindra Bank closed 3.87 per cent higher at ₹1,691.05 on the BSE.
The private sector bank, on Thursday, had informed the exchanges that the RBI had in-principle approved its proposal for reduction in promoter holding, and it is withdrawing the writ petition filed in the Bombay High Court. According to the agreement, the promoter stake in the bank will be diluted to 26 per cent in six months after final approval from the regulator.
The RBI has also accepted the proposal for capping the promoters’ voting rights in the bank at 20 per cent of the paid-up voting equity share capital (PUVESC) until March 31, 2020. From April 1, 2020, the promoters’ voting rights in the bank will be further lowered and capped at 15 per cent of PUVESC.
Bank ownership norms
Experts also said that it may be time to review the RBI’s holding norms for banks to ensure that other lenders do not get into such a tiff with the regulator.
“Ideally, there shouldn’t be a need to take the regulator to court for such issues. There are views that ownership of banks should be widely held versus concentration of promoter stake,” noted an expert who did not wish to be named, adding that the RBI has till now held firm on wider ownership in banks.