Uday Kotak sells 5.6 cr shares in Kotak Mahindra Bank, ends standoff with RBI; shares surge over 7% in early trade

Billionaire banker Uday Kotak, who had a long run-in with the Reserve Bank over his excess personal holding in Kotak Mahindra Bank, will sell 2.8 percent stake in the lender for at least Rs 6,800 crore. The move would bring the curtains down on a long standoff between the regulator and the bank over the issue, which saw Kotak dragging the RBI to the Bombay High Court in December 2018, and the case is still pending.

Uday Kotak sells 5.6 cr shares in Kotak Mahindra Bank to comply with RBI normshttps://t.co/PGOD5i1QDQ

— CNBC-TV18 (@CNBCTV18Live) June 2, 2020

“The stake dilution will be done through a block deal and will be completed shortly at a price band of Rs 1,215 to Rs 1,240 a share,” a person familiar with the development told PTI. As per the term sheet, the deal would be worth Rs 6,800 crore at the lower end of the price band. Currently, Kotak and his family holds 28.8 percent stake in the bank as against the RBI mandate of 26 percent. Kotak, the richest banker in Asia, is the Managing Director of Kotak Mahindra Bank, which is the fourth largest private sector lender in the country. RBI nod for trimming promoters’ stake In February, Kotak Mahindra Bank had said the RBI had granted its final approval for reducing promoters’ stake in the bank to 26 percent. On 30 January, the bank had informed about RBI’s in-principle acceptance for reducing promoters’ shareholding to 26 percent of the paid-up voting equity share capital (PUVESC) of the bank within six months from the date of final approval of the regulator, PTI had reported. The RBI had asked the bank to cut promoters’ shareholding to 20 percent of paid-up capital by 31 December, 2018, and 15 percent by 31 March, 2020. “Further to our intimation dated 30th January 2020,…the Reserve Bank of India has granted its final approval vide its letter dated 18th February 2020 in the matter relating to dilution of promoters’’ shareholding in the bank,” Kotak Mahindra Bank said in a regulatory filing. With this, the bank is also moving towards withdrawing a case concerning dilution of promoters’ shareholding in the bank which it had filed against the RBI in the Bombay High Court. “Our board of directors has resolved to abide by the above. The bank is withdrawing writ petition No. 3542 of 2018 filed by it in the High Court of Bombay,” Kotak Mahindra Bank had said in late January filing. In August 2018, Kotak had proposed the issuance of perpetual non-cumulative preference shares (PNCPS) to cut promoter holding to 19.70 percent, which the RBI rejected. The bank then challenged the RBI’s contention in the Bombay High Court. The RBI’s bank licensing rules mandate that a private bank’s promoter will need to pare holding to 40 percent within three years, 20 percent within 10 years and to 15 percent within 15 years. In 2003, Kotak Mahindra Group’s financial arm Kotak Mahindra Finance had received banking licence from the RBI, becoming the first NBFC in India to convert into a bank. Effective April 2015, another private sector lender ING Vysya Bank was merged into Kotak Mahindra Bank.