Stake Cut: Kotak Mahindra Bank promoters get RBI breather

Kotak Mahindra Bank (KMB) on Thursday said the Reserve Bank of India (RBI) had granted the bank’s promoters an in-principle approval to cap their voting rights at 20% of paid-up voting equity share capital (PUVESC) until March 31, 2020. The private sector bank said the RBI has also approved the reduction in the promoters’ shareholding to 26% of the PUVESC within six months from the date of final approval.

KMB will cap promoters’ voting rights at 15% of the PUVESC from April 1, 2020 onwards. The regulator has also said the promoters would not be able to buy any further ‘paid up voting equity shares’ till their shareholding fell to 15% of PUVESC market. Earlier,the RBI had asked the lender to trim the promoter shareholding to 20% of paid-up capital by December 31, 2018, and 15% by March 31, 2020.
The promoters of KMB need to sell a stake of around 3.67% to bring down their stake to 26%.

As of December 2019, Uday Kotak held 29.67% stake in KMB. The stake sale can take place, analysts noted, via an offer for sale in the secondary market and, at the current market price, would fetch Rs 11,419 crore.

“With respect to our proposal… RBI vide its letter dated January 29, 2020 has conveyed its in-principle acceptance for promoters’ voting rights in the bank to be capped to 20% of PUVESC until March 31, 2020; and promoters’ shareholding in the bank to be reduced to 26% of PUVESC of the bank within six months from the date of final approval of the RBI,” Kotak Mahindra Bank said in a regulatory filing.

The lender said, in a filing, it will withdraw a writ petition relating to the dilution of promoters’ shareholding in the bank which it had filed against the RBI in the Bombay High Court.

In January 2017, the RBI asked bank to cut promoter shareholding to 20% by December 31, 2018, and 15% by March 31, 2020. In August 2018, KMB had proposed the issuance of perpetual non-cumulative preference shares (PNCPS) to cut promoter holding to 19.70%, which the RBI rejected.The bank then challenged the RBI’s contention in the Bombay High Court in December 2018.

Source: Financial Express