Mumbai: Promoters of Kotak Mahindra Bank, led by MD and CEO Uday Kotak, reduced their stake in the private sector lender to 19.7% after the bank issued preference shares worth Rs 5 billion to investors. Before the issue, promoters held 30.03% in the bank.
The bank issued one billion non-convertible perpetual non-cumulative preference shares (PNCPS) of a face value of Rs 5 each to investors on Thursday. The PNCPS 2018 was issued to diversify funding sources to optimise a mix of liabilities by channelising funds from alternative sources, at different price points and for varying tenures, the bank said.
The issue would also help meet the Reserve Bank of India’s (RBI’s) requirement on shareholding. According to the information memorandum filed with stock exchanges, the RBI expects the private lender to reduce promoter holding to 20% of paid-up capital by December 31, 2018, and 15% by March 31, 2020.
The Wire had first reported in 2017 about how regulatory relaxation was paying off for Kotak Mahindra promoters, and how the constant extension of a deadline to reduce promoter shareholding could net Uday Kotak and his family members a hefty sum.
The promoters’ shareholding prior to the PNCPS 2018 issue stood at 30.03%, which stands reduced to 19.7% after the issue, which is well within the 20% mark the bank requires to achieve by the end of this calendar year.
The PNCPS investors will own 34.41% stake in the post-issue paid-up capital. The public shareholding after the issue will reduce from 69.97% to 45.89%.
The proceeds from the issue will augment additional tier 1 capital and overall capital for further strengthening its capital adequacy and for enhancing its long term resources. Kotak Mahindra Bank will utilise the proceeds of the issue for regular business activities.
The PNCPS 2018 issue opened on August 1 and was closed on August 2. After the issue, the bank’s paid-up capital increased from Rs 9.53 billion to Rs 14.53 billion.
The annual dividend payable on the PNCPS is 8.10%. In the first quarter of FY19, Kotak Mahindra Bank reported a 17% rise in consolidated net profit to Rs 15.74 billion on account of higher interest income and fee income.
Consolidated advances were at Rs 2.13 trillion as on June 30, 2018, with consolidated net worth of Rs 521.24 billion. Its capital adequacy ratio stood at 18.5% with Tier I of 18% at the end of June 2018. The bank’s stock closed 2.5% lower at Rs 1,281 per share on the BSE on Thursday.
By arrangement with Business Standard.