MUMBAI: Kotak Mahindra Bank said on Thursday its board has approved the proposal to raise equity capital of 62 million shares, with a face value of Rs 5 each, or Rs 5,363 crore ($819 million) as on Thursday’s closing price of Rs 865.
The country’s fourth-largest private sector lender seems to have dropped the biggest hint about its presence in the shopping market, with Thursday’s move strengthening speculation of an impending takeover. Kotak is not new to acquisitions; it paid $2.4 billion for ING Vysya in 2015 – billed as the Indian banking sector’s largest deal yet.
In a filing to exchanges, the bank said, “The purpose of raising equity capital is also to augment Kotak’s capital base to pursue consolidation opportunities in the Indian banking system and financial services space.”
Or it may use the funds to capitalise on opportunities available in acquisition and resolution of stressed assets in the banking sector, including participation in the ‘bad bank,’ or towards new opportunities in digital or subsidiary expansion, it added.
The funds may be raised through a rights issue, private placement, FPO, QIP, GDRs, American Depository Receipts or through any other permissible mode or a combination thereof, which the board decides is appropriate.
The announcement comes a day after Executive Vice-Chairman and Managing Director Uday Kotak played down the acquisition buzz, though he admitted to be open to all options.
The crowded Indian banking sector is undergoing consolidation with SBI and associate banks merging into a single entity on April 1.
The government also expressed its intent to merge other nationalised banks to shrink the overall number to 4-5.
RBI had issued a directive that the bank’s promoters (Kotak family, led by Uday Kotak) would need to reduce their stake in the bank to 30 per cent by June 2017 and to 20 per cent by December 2018. As of December 2016, the promoter’s stake in the bank was nearly 33.61 per cent.