Kotak Mahindra Bank's board approves fundraising proposal; to raise about Rs 7,500 crore

Private sector lender Kotak Mahindra Bank's board on Wednesday approved a capital raising plan which may see it raise up to nearly Rs 7,500 crore by issuance of shares.

The share sale will also help reduce the promoter group's ownership in the lender by 3.4 per cent and help take it closer to the levels mandated by RBI, analysts said.

The promoter group, led by the bank's chief executive Uday Kotak, is required to reduce its ownership in the bank to 26 per cent by August, down from the last disclosed level of over 30 per cent in December.

Kotak Mahindra Bank (KMB) will be selling 6.5 crore equity shares of face value of Rs 5 each either through private placement, follow-on public offering (FPO), qualified institutions placement (QIP) or a combination thereof, it informed the exchanges.

The deal will require approval from shareholders, regulators and the government, it said.

As per the share price on Wednesday's close at BSE, the sale of 6.5 crore shares will entail an infusion of Rs 7,481 crore.

Analysts at Morgan Stanley said if executed, this will see a reduction of 3.4 per cent in promoter stake and also push up capital buffers.

The Reserve Bank of India, which insists on promoter holdings to be at 15 per cent for private sector lenders, had agreed to let KMB's promoters have their holding at 26 per cent by August, but capped their voting rights at 15 per cent to limit their decision-making influence.

In December 2018, KMB had dragged RBI to Bombay High Court after one of its earlier attempts to reduce promoter ownership through a complex debt instrument did not make the cut with the central bank.

The case was withdrawn by KMB after its suggestions to RBI were approved in February this year.

Shares of KMB rose 1.82 per cent to Rs 1,151 apiece on the BSE on Wednesday.