Kotak Mahindra Bank to raise Rs 5,400 crore of equity

Published on 31 Mar 2017 by Team

The board of directors of Kotak Mahindra Bank has approved the bank’s plan to raise equity capital to the extent of 62 million shares of Rs 5 each of face value. At the current market price of Rs 866 at around 1.00 pm on Thursday, the total amount works out to Rs 5,370 crore.

The said funds may be raised through a rights issue, private placement, follow-on public offering (FPO), qualified institutional placement (QIP), Global Depository Receipts (GDR), American Depository Receipts (ADR) or through any other permissible mode or a combination thereof, which the board decides is appropriate.

The Reserve Bank of India had issued a directive that the bank’s promoters (Kotak family, led by Executive Vice-Chairman 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 on December 31, 2016, promoters' stake in the bank was nearly 33.61 per cent. The proposed capital dilution works out to about 3.26 per cent on the expanded equity base.

An announcement issued by the bank to the stock exchanges stated that the equity funds raised by the bank would be deployed towards pursing consolidation opportunities in the Indian banking and financial services sector or capitalisation of opportunities available in acquisition and resolution of stressed assets in the banking sector, including participation in the ‘bad bank’ plan now widely talked about in the banking channels. The funds may also be deployed towards supplementing additional avenues of organic growth for the bank such as opportunities in digital expansion, domestic and international lending and so on. The capital raised may also be deployed towards growth of the bank’s subsidiaries, the statement added.

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