Kotak Bank to sell 65m shares to raise capital

Bloomberg

Kotak Mahindra Bank Ltd. plans to issue as many as 65 million shares in a move that will strengthen its capital buffers and reduce the stake held by its wealthy founder.
The Mumbai-based lender didn’t provide details of the pricing of the new shares in its filing on Wednesday. However, under a regulatory formula, they should be priced around the level of the latest two-week average, which works out at about 1,184 rupees ($15). That would put a total value on the offering of about $1 billion.
The bank’s shares rose 2.4% to 1,157 rupees in Mumbai after the announcement.
The plan follows the resolution in January of an unusual legal feud with the Reserve Bank of India over the pace at which Uday Kotak should reduce his stake in the lender he founded. The two sides agreed Kotak should lower his holding to 26% from 30% by August. Kotak Mahindra Bank hasn’t specified the extent of dilution under the latest plan.
The capital raising will also provide an additional buffer as Indian banks brace for a surge in defaults due the lockdown on the economy intended to contain the spread of the coronavirus. Other lenders including IndusInd Bank Ltd., Yes Bank Ltd. and Bank of Baroda are planning to raise new capital.
Kotak Mahindra Bank has less need of the additional buffer than most. Its capital adequacy ratio was 18% at end-December, double the regulatory minimum. Its gross bad loan ratio was 2.5%.
However, the bank has become more cautious as a result of the lockdown, which has left businesses struggling to stay afloat and job losses rising. The bank’s loan book grew at 6.7% in the March quarter, the slowest in at least three years.
Kotak Mahindra Bank invested 5 billion rupees last month as part of the 100 billion rupee bailout of Yes Bank by a group of eight lenders.
Uday Kotak is Asia’s richest banker and worth about $9.4 billion, according to reports.