Kotak launches $1 bn QIP, will issue 65 mn new shares for Rs 1,147.75 each

Kotak Mahindra Bank on Tuesday launched its qualified institutional placement (QIP) programme to raise Rs 7,460 crore (nearly $1 billion). The private sector lender will issue 65 million fresh shares at a floor price of Rs 1,147.75 apiece.

The bank has the discretion to offer up to 5 per cent discount on the floor price to investors participating in the QIP programme. The issue price and the list of investors will be finalised by the bank’s issuance committee of the board on May 29. The QIP will lead to 3.4 per cent dilution in the bank’s equity base. Following the fundraising, the promoter shareholding in the bank will fall by 98 basis points from 29.92 per cent at present to 28.94 per cent.
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The private lender had last month said that the proposed issue would augment its capital base, strengthen its balance sheet, and help in dealing with contingencies or financing both organic and inorganic business opportunities, which may arise after the Covid-19 outbreak.

After the March quarter results the bank had said, in times like these (the Covid-19 pandemic), the strength of balance sheet is very important.

The capital adequacy ratio of the bank stood at 17.9 per cent with tier-1 capital at 17.3 per cent at the end of March 2020.
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In February, the Reserve Bank of India (RBI) had given final approval to the bank’s proposal on promoters’ stake reduction and capping voting rights in the bank. The RBI had said that the bank’s promoters would have to bring down their shareholding to 26 per cent of the paid-up voting equity share capital by August 2020. Also, promoters would have 20 per cent of the paid-up voting equity share capital until March 31, 2020, and it would be brought down to 15 per cent from April 1, 2020.

Shares of Kotak Mahindra Bank closed at Rs 1,152.5, down 0.7 per cent on Tuesday.

Share sales in listed firms at record high this month

Two jumbo block trades in India this month have pushed follow-on offerings in the country to a record high. A

$3.3-billion sell-down of GlaxoSmithKline’s stake in Unilever’s Indian unit, Hindustan Unilever, and a $1.1-billion placement of Bharti Airtel shares by its parent take May’s total follow-on offerings in the country to $4.4 billion, the most for a month on record, data compiled by Bloomberg shows.

In addition to that, Reliance Industries, the largest company by market capitalisation, kicked off a $7-billion rights offer this month. Companies and shareholders across Asia have been taking advantage of a market rebound since late March to sell shares. Almost $23 billion was raised in April across the region, the most since March 2018. India was quiet in March and April, when companies and shareholders sold just $299 million and $99 million worth of stock respectively, as the country went into lockdown due to the Covid-19 pandemic. The Unilever deal is the largest additional share sale in India this year, while the Bharti Airtel block came at an opportune time given the stock is trading close to an all-time high.BLOOMBERG

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd.

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