Uday Kotak Sells $919 Million Bank Stake to Comply With RBI

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Uday Kotak sold part of his stake in Kotak Mahindra Bank Ltd. for about 69.4 billion rupees ($919 million) as the billionaire cut his ownership in the lender he founded to comply with central bank regulations.

Kotak sold 56 million shares of the bank at 1,240 rupees each, the top end of a marketed range, according to terms of the deal seen by Bloomberg News. The offer price was at a 0.7% discount to Monday's closing price. The tycoon's holdings will reduce to 26.1% from 28.93% after the sale.

The top buyers of Kotak's equity stake are the Regents of the University of California, Oppenheimer Developing Market Fund and JPMorgan Securities Ltd.

The disposal comes after a resolution in January of an unusual legal feud with the Reserve Bank of India over the pace at which Kotak, the bank's founder and chief executive officer, should cut his stake in the lender. The two sides agreed that Kotak should lower his holding to 26% by August.

Shares of Kotak Mahindra Bank jumped 7.6% to 1,342.90, the highest level since April 30, at the close in Mumbai on Tuesday.

“The regulatory overhang on the stock is finally over,” said Siddharth Purohit, analyst at SMC Global Securities in Mumbai. “Market has absorbed the supply at a premium valuation because it is better managed compared to many other banks.”

Kotak's divestment also comes close on the heels of the bank's own equity raising of about 74.4 billion rupees to shore up capital against the coronavirus shock. Investors including Invesco Oppenheimer Developing Markets Fund, Canada Pension Plan Investment Board and ICICI Prudential Asset Management Co. participated in the sale, according to an exchange filing.

Morgan Stanley, Goldman Sachs Group Inc. and Kotak Securities Ltd. are the placement agents for Uday Kotak's share sale, according to the terms.