On Tuesday, June 2, 2020, Billionaire Promoter and Managing Director of Kotak Mahindra Bank, Uday Kotak, sold 56 million or 5.6 crores of his shares in the said bank to comply with the Reserve Bank of India’s promoter shareholding norms. He sold the shares following a 100 percent secondary placement at Rs. 1,240 per share.
Kotak Mahindra Bank, on Thursday, 30th January 2020, said that an agreement was made with the regulator to reduce Uday Kotak's shareholding to 26 percent by August 2020, to comply with the promoter shareholding standards. Moreover, it was decided not to buy any further paid-up voting equity shares of the bank before the promoter's shareholding has surpassed 15 percent or the higher percentage permitted by RBI from time to time.
Kotak Mahindra Bank was expected to reduce the stake of the promoter to 15 percent by March 2020, but the condition has now been relaxed by a gradual reduction in the stakes authorized by RBI. Nevertheless, Uday Kotak's voting privileges were restricted at 15 percent effective 1st April 2020, given the fact that his actual shareholding was higher.
Reserve Bank of India's regulation requires private bank promoters to limit their shareholding in the bank to 40 percent within three years, 20 percent within 10 years, and 15 percent within 15 years of acquiring their license. This disagreement between the bank and its regulator resulted in Kotak dragging RBI to the Bombay High Court, but the case was eventually removed after the settlement was reached in January of this year.
With this settlement deal, the Bank agreed to withdraw the writ petition filed in the Bombay High Court after RBI had withdrawn its request to grant permanent non-convertible preference shares to conform to the promoter shareholding norms. On Tuesday, 18 February 2020, RBI gave final clearance to the agreement between the two sides.
The share price of Kotak Mahindra Bank jumped just about 6 percent in the morning trade on Tuesday, June 2, 2020, after Uday Kotak, Managing Director of the bank agreed to sell shares in the private sector lender. The stock price is the highest index leader and has had a spike in the value of more than 212, 23 times. It was quoting at Rs 1,307.15, up to Rs 57.90, or 4.63 percent. It hit an intraday peak of Rs 1,327.50 and an intraday low of Rs 1,299.40. The script traded 56,178,355 shares in volume compared to its five-day average of 356,918 shares, a boost of 15, 639, 85 percent.
A person familiar to the sale of the stakes plan of the bank said, “The promoter stake sale will happen via a block, which is likely to be launched shortly. Kotak Mahindra Bank has already issued shares as part of the recent Rs 7,000 crore qualified institutional placement (QIP), so Kotak may not have to sell 4 percent stake to meet the 26 percent promoter stake requirement, which was the case earlier.”