Kotak Mahindra Bank set to raise Rs 7,460 crore through share sale

The bank also informed that meeting of the issuance committee of the board is scheduled to be held on May 29 to approve the issue price.

Kotak Mahindra Bank (KMB) on Tuesday disclosed the floor price for its qualified institutional placement (QIP) at Rs 1,147.75 per share for raising capital by a fresh issue of 6.5 crore shares, the lender informed stock exchanges by a release. “The bank may at its discretion consider offering a discount of not more than 5% on the floor price so calculated for the issue,” the private lender further said.

At the floor price of Rs 1,147.75, the size of the issue works out to Rs 7,460 crore. Taking a 5% discount into account, the price of the issue works out to Rs 1,090 per share. The lender will be able to raise Rs 7,087 crore at the discounted price of Rs 1,090 per share. The KMB board had earlier approved a proposal to raise capital through a fresh issue of 6.5 crore shares.

The bank also informed that meeting of the issuance committee of the board is scheduled to be held on May 29 to approve the issue price. Following the share sale, the promoter’s stake in the bank will reduce to around 29% from 29.92% earlier.

Analysts expect KMB’s tier-I capital ratio to strengthen further after QIP. At the end of December 2019, the bank had a capital adequacy ratio (CAR) of 18.21% as against the regulatory requirement of 11.075%. KMB’s tier 1 ratio was 17.7%.

At the same time, the bank’s return on equity (RoE) could take a hit from the share sale, analysts said. “The bank is planning a fresh issue of 65 million shares to shore up its capital (tier I ~17%) and reduce promoter stake by 1% to 29%, but in the process, it may depress RoEs to 11-12% over FY21/FY22,” Emkay Global Financial Services said in a recent report.

On Tuesday, KMB’s shares ended at Rs 1,152.45 on the BSE, 0.67% lower than their previous close. The announcement was made after the close of the day’s trade.