Kotak Bank jumps 4% on QIP launch; floor price set at Rs 1,147.75 per share
The bank set the floor price of the issue at Rs 1,147.75 per share, which was at just half a per cent discount to Tuesday's closing price of Rs 1,152.45.by ETMarkets.com
NEW DELHI: Shares of Kotak Mahindra Bank jumped 4 per cent in Wednesday's trade after the private lender launched a qualified institutional placement (QIP) to raise up to Rs 7,500 crore.
The bank set the floor price of the issue at Rs 1,147.75 per share, which was at just half a per cent discount to Tuesday's closing price of Rs 1,152.45. As per Sebi norms, a QIP issuer can offer up to 5 per cent discount on the floor price to investors.
Following the development, the stock rose 4.32 per cent to hit a high of Rs 1,202.35 on BSE in morning trade. The fundraising will help the lender dilute promoter shareholding to comply with regulatory norms and strengthen the balance sheet. Most banks require capital to fend off worries of an escalation in bad loans after the Covid-19 pandemic.
“We intend to use the net proceeds to augment capital base and strengthen the balance sheet, which would assist our bank to deal with contingencies or financing business opportunities (which may be organic or inorganic), or both, which may arise pursuant to the economic events driven by the outbreak of Covid-19, or otherwise,” the bank said in its draft offer document.
"Having worked out a truce with the regulator, a QIP was anticipated. But the timing has surprised us. Banks have been under pressure of late but Kotak remains a class franchise to own. It remains the top quartile franchise. So to that extent, we believe in Kotak’s ability to raise capital. They are already well-capitalised. This allows them to come on the right side of the regulator as well. The QIP would add 200 bps to Tier I capital, which is not a problem," said Krishnan ASV of SBICAP Securities.
"The more dry powder you have in this environment, the better off you are. That is how I would read it. This a very good attractive price point to enter into a very high quality franchise," Krishnan told ET NOW.
Kotak Mahindra Capital, Goldman Sachs, SBI Capital Market and Morgan Stanley are managing the share sale.