INSUBCONTINENT EXCLUSIVE:
MUMBAI: Kotak Mahindra Bank has approached the Bombay High Court against a central bank order that had disallowed the use of preference
the promoter holding dilution requirement with the perpetual noncumulative preference share (PNCPS) issuances
On August 2, the bank had announced the completion of the PNCPS issue, resulting in dilution of promoter stake to 19.70 per cent of paid-up
capital.
However, the Reserve Bank of India (RBI) had said that the preference share allotment route did not meet its promoter holding
dilution requirement.
Kotak Mahindra has appointed Manilal Kher Ambalal law firm to argue its case in the high court.
Shares of the bank
fell 6.5 per cent to Rs 1,198 on the Bombay Stock Exchange
The stock had climbed 9 per cent on Friday on speculation that Berkshire Hathaway would buy 10 per cent in the bank
Promoter shareholding is 29.7 per cent as on September 30, 2018
Under the RBI guidelines for new banks, the promoters of Kotak Mahindra Bank had to bring down their holding to 20 per cent by December 2018
crore and increased paid-up capital to Rs 1,453 crore from Rs 953 crore
RBI has clarified that this did not fall under the definition of promoter stake dilution
Kotak Mahindra had taken views from eminent lawyers and unanimously got the view that the Act allows equity dilution through preference
share sale, without diluting voting rights.
In the past two years, small finance banks such as Ujjivan has also issued PNCPS
Section 12 (2) of the Banking Regulations Act says that voting rights by any shareholder be capped
The Act was amended to raise voting rights up to 26 per cent in 2013 from 10 per cent.
The RBI raised it to 15 per cent in 2013 and then to
If a shareholder owns more than 26 per cent in a bank, the voting right of that investor is still capped at 26 per cent.
The other option
before the bank was to raise capital, but that would have meant issuance of Rs 1.1lakh crore worth of stock
The bank has a capital adequacy of over 18 per cent
It looked at acquisitions options to dilute promoter holding, but did not finalise one
Also, getting an investor for a large stake would require RBI approval.
The bank is likely to cite the Cyrus Mistry case before the high
NCLT and NCLAT both have passed judgements that if the requirement is more than 10 per cent capital, it has to be 10 per cent of equity plus
