Mumbai: Kotak Mahindra Bank shares surged 8.5 per cent, the most in five years, on speculation that billionaire Warren Buffetts Berkshire Hathaway may buy a stake in the lender as promoter Uday Kotak runs against time to meet a regulatory diktat on reducing his holdings.The bank, which has been among the best performers in the past three years, closed at Rs 1,282.25 on the BSE, with a market capitalisation of Rs 2.4 lakh crore.
The shares climbed as much as 13.9 per cent to Rs 1,345.35 during the day.Kotak Mahindra, responding to a clarification sought by the BSE on a news report, said that there was no development that warranted a regulatory disclosure.
We confirm that we have nothing to report to the exchanges, the bank said in a filing during trading hours.
Kotak Mahindra Bank is unaware of any plans by Berkshire Hathaway buying a stake in the bank.Uday Kotak, who was at a book launch function in Mumbai, declined to comment on the development.
Kotak is mandated by RBI to cut his stake to 20 per cent by December, 15 per cent by 2020 and eventually to 10 per cent as the regulator seeks to reduce the concentration of bank ownership in the hands of individuals to avoid conflicts of interest.Disclosure RequirementKotaks personal shareholding stood at 29.73 per cent at the end of September compared with 31.77 per cent at the end of March 2017, according to information on the BSE website.While Kotak Mahindra has said it was unaware of any stake sale plan, people familiar with the matter said a transaction cannot be ruled out and that Kotak may be negotiating to sell a part of his holdings, a process that doesnt necessarily need board approval.Only if it is a fresh issue of shares and involving the bank does it need to come to the board, said a banker.
If it is a sale by Uday Kotak, the bank is under no obligation to make any regulatory disclosure.Berkshire did not respond to an email query.
It recently bought a stake in Paytm, a digital payments company.While Kotak has been reducing his stake, he has also argued for the norms to be relaxed as management of an institution and governance practices are more important than laws written during a different period.
Kotaks attempts to overcome the regulatory diktat have been turned down by the RBI.Earlier this year, Kotak Mahindra Bank proposed to issue perpetual non-cumulative preference shares of Rs 500 crore to increase its paid-up capital to Rs 1,453 crore, which would have helped Kotak meet the regulatory norms on cutting his stake.
The RBI said the plan did not meet its mandate.After the RBI refused to entertain its proposal, the bank said it believed the plan meets the regulatory norms and would negotiate with the regulator to convince it.
Of late, the regulator has been in no mood to relax regulations that could send wrong signals.
It recently pulled up Bandhan Bank for failing to meet the deadline to reduce promoter shareholding.However, the regulator has also applied some discretion.
It permitted Prem Watsas Fairfax India Holdings to own 51 per cent in Kerala-based Catholic Syrian Bank, which was in need of capital.
Also, Housing Development Finance Corporation Ltd.
owns close to 20 per cent in HDFC Bank.While Kotak races to meet the deadline, missing it would not attract a heavy penalty.
The bank may not be permitted to expand its branch network and the CEOs remuneration may be frozen.