Kotak Mahindra Bank Ltd said on Monday it had challenged in court the central bank's decision to disregard the issue of preference shares to reduce promoter stake in the private-sector lender, sending shares sharply lower. Uday Kotak, the billionaire head of Kotak Mahindra Bank, has been asked by the Reserve Bank of India (RBI) to lower his holding in the lender to 20 per cent by this year-end, and to 15 per cent by March 31, 2020. Uday Kotak directly held a 29.73 per cent stake in the lender, as of September 30, 2018, according to Bombay Stock Exchange data.
Kotak Mahindra, which in August completed an issue of perpetual non-convertible preference shares (PNCPS) in a bid to cut promoter stake, was told by the RBI that this did not meet the central bank's promoter-holding dilution requirement.
The bank said it had not heard from the RBI on the matter after clarifying that PNCPS were a part of the paid-up capital of the bank, and also the legal basis on the dilution of shareholding.
"Given the milestone of December 31, 2018, the bank has been left with no option but to protect its interest," the lender said in a statement. Kotak Mahindra Bank's move against the RBI comes days after billionaire investor Warren Buffett's Berkshire Hathaway Inc was rumoured to be in talks with the bank to pick up a 10 per cent stake. The lender's shares had closed 8.4 per cent firmer following the report on Friday.
The bank said it was unaware of any plans of Berkshire investment.
The stock fell as much as 7.2 per cent in its biggest daily drop since October 1 after Kotak Mahindra's announcement on Monday.
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