Billionaire banker Uday Kotak, who has had a long run-in with the Reserve Bank over his excess personal holding in Kotak Mahindra Bank, will be selling 2.83 per cent stake worth over Rs 6,800 crore in the lender on Tuesday.
The stake sale would help bring down his stake in the country's fourth largest private sector lender to the RBI-mandated 26 per cent.
A source aware of the development told PTI that the stake dilution would be carried out through private placement by way of a block deal on June 2.
"Uday Suresh Kotak will sell 56 million equity shares or 2.83 per cent of equity of bank through the block deal. After the dilution, his personal holding will come down to 26.1 per cent from 28.93 percent now," as per the term sheet.
The move would also bring the curtains down on a long standoff between the regulator and the bank over the issue, which saw him dragging the RBI to the Bombay High Court in December 2018.
Under the agreement, Mr Kotak had reached with the RBI this January, he has time till August 17, 2020 to pare the promoters/promoter group stake which currently is at 28.93 per cent.
The price band for the share sale has been fixed at Rs 1,215 to Rs 1,240 apiece. The sale would fetch Rs 6,804 crore at the lower end of the price band and Rs 6,944 crore at the upper-end, the term sheet said.
At the upper end, the offer price is at a discount of 0.7 per cent to Monday's closing price of Kotak Mahindra Bank shares on the NSE. When compared with the lower end, the discount is 2.7 per cent, it added.
On Monday, the scrip gained nearly 2 per cent to Rs 1,248.40 on the NSE. On the BSE, it ended at Rs 1,251.90, up 2.30 per cent with a market capitalisation of Rs 2,39,588.62 crore on a day when the Sensex rallied 2.71 per cent.
Through the just-concluded the QIP issue worth Rs 7,000 crore, promoter holding in the bank came down by a tad over 1 per cent from 29.8 per cent.
The source clarified that the QIP was not meant for stake dilution though.
According to the term-sheet, the deal would be 100 per cent secondary placement through the accelerated book-building route.
Mr Kotak, the richest banker in Asia, is the managing director of Kotak Mahindra Bank.
Uday Kotak has appointed Morgan Stanley, Goldman Sachs and Kotak Securities as the advisors to the deal," according to the term sheet.
"The objective of the share sale is to assist the bank to progress towards compliance with the RBI requirement of reducing the promoter''s holding in the bank to 26 per cent of bank's paid-up equity share capital by August 17, 2020," the term sheet said.
An e-mail sent to Kotak Mahindra Bank spokesman did not elicit any response. The merchant bankers also could not be reached immediately for comment.
On January 30 2020, the bank said the RBI had agreed to its proposal to reduce promoters' stake to 26 per cent from then 29.9 percent over the next six months, which is June. It also said promoter's voting rights would be capped at 20 per cent of the paid-up voting share capital until March 31, 2020 and would be further capped at 15 per cent effective April 1, 2020.
The bank had also said that as part of the settlement with the RBI, the promoters would not purchase any more paid-up voting equity shares till their shareholding reached 15 per cent.
Following this agreement, RBI, the bank withdrew its writ petition from the Bombay High Court. On February 18, the RBI granted final approval to the settlement between both parties.
Uday Kotak dragged the regulator to the court after the RBI struck down its proposal in August 2018 to issue perpetual non-convertible preference shares to comply with promoter shareholding norms.
Founded in 1985, the Kotak Mahindra Group is also into share broking, investment banking insurance and asset reconstruction business and mutual funds. The bank was founded in February 2003 after the RBI issued banking license to Kotak Mahindra Finance.