| The Kotak Mahindra Bank board at its meeting today also approved increasing the ceiling for investment by foreign institutional investors from 24 per cent to 30 per cent, subject to shareholder approval. |
| Kotak's placement of a 2.75 per cent stake with Warburg Pincus is part of the bank's plan to bring down the promoter's stake from the current level of 61 per cent to 49 per cent, as required by the Reserve Bank of India's (RBI) for private banks. |
| "We will bring down our shareholding as and when the bank requires funds," Uday Kotak, executive vice chairman and managing director, Kotak Mahindra Bank told Business Standard. |
| Current RBI guidelines stipulate the promoters of private banks should not hold more than 49 per cent equity stake, and the promoters should dilute their stake to this level within one year of operations. Kotak Mahindra Bank has already placed a proposal before the Reserve Bank of India for a revised schedule, Dipak Gupta, executive director said. |
| "We have written to them (RBI) and are waiting to hear from them," he said, adding that dilution would be taken up as opportunities arise. |
| "The Indian banking sector, which is undergoing rapid development, has significant growth potential and we believe that Kotak Mahindra Bank is well placed to establish a successful position within the sector," said Dalip Pathak, managing director, Warburg Pincus. |
| Stating his confidence in the bank's management team, Pathak added that the investment also reinforces the fund's continued commitment to India as a key investment destination. |
| Warburg Pincus will pick up a stake in Kotak Mahindra Bank at Rs 230 per share, which reflects a discount of 4.8 per cent to the market price as on Friday. Gupta however, stated that this was the prevailing price about a week back. |
| The Kotak Mahindra Bank scrip closed today at Rs 255.55, up 5.99 per cent from Friday's close of Rs 241.10 on the Bombay Stock Exchange. The shares will be issued with a one-year lock-in period, subject to necessary approvals. |
| Warburg Pincus is the largest international private equity investor in India with investments in excess of $ 850 million. |
| "We are committed to building a world class Indian financial institution. Raising capital at this stage is part of our plan to fund the bank's expansion strategy. Having a reputed investor like Warburg Pincus on board underlines the confidence of long term investors in Kotak Mahindra," Uday Kotak said in a media statement. |
| The Rs 75.9-crore investment will help the bank meet its asset growth, (its focus is on the retail segment) and expand its branch network to 100-odd by the financial year ending 2008, said Gupta. |
| He declined to identify the total quantum of funds required for the bank's expansion, stating "at this stage all segments of the business are growing and we require this amount." |
| He added that the bank's capital adequacy ratio (CAR) would marginally increase by about 2.5 per cent. On September 30, the CAR stood at 12.6 per cent. |
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