Kotak to buy majority stake in 5 group firms

Kotak Mahindra Bank has proposed to buy 51 per cent stake in each of the Kotak group's four overseas companies and in one Indian entity to make them direct subsidiaries of the bank.

The Reserve Bank of India (RBI) had laid down a condition that these indirect subsidiaries would be converted into direct subsidiaries when it issued a bank licence to Kotak Mahindra Finance. Uday Kotak, executive vice chairman & managing director of Kotak Bank, said:

"The bank would have to pay about Rs 23 crore for acquiring stakes in the five indirect subsidiaries. The acquisitions are subject to necessary approvals."

The four overseas subsidiaries are Kotak Mahindra UK, Kotak Mahindra International, Kotak Mahindra Inc and Global Investment Opportunities Fund. The Indian entity is Kotak Mahindra Securities.

The board of Kotak Bank, at its meeting convened today to consider the first quarter results of 2006-07, also approved, in principle, the merger of the fixed income and primary dealership business of Kotak Mahindra Capital Company (KMCC) into the bank. Kotak Bank stock today gained 3.4 per cent on Bombay Stock Exchange to close at Rs 253.35.

Kotak said the bank would not pay anything for absorbing one of the divisions of KMCC as the economic interests of the group companies held by common entities. "The merger of the division with the bank will enhance the bank's net worth by Rs 175 crore," he added.

The boards of KMCC and Kotak Mahindra Securities (KMSL) also in-principle approved the merger of KMSL's strategic investment division and trading and clearing operations of the NSE into KMCC.