Days after private lender Kotak Mahindra Bank said it had used the preference share allotment route to reduce promoter Uday Kotak's shareholding in the bank, the RBI rejected it saying "it does meet their promoter holding dilution requirement". In a regulatory filing on Tuesday, Kotak Mahindra Bank said it still believes that the bank's stake dilution plan meets the requirement, and assured to continue engaging with the central bank over the issue.
"This refers to our letter dated August 2, 2018. RBI has today communicated to us that our PNCPS (perpetual non-cumulative preference share) issuance does not meet their promoter holding dilution requirement. We continue to believe that we have met the requirement and will engage with the RBI in this behalf," stated the bank.
In its stock exchange filing on August 2, the bank had said that its PNCPS issuance committee had issued 8.10 per cent non-convertible PNCPS of the face value of Rs 5 each to reduce the promoter's stake in the bank. The provision is allowed under several provisions of Sebi, the Companies Act, the Banking Regulation Act, and RBI Basel-Ill norms, the bank had maintained.
Under the plan, the bank issued Rs 100 crore PNCPS to investors at Rs 5 apiece, aggregating to Rs 500 crore, and hence increasing its paid-up capital to Rs 1,453 crore from Rs 953 crore. After the issuance of PNCPS, Kotak's shareholding in the bank had reduced to 19.7 per cent from 29.7 per cent.
Interestingly, as part of the RBI's guidelines for new bank licences released four years ago, the Kotak Bank promoters were asked to reduce their stake to 20 per cent by December 2018, 15 per cent by 2020, and then 10 per cent. The aim of the guidelines was to diversify shareholding to reduce promoter control in an entity.
However, as a percentage of post-issue equity share capital, the promoter group shareholding remains 30.3 per cent since preference shares do not count towards the equity share capital, reported BloombergQuint.
The bank had earlier said that promoters only have 15 per cent voting rights under the RBI Regulations Act, which in itself is a reduction of control in an entity.
(Edited by Manoj Sharma)