Private sector lender Kotak Mahindra Bank is set to raise about ₹7,500 crore, with its board approving a proposal to raise equity capital by the issuance of 6.5 crore shares.

“…the Board has accorded its approval for raising of capital by way of issue of equity shares by the bank for up to 6.5 crore equity shares of ₹5 each, through a private placement, follow-on public offering, qualified institutional placement (QIP) or a combination thereof…,” the bank said in a regulatory filing on Wednesday after a board meeting.

At Wednesday’s closing price of ₹1,151 apiece, the share sale will help the lender raise ₹7,481.5 crore. It has not given a timeline for the proposed equity capital raise.

The move comes at a time when financial institutions are working to conserve capital and increase liquidity amid concerns of an economic slowdown and deteriorating asset quality.

Promoter stake

It could also potentially help Kotak Mahindra Bank’s promoters lower their stake to some extent in line with the agreement reached with the Reserve Bank of India in February. Under the agreement, the bank’s promoters — Uday Kotak and his family — had to bring down their stake to 26 per cent in six months from then.

As on December 31, 2019, the promoter and promoter group held a 29.96 per cent stake in the bank.

Kotak Mahindra Bank had last raised ₹5,800 crore in core capital in 2017 through the QIP route.

Global rating agency Standard and Poor’s had last week affirmed the bank’s issuer credit ratings at BBB-/Stable/A-3 and had said this reflects its robust capitalisation, strong management and better asset quality than that of its peers. Its capital adequacy ratio was 18.21 per cent as on December 31, 2019.