Kotak Mahindra Bank share price jumped 5 percent in early trade on January 31 after the Reserve Bank of India (RBI) accepted promoters' voting rights to be capped at 20 percent till March.
"The RBI on January 29, 2020, has conveyed its in-principle acceptance promoters' voting rights in the bank to be capped at 20 percent till March 31, 2020," Kotak Mahindra Bank said in a BSE filing on January 30.
The bank said promoters' voting rights in the bank will be capped to 15 percent from April 1 and promoters' shareholding will be cut to 26 percent within six months from the final RBI nod.
The RBI's licensing rules mandate a private bank's promoter to pare holding to 40 percent within three years, 20 percent in 10 years and 15 percent within 15 years.
Nomura | Rating: Neutral | Target: Rs 1,600 per share
The issue of promoter’s shareholdings being settled which is a near-term positive for the stock. It settled pending litigation with regulator without any operational repercussions.
The bank should prefer promoter diluting stake by sell-down or by value-accretive M&A.
UBS | Rating: Neutral | Target: Rs 1,750 per share
The uncertainty over promoter stake has been removed as it’s a positive development.
The stock already trades at premium valuations and expect limited upside.
UBS expect bank's earnings to grow at 30 percent CAGR over FY19-21 driven by 17 percent loan growth and RoE to improve to 14/16 percent in FY20/21 from 12 percent In FY19.
According to reseach house Citi the uncertainty ended and promoters can retain 26 percent stake.
There is no explicit requirement for reducing stake below 26 percent. The bank is well capitalised with tier -I of 17.7 percent as of Q3FY20.
The bank unlikely to need any primary capital infusion in the medium term, Citi added.At 09:18 hrs Kotak Mahindra Bank was quoting at Rs 1,716.00, up Rs 87.90, or 5.40 percent on the BSE.