Kotak Bank launches QIP worth Rs 7,500 crore

Share price of Kotak Mahindra Bank rallied over 4% in early trade after the private sector lender launched a qualified institutional placement (QIP) to raise up to Rs 7,500 crore.
The bank set the floor price of the issue at Rs 1,147.75 per share, which was at just half a per cent discount to Tuesday’s closing price of Rs 1,152.45. As per Sebi norms, a QIP issuer can offer up to 5% discount on the floor price to investors.

The fundraising will help the lender dilute promoter shareholding to comply with regulatory norms and strengthen the balance sheet. Most banks require capital to fend off worries of an escalation in bad loans after the Covid-19 pandemic.

The QIP move follows a truce carved out with the regulator. However, the timing of the same is pretty surprising.
Banks have been under pressure of late but Kotak remains a class franchise to own. It remains the top quartile franchise. So to that extent, it will succeed in raising capital. The lender is already well-capitalised. The latest move allows them to come on the right side of the regulator as well. The QIP would add 200 bps to Tier I capital, which should not be a problem.

The Bank reported standalone profit of Rs 1,266.6 crore for the quarter ended March 2020, registering a 10% fall due to a signinficant jump in COVID-19 related provisions.

Provisions and contingencies shot up 6-fold to Rs 1,047.47 crore in Q4FY20 against Rs 171.26 crore in same period last year, while the sequential rise was 136%. Net interest income, the difference between interest earned and expended, grew by 17.2% on year to Rs 3,559.65 crore for March quarter, with net interest margin improving 26 basis points YoY to 4.72% in Q4.

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