Kotak Mahindra Bank (KMB) on Monday said it has moved Bombay High Court against Reserve Bank of India's (RBI) order of its Perpetual Non Convertible Preference Shares (PNCPS) issue not meeting promoter holding dilution requirement.
Shares of Kotak Mahindra Bank fell over 5 percent and were trading at Rs 1214 per share on the BSE at 1137 hours.
The bank, in a statement to stock exchanges said, "We have since clarified and conveyed to the RBI our position in relation to PNCPS being a part of paid up capital and the legal basis on the matter of dilution of shareholding under the Banking Regulation Act. We have also shared with the RBI the opinions of eminent jurists and senior most legal counsels of the country, which confirm our understanding."
It further said, "However, we have no heard from the RBI on the above matter. Given the milestone of December 31, 2018, the Bank has been left with no option but to protect its interest. By way of abundant caution, the Bank has today filed a write petition with the Honourable Bombay High Court to validate the Bank's position."
As per RBI guidelines, Uday Kotak needs to dilute his stake to below 20 percent by December 2018 in order to ensure a wider ownership of banks.
Uday Kotak had sought RBI's permission to bring down his stake in the bank to 20 percent from the current 30 percent by selling nonconvertible perpetual noncumulative preference shares (PNCPS) to a group of investors in August 2018. RBI, however, shot down this arrangement.
On August 14, Kotak Mahindra Bank said, "RBI has today communicated to us that our PNCPS 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."
On December 7, CNBC-TV18 reported Warren Buffett's Berkshire Hathaway is in talks with Kotak Mahindra Bank to invest between $4 billion and $6 billion for a 10 percent stake.
Kotak Mahindra Bank declined to comment for the story. However, in a statement to the stock exchanges, it said, "Kotak Mahindra Bank is unaware of any plans by Berkshire Hathaway buying stake in the Bank as stated in the story."
This is a developing story. Please check back later for more details.
First Published: IST