Sumitomo gets 4.5% in Kotak M

Entrepreneurial banker Uday Kotak has picked Japan’s Sumitomo Mitsui Banking Corp as a key stakeholder, for a 4.5 per cent stake sale in Kotak Mahindra Bank at Rs 1,366 crore.

Entrepreneurial banker Uday Kotak has picked Japan’s Sumitomo Mitsui Banking Corp (SMBC) as a key stakeholder, for a 4.5 per cent stake sale in Kotak Mahindra Bank at Rs 1,366 crore.

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The sale of 16.4 million preferential shares will be used by the Indian private sector bank to fund acquisition, and fulfills a regulatory requirement under which the promoters’ stake must be below 49 per cent. The bank, the country’s sixth largest in terms of market capitalisation, had a value of Rs. 26,851 crore on Wednesday.

The deal price works out to Rs. 833, a 11.6 per cent premium over Tuesday’s closing price. Kotak Mahindra shares rose 3.2 per cent to close at Rs. 770.8 after the announcement.

“The deal helps us to achieve the regulatory compliance, raise capital for future growth and build relationship with an institution that will strengthen our revenue stream along with a long term business co-operation,” said TV Raghunath, head of strategy at Kotak Mahindra.

Kotak and SMBC also entered into a Memorandum of Understanding (MoU) for business cooperation in the areas of asset management, project and infrastructure financing, besides raising of funds for Indian companies through external commercial borrowings.

SMBC is a part of the Sumitomo Mitsui Financial Group that has total assets of $1.37 trillion (around Rs 6,165,000 crore).

“We see this as an opportunity for two financial conglomerates to leverage their strengths to serve the Indo-Japan corridor across a range of financial services,” said Uday Kotak, vice-chairman and managing director of Kotak Mahindra Bank.

“Inorganic route is an important avenue for growth and we would look for acquisitions in the banking, asset management and broking space...,” said Raghunath.