Warren Buffett’s Berkshire Hathaway is looking to buy 10 percent stake in Kotak Mahindra Bank, multiple sources told on Friday, adding that the deal is valued between $4 billion and $6 billion.
Berkshire Hathaway may look at buying promoter stake or via a preferential allotment, said the sources, who did not want to be named.
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.”
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.” CNBC-TV18 still awaits response from Berkshire Hathaway.
Though analysts remain unsure of the claims, they believe that the reports would be positive for the bank.
“At this point of time, it is source-based, speculative, etc. so to that extent, I wouldn’t react but then it remains a fundamentally very strong franchise. So if you take care of the technical overhang, a fair amount of supply coming into the market, you can get rid of the distraction then take a more fundamental view.
We generally believe that it is a very strong franchise but the return ratio could be under pressure. That would be my take. It is a source-based information, very hard for a fundamental analyst to take a call,” said Krishnan ASV of SBICAP Securities.
“Kotak has not commented anything on it but definitely this was being watched out for as to how they are trying to bring down the shareholding from 30 percent to 20 percent and I think if this happens, this takes away the overhang, which is there in the stock.
Otherwise, I think Kotak in the current environment is very appropriately positioned to benefit of the overall conditions which are there in terms of gaining the market share, they have built up a very strong liability franchise as well and they have adequate capital on the balance sheet.
So they are well prepared for a growth. So fundamentally, it is on a strong footing. The only overhang was in terms of stake dilution and even though it is a speculation as of now, if this news come soon, it will be a positive for the stock,” Kunal Shah of Edelweiss Financial Services said.
Warren Buffett’s :
- Known as the “Oracle of Omaha,” Warren Buffett is one of the most successful investors of all time.
- Buffett runs Berkshire Hathaway, which owns more than 60 companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.
- The son of a U.S. congressman, he first bought stock at age 11 and first filed taxes at age 13.
- He’s promised to give away over 99% of his fortune. So far he’s donated $35 billion, much of it to the foundation of friends Bill and Melinda Gates.
- In 2010, he and Gates launched the Giving Pledge, asking billionaires to commit to donating half their wealth to charitable causes.