Canada’s CPP Investments will sell a 1.66% stake in Kotak Mahindra Bank on the stock exchanges for ₹5,914-6,225 crore on Friday, a person aware of the development said.
The Canadian pension fund will sell 33 million shares at the stock’s Thursday closing price of 1,886.5, or a discount of as much as 5%, the person cited above said on condition of anonymity, adding Kotak Securities will be the book-builder for the transaction.
After the deal, CPP Investments’ stake in the bank will fall to 2.68% from 4.34% at the end of March. The fund reduced its shareholding in the March quarter by a marginal 0.1% from the preceding quarter.
A spokesperson for CPP Investments in Canada declined to comment on Thursday. A Kotak Securities spokesperson did not respond to a request for comment. This ranks among the larger block deals in the Indian equity market. On 12 March, PE major Blackstone sold a $640 million chunk of Sona Comstar, exiting the auto components business.
CPP Investments first acquired a stake in Kotak Mahindra Bank in mid-2013 and has increased its stake over the years. In 2014, founder Uday Kotak sold a 3.24% stake for $372 million to CPPIB, as it was then called, as part of his plan to reduce his stake in keeping with RBI norms, which mandated promoter holding at 15% back then. In 2016, CPPIB acquired more shares from Japan’s Sumitomo Mitsui Banking Corp.
In November 2021, RBI raised the promoter ownership limit to 26%. The promoter of the bank, led by Uday Kotak, currently holds 25.95%.
Though the news of the sale emerged after the market closed, some in the market appeared to have got wind of the development, with the stock falling almost 3%. It was the biggest loser in the 12-member Bank Nifty, prompting calls by some market mavens for a regulatory probe into any potential “leak” of information.
“It’s obvious somebody might have prior information of the deal and shorted the stock, as such large deals normally happen at a discount to the market price,” a fund manager requesting anonymity said. “This is a matter for the regulator to investigate in order that such practices can be contained.”
A clear indicator of shorts was borne out by the rise in open interest of the active futures contract and heavy call option selling. The futures contract witnessed traders ratcheting up their outstanding or open buy-sell positions by 6.44% to 32.8 million shares.
A rise in open position accompanied by a price correction implies bearish sentiment. Also, call options are sold when the seller expects the underlying share price to fall, enabling her to pocket the premiums paid by the option buyers.