Shares of India’s Kotak Mahindra Bank surged to a four-year high after media reports of Warren Buffett’s Berkshire Hathaway showing interest in picking up a stake in the bank.
Omaha-based Berkshire Hathaway is reportedly in talks over the purchase of a 10% stake in Kotak Mahindra, valued at between US$4 billion and $6 billion.
According to a report from CNBC TV18, Berkshire Hathaway seeks either to buy a promoter stake, i.e. shares given as payment to a contractor or employee or existing shareholder, or to pick up shares granted during fund-raising to an investor or company via a preferential allotment.
A recent Reserve Bank of India (RBI) ruling means that bank founder and CEO Uday Kotak needs to cut his stake to below 20% by later this month. He currently holds around 30% of the bank.
In August this year, Kotak sought the RBI’s permission to bring down his stake in the bank to 20% by selling nonconvertible perpetual noncumulative preference shares (PNCPS) to a group of investors. However the central bank rejected this arrangement.
At 12.30 pm Kotak Mahindra Bank was trading at 1303.35 rupees as against the previous close of 1180.25 rupees in the national stock exchange.
Kotak Mahindra Bank is the country’s fourth biggest bank in terms of market capitalization after HDFC Bank, State Bank of India and ICICI Bank.