Between Jan-Jun 2015 Kotak Bank, is the only large private sector which has been saved the blushes of the market. It has ranged between Rs 1290 and Rs 1440 for six months, a deceptively quiet movement. In between it successfully merged Ing with itself, gave a bonus and a poor dividend of a mere 90 paise. And yet the stock did not move. Surprisingly for six months the open interest in futures has been 60 lakh shares always, and a backwardation or undha badla has prevailed. While an Arbitrage gas remained between the cash and FNO segments, where cash price is higher than the futures price, This effectively the investors are keen to take delivery rather than play futures.
For nearly a month we have been hearing the Bank has gone to the FIPB for allowing a hike in FII holding to 55 per cent from the present 49 per cent. This additional equity of 6 per cent has probably been warehoused pending the approval. But if one were to listen to Mr. Uday Kotak speaking from a marina in Monte Carlo, his proposal has been rejected once.
And it may get rejected again.
The foreign ownership rules differentiate between classes of foreign investors for the purpose of assuming management control. So we have a FII/DII/QII and a FPI. Additionally, while a more than 51 per cent ownership is allowed in Private Banks, a clash occurs where a private bank is also running a insurance company where FDI of just 49 per cent is allowed.
This means that neither HDFC, nor ICICI, Kotak and a few more owners of Insurance companies are not in compliance with the foreign ownership guidelines. This begets the question, what does ultimately happen to the warehoused stock of Kotak if the FIPB approval is denied once more pending a clarificatory note on how FPI ownership gets defined in Banks and Bank Holding companies which are promoters of insurance companies. The entire stock could come to the market in case a adverse clarification gets issued.
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