Warburg Pincus Offloads Stake In Kotak Mahindra Bank

DSIJ Intelligence / 27 Mar 2012

On Mar 26, 2012, private equity Investor Warburg Pincus LLC sold its 3.6% stake in Kotak Mahindra Bank for an approximately value of Rs 1400 crore.
As per media reports, on Mar 26, 2012, private equity Investor Warburg Pincus LLC sold its 3.6% stake in Kotak Mahindra Bank for an approximately value of Rs 1400 crore. A bulk deal was carried out and approximations of 26.5 million shares were sold on the exchange. The PE investor entities, viz. Melany Holdings and Madison Holdings, held the shares of the bank, from which they have now completely exited. The major buyers were the Genesis Group and the Genesis Emerging Markets Investment Company.

As on Dec 31, 2011, the two entities together held an approximate of 44 million shares of the bank. An approximate of 17.5 million shares were sold in Feb, which had approximate value of Rs 850 crore. The shares were sold at an approximate price of Rs 485 per share, while yesterday they fetched an approximate price of Rs 530.

As per reports in the Hindu Business Line, Warburg Pincus LLC exited several of its investments in 2011 in DB Corp, Max Healthcare, Vaibhav Gems etc. It has continuously reduced its shareholding pattern in the Kotak Mahindra Bank over the past one year, offloading its stakes on a regular basis. In Mar 2011, it had held an approximation of 9.28% in the bank. First, it sold the stake in Jun-Jul 2011 (around 2.28%), followed by stake sales in Oct 2011 (around 1%), Feb 2012 (around 2.37%) and Mar 2012 (the remaining 3.6%).

It certainly seems that foreign investors are booking profits by selling their stakes in Indian companies. Recently, Citigroup offloaded its entire 9.86% stake in HDFC. As per the media reports, the shares were sold at a price of Rs 657.56, resulting in a cash inflow of approximately Rs 9555 crore for Citigroup.

The question that would arise in investors’ minds is that what they should do with the counter. In Q3 FY12, Kotak Mahindra Bank posted Profit After Tax (PAT) of Rs 463 crore, which was up 21% on a YoY basis. Although the Net Interest Margin (NIM) of the bank decreased by 30 basis points to 4.7%, it still stood in the first place with respect to the NIM. The asset quality of the bank improved further. The Net NPAs of the bank decreased by 22 basis points to 0.47% on a YoY basis, and increased by 1 basis point on a sequential basis.

On the valuations front, the bank is available at a Price-to-Earnings (P/E) multiple of 22x and the Price to Book Value (P/BV) of the bank comes around 3.19x, which is on a very high path as compared to those of its peers. YES Bank is available at a P/BV of 2.67x and Federal Bank at a P/BV of 1.26x. Those who already have shares of the bank may take a ‘hold’ stance, taking fresh position in the counter after analysing the bank’s Q4 results.

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