Canada Pension fund sells 1.6% stake in Kotak Mahindra Bank for Rs 6,123 crore

 In a major bulk deal, Canada Pension Plan Investment Board (CPPIB) has sold about 3.3 crore shares or 1.6% stake in private lender Kotak Mahindra Bank on Friday through open market transactions. The deal was executed at a weighted average price of Rs 1,855.64 and CPPIB took home Rs 6,123 crore through the stake sale.

As of March quarter, CPPIB held 4.6% stake in Kotak Mahindra Bank. With the sale of the latest stake, the holding of CPPIB came down to 3%. CPPIB is an investment management company that offers pension management services, as well as provides investments such as private equity, real assets, and fixed income.

The deal triggered a correction in the stock price of Kotak Mahindra Bank amid significant volumes earlier in the morning. The stock has underperformed the Nifty50 over a 12-month period and given returns of 1.9% versus 13.9% given by the broader index during this period. On Friday, Kotak Mahindra Bank shares ended 0.66% lower at Rs 1,874 on NSE.

Kotak Mahindra Bank is one of the leading private sector lenders in India with a market capitalization of over Rs 3.7 lakh crore. The bank posted a 26% year-on-year rise in its March quarter standalone net profit at Rs 3,495.6 crore, while its net interest income jumped 35% year-on-year to Rs 6,102.6 crore. The bank also improved its asset quality with net NPA ratio at 0.37% of net advances as against 0.64% in the corresponding quarter of FY22.

Global brokerage firms have mixed views on the stock with CLSA having an outperform rating on the stock at a target price of Rs 2,150. JP Morgan and Macquarie have neutral ratings with targets of Rs 2,070 and Rs 1,860, respectively.

The bulk deal by CPPIB is one of the largest transactions in the banking sector in recent times and reflects the confidence of foreign investors in the Indian banking system. Kotak Mahindra Bank is well-positioned to capitalize on the growth opportunities in the post-pandemic scenario with its strong balance sheet and digital capabilities.