Kotak Bank to issue 5 mn depository receipts

Private sector Kotak Mahindra Bank on Thursday said its board has approved issuing up to 5 million Depository Receipts (DRs) and converting one existing share to one such instrument.

The board has approved a "Sponsored Depository Receipt (DR) issuance programme of up to 5 million DRs, with conversion of 1 equity share to 1 DR," Kotak Mahindra Bank said in a filing on the BSE.

The decision in this regard was taken in a board meeting held today.

This is an enabling board approval and the issuance of DRs will not change the shareholding pattern as the existing shares held by investors will be converted.

The conversion into depository receipts will allow the foreign investors to trade these instrument at a stock exchange in their country.

However, these depository receipts would be calculated as foreign direct investment.

Recently, Kotak Mahindra Bank got approval from the government to raise foreign investment limit to 55 per cent.

The Reserve Bank barred overseas investments in it as foreign shareholding hit the permissible threshold following the merger of ING Vysya Bank with Kotak Mahindra Bank.

Investments from FIIs, FPIs and foreign banks had reached 48.55 per cent in the merged entity.

Depository Receipt means a foreign currency denominated instrument issued by a foreign depository on the back of securities deposited with a domestic custodian.

Such instrument should not be issued or transferred to a foreign depository for the purpose of issuing depository receipts at a price less than the price applicable to a corresponding mode of issue or transfer of such securities to domestic investors.