Billionaire global investor Warren Buffett's Berkshire Hathaway Inc is looking to pick up a 10 percent stake in Kotak Mahindra Bank Ltd, according to a media report on Friday, a plan the Indian bank said it was unaware of.
Kotak Mahindra shares, which initially surged 14 percent in their sharpest intraday gain in nearly nine years on the CNBC-TV18 report, pared some gains to close up 8.8 percent following the company's statement.
Such a move by U.S.-based Berkshire Hathaway would come as Uday Kotak, the billionaire head of Kotak Mahindra, seeks to comply with a request by the Reserve Bank of India (RBI) to lower his holding in the private-sector lender to 20 percent by the end of this year, and to 15 percent by March 31, 2020.
Berkshire Hathaway is likely to invest between $4 billion and $6 billion in the private-sector bank by buying a promoter stake or through a preferential allotment, according to the report.
The acquisition of a 5 percent stake or more in an Indian bank requires prior approval from the central bank.
"The way (Uday) Kotak works is that he would look for a stable investor in case of a stake sale, so it may just happen that the bank may bring Berkshire into the fold," said Asutosh K Mishra, head of institutional equity research at Ashika Stock Broking Ltd.
Kotak Mahindra Bank said it was unaware of any plans by Berkshire Hathaway to buy a stake in the lender.
"The key thing to watch out will be whether it will be a preferential issue of fresh shares or a stake sale by Uday Kotak," Mishra said. "While Uday Kotak may not want to take out his money from the bank, the bank is over-capitalized. So it will be interesting to see how that equilibrium is reached."
In August, the RBI said the CEO's plan to reduce his stake by issuing non-convertible perpetual non-cumulative preference shares would not meet their promoter holding dilution requirement.
Uday Kotak directly held a 29.73 percent stake in the lender as of Sept. 30, 2018, according to Bombay Stock Exchange data.
Berkshire Hathaway did not immediately respond to Reuters' request for comment on the CNBC report.
Earlier this year, Berkshire Hathaway forayed into India's digital payments space by taking a 25-billion-rupee stake in the parent of Paytm. (Reporting by Chris Thomas, Krishna V Kurup and Aditya Soni in Bengaluru; Editing by Sunil Nair)