Is India proving a lure, once again, for the “Oracle of Omaha?”
Reuters reported that the famed value investor’s favored investment vehicle, Berkshire Hathaway, is eyeing taking a 10 percent stake in India’s Kotak Mahindra Bank. The bank, which saw its shares surge double digits intraday on the news, has said that it is unaware of that rumored intent.
If Berkshire were indeed to take a stake, the firm would pay between $4 billion to $5 billion, Reuters said, citing, in turn, CNBC. As has been noted, for Berkshire to purchase a holding that equates to ownership beyond 5 percent, the transaction has to have approval from the Reserve Bank of India.
The news comes as India’s central bank has asked the billionaire at the helm of the private bank, Uday Kotak, to lower his own holdings in the company from just under 30 percent today to 15 percent by the end of the first quarter of 2020.
“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,” Reuters quoted Asutosh K Mishra, head of research of institutional equity at Ashika Stock Broking Ltd., as stating. He noted that an offering could be done through a preferential issue or a stake sale by Kotak of his holdings. The arrangement would be one that would ostensibly seek to satisfy requirements in the country known as a “promoter holder dilution requirement.”
This, of course, would not be the first movement of Buffett, via Berkshire, into India’s banking and payments realm – and especially FinTech. The company earlier this year took a holding in the parent company of Paytm, worth (in local currency) 25 billion rupees.
Financial Times wrote that Buffett may be coming in here as Kotak faces the looming deadline to reduce his stake, and where, as the financial publication noted, the bank has had ambitions to be a global finance player. The company has a $207 billion portfolio that spans banking, finance and insurance.
The bank is the third largest, as measured by market capitalization, and has broad reach, as noted above. The company also said late last month that it has debuted an open banking platform that would make APIs available to developers and FinTechs – in turn bringing new tech-driven services to market. The company’s lending and payment products, as noted by The Verdict, have been “made live” across 30 partners, and more than 40 developers are in the midst of the integration process. The company also has Kotak Remit and blockchain-underpinned trade finance offerings in place.