Way ahead
Reading the pulse of the equity market enabled Kotak Investment Banking to lead the pack by a distance in India.
The global technology sector meltdown, rising interest rates and fears of recession resulted in fewer and shorter launch windows, but Kotak was able to gauge appetite from both local and foreign investors to judge when to launch deals.
In April to May, noticing there was high liquidity with local investors and selected foreign demand for certain sectors, Kotak advised state-owned Life Insurance Corporation of India and e-logistics firm Delhivery to launch their respective Rs206bn (US$2.66bn) and Rs52bn IPOs.
Both deals were challenging and came at a time when foreign investors were net sellers of Indian shares.
Kotak’s deep relationship with investors brought in local institutions to subscribe to the LIC IPO. It also ensured foreign investor interest was strong for Delhivery despite their weak appetite for Indian stocks in general and technology IPOs in particular.
Foreign investors contributed more than 46% of the institutional demand for Delhivery, which soared 10% on its trading debut.
Global Health’s bigger-than-planned IPO again demonstrated Kotak’s unparalleled ability to time the market. The Indian hospital chain put its float on hold in June because of uncertainty on the extent of the US Federal Reserve rate increases. Kotak, as one of the four leads, advised the company to launch the IPO in November when there was more clarity on US monetary policy and renewed investor interest in the healthcare sector. As a result, the IPO raised Rs22bn instead of Rs20bn as previously planned.
Apart from IPOs, it dominated follow-on offerings, launching some of the largest blocks of the year. Its ability to get the best outcome for issuers, vendors and investors ensured that it had repeat clients.
Its largest follow-on offering was private equity firm KKR’s Rs92bn block in Max Healthcare Institute in August, the second KKR block in the Indian hospital chain that Kotak helped manage during the year.
The deal, involving around 27% of the company’s capital, was priced at a narrow discount of 2.5% to the pre-deal close at a time when blocks were generally priced at a 5%–10% discount.
The clean-up trade removed the overhang, prompting shares in Max Healthcare to surge 10% on the day the block was crossed on the local stock exchanges.
Kotak’s deft performance meant it won several sole mandates. The bank sold two blocks in Zee Entertainment for Invesco Oppenheimer (Rs21bn in April and Rs14bn in October) on a sole basis, and Canada Pension Plan Investment Board entrusted Kotak alone to sell a block each in Kotak Mahindra Bank (Rs68bn) and SBI Life Insurance (Rs6bn).
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