It is not only FIIs who are selling Indian stocks with gusto, many company insiders are also at it. Paritosh Kashyap, non-executive director, Kotak Mahindra Bank recently sold 107,655 shares netting Rs.151 million. After the recent sale, Kashyap still holds 322,319 shares worth Rs.400 million. Kashyap earlier served as CEO of Kotak Mahindra Investments. It is not only Kashyap who has lightened his holding. Many Kotak veterans such as C Jayaram, Narayan SA, Jaimin Bhatt, Dipak Gupta, Gaurang Shah, D Kannan and Arvind Kathpalia also sold stock from February through March.
The stock was up 21% in FY20 until all that gain evaporated in the recent March carnage. In just under a month, the stock lost 35% to hit a 52-week low of Rs.1,001 on March 19 from its 52-week high of Rs.1,740 on February 19.
Insiders have sold stock worth Rs.1.5 billion in 2020 so far, with bulk of the selling happening in March. Of course, when you place that Rs.1.5 billion in context of the bank’s market cap of Rs.2.4 trillion, it seems like a rounding error. What is more significant here is the concerted selling among the top brass. It either points to sheer panic or the fear that the worst is possibly yet to come. In the earlier market decline post the FY19 Budget, insider selling was negligent as Kotak Mahindra Bank fell 20% from its peak over three months.
Still, the bank has always enjoyed a premium valuation by virtue of its prudent lending practices put in place by founder Uday Kotak. Alongside promoter Kotak’s stake of 29.92%, institutional holding stood at 51.8% in March 2020. Of late what has also buoyed the stock is the management’s plan to raise Rs.75 billion through a public offering and/or QIP. Brokerage CLSA Securities continues to be bullish with a price target of Rs.1,425. Its analysts feel that the latest fund raising might be used for an acquisition. Analysts at Morgan Stanley are even more optimistic and have a price target of Rs.1,680. They believe that the new capital will help cushion the balance sheet in these tough times.