18 January 2016
3QFY16 Results Update | Sector:
Financials
BSE SENSEX
24,188
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,351
KMB IN
1825.7
744 / 594
0/7/10
1159
66.2
CMP: INR667
Kotak Mahindra Bank
TP: INR720 (+8%)
Neutral
In line: Healthy lending business performance; stable asset quality
KMB’s standalone adj. PAT (for one-off derivative loss in 2Q) grew ~4% QoQ to
INR6.35b (in line). However, lower-than-expected profitability in capital market
businesses led to a marginal (~4%) miss at the consolidated level. Consolidated loans
grew 5% QoQ, led by ~8% QoQ growth in CV loans and SBPL segment and ~6% QoQ
growth in corporate loans segment. NIMs remained stable QoQ at 4.4%. Asset
quality surprised positively, with net stress declining ~20bp QoQ to ~1.3%.
Integration with ING Vyasa Bank Limited (eIVBL) is well on track, with traction seen
in SB deposits growth (30% YoY in eIVBL network) and no fresh negative surprise on
asset quality.
Banking business:
Due to merger, previous period numbers are not comparable
for the bank. On pro-forma merged basis, 3QFY16 PAT grew 4% YoY (see Exhibit
1), loans/deposits increased 10% YoY, CASA ratio improved ~360bp YoY to
35.3%, NSL was stable YoY at 1.3% and PCR improved ~400bp YoY to ~59%.
Other businesses:
a) Strong customer assets growth (9% QoQ) seen in KMPL-led
by strong growth in LAS business. Auto loans grew 4% QoQ. b) K-Sec market
share remained flat QoQ at 2.7%; however, PAT declined QoQ—led by lower
trading volumes and days at the industry level. c) Overall average AUM declined
3% QoQ; however, equity AUM grew 7% QoQ
Valuation and view:
Merger with eIVBL places KMB in a sweet spot, with strong
presence across geographies and products, and continued healthy capitalization (T1
of ~15%). The merged entity is India’s fourth largest private sector bank, with a loan
book of INR1.4t and loan market share of 1.8%+. KMB’s premium multiples are likely
to sustain, considering the strong growth and operating leverage available across
businesses and clean loan portfolio. While we are positive on the business, at 3.2x
consolidated BV and 27x EPS, upside is limited. Reiterate
Neutral;
our SOTP-based
TP is INR720 (implied 3.5x FY17 BV).
M.Cap. (INR b) / (USD b) 1,217.7/18.4
Financials & Valuation (INR b)
Y/E Mar
NII
OP
NP
Cons. NP
NIM (%)
Cons. EPS
(INR)
EPS Gr. (%)
2016E 2017E 2018E
68.5
40.1
19.9
33.5
4.1
18.4
77.1
51.5
28.7
45.1
4.1
24.7
34.6
206
12.7
1.4
3.5
92.8
65.2
38.0
57.1
4.2
31.3
26.6
237
14.1
1.5
3.5
Cons. BV. (INR) 182
Cons. RoE (%) 10.6
RoA (%)
Valuations
1.1
3.5
P/E(X) (Cons.)
P/BV (X)
36.3 27.0 21.3
(C
)
Div. Yield (%)
3.7
3.2
2.8
* Proforma merged (KMB+EIVBL )
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Dhaval Gada
(Dhaval.Gada@MotilalOswal.com); +91 22 3982 5505
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Kotak Mahindra Bank
Exhibit 1: Proforma Quarterly Performance
3QFY16
(INR m)
Interest earned
Interest expenses
Net interest income
Non-Interest income
Fees and Services
Treasury Income
Others
Total Income
Operating expenses
Employee cost
Others
Pre-provision profits
Provisions
PBT
Taxes
Profit After Tax
Asset quality
GNPA
NNPA
Gross NPA %
Net NPA %
Provisions Coverage (%)
Restructured loans
% of loans
Balance Sheet (INR b)
Current deposits
Savings deposits
CASA deposits
CASA ratio (%)
Deposits
Borrowings
Investments
Advances
Branches
ATM
Kotak+ING
41,217
23,555
17,662
7,222
4,660
2,000
562
24,884
12,832
6,182
6,650
12,052
2,353
9,700
3,352
6,347
26,903
11,108
2.3
1.0
58.7
3,460
0.3
196
266
462
35.3
1,309
198
453
1,153
1,298
1,987
2QFY16
Kotak+ING
40,057
23,269
16,787
6,157
4,570
910
677
22,945
12,497
6,230
6,267
10,448
1,764
8,684
2,989
5,695
26,554
11,676
2.4
1.1
56.0
4,030
0.4
203
243
447
36.2
1,232
219
426
1,117
1,269
1,934
QoQ (%)
Reported
3
1
5
17
2
120
-17
8
3
-1
6
15
33
12
12
11
1
-5
Kotak
25,001
14,407
10,594
4,941
3,280
1,180
481
15,535
8,160
3,679
4,481
7,376
299
7,077
2,431
4,645
12,199
6,298
1.9
1.0
48.4
1,591
0.3
107
124
231
31.5
731
111
302
646
661
1,195
3QFY15
ING
14,877
9,961
4,917
2,056
1,863
140
53
6,972
4,171
2,479
1,692
2,801
615
2,186
729
1,457
7,640
2,683
1.9
0.7
64.9
5,200
1.3
73
73
146
31.8
460
90
195
406
583
650
Kotak+ING
39,878
24,368
15,511
6,997
5,143
1,320
534
22,508
12,331
6,158
6,173
10,177
914
9,262
3,160
6,102
19,839
8,981
1.7
0.8
54.7
6,791
0.6
180
197
377
31.7
1,190
202
497
1,052
1,244
1,845
Growth YoY (%)
Proforma
3
-3
14
3
-9
52
5
11
4
0
8
18
157
5
6
4
36
24
Reported
65
64
67
46
42
69
17
60
57
68
48
63
686
37
38
37
121
76
-14
-49
117
-4
9
3
9
35
23
83
115
100
6
-10
6
3
2
3
10
-2
-9
10
79
78
50
78
54
54
142
142
Source: MOSL, Company
18 January 2016
2

Kotak Mahindra Bank
Exhibit 2: Quarterly performance v/s our estimates and reasons for deviation (INR m)
Kotak Bank (standalone)
Net Interest Income
% Change (Q-o-Q)
Operating Profit
% Change (Q-o-Q)
Net Profit
% Change (Q-o-Q)
Other Businesses
Kotak Prime
Kotak Mah. Investments
Kotak Mah. Capital Co
Kotak Securities
International subs
Kotak Mah. AMC & Trustee Co.
Kotak Investment Advisors
Kotak OM Life Insurance
Con.adj and MI
Consol. PAT
% Change (Q-o-Q)
3QFY16A
17,662
5.2
12,052
15.4
6,347
11.5
1,260
390
60
550
260
40
-10
600
-40
9,457
32.0
3QFY16E
17,583
4.7
11,699
12.0
6,287
10.4
1,300
375
80
810
400
250
0
550
-150
9,902
38.2
v/s Est.
0
3
1
Comments
NIMs better than expected; loan growth marginally lower
than expected
Better than expected trading gains drove PPP beat
Strong core operating performance; Asset quality stable
QoQ
Miss despite strong growth in LAS business
Partially helped by capital markets
Lower trading volumes QoQ; Market share stable at 2.7%
One-off operational expenses
-3
4
-25
-32
-35
-84
9
-4
Lending business inline; Capital market businesses
marginal miss
Source: MOSL, Company
Most non-lending businesses disappoints
K-Sec market share stable
QoQ at 2.7%
Asset management business reported PAT of INR290m vs. INR550m in 2QFY16
(INR60m in 2QFY16). Domestic AMC business PAT declined to INR40m vs
INR230m a quarter ago due to one off operational expenses. Overall AUM
declined 3% QoQ however, equity AUM improved 7% QoQ
Capital market related business PAT was at INR6.1b vs INR7.8b driven by decline
in profitability in the securities division (led by lower trading volumes and days
during the quarter). K-sec market share remained stable QoQ at 2.7%.
Life insurance profit increased 25% QoQ to INR6b.
18 January 2016
3

Kotak Mahindra Bank
Exhibit 3: KMPL: Sharp increase in loan growth led by loan
against shares (+15% YoY, +9% QoQ)
Auto Loans (INR b)
Other Loans (INR b)
Exhibit 4: Debt funds now accounts for 42% of overall AUMs
v/s 39% in 2QFY16
Debt
Offshore Funds
17
16
2
5
52
Equity
Alternate assets
20
18
18
1
7
47
PMS
Insurance
18
8
10
16
1
5
17
10
17
1
6
18
10
18
1
6
9
19
19
1
9
43
9
18
22
1
10
40
9
7
15
23
1
14
41
6
15
25
1
14
39
6
15
22
1
14
42
6
26
1
12
36
51
48
45
Source: MOSL, Company
Source: MOSL, Company
Exhibit 5: K-Sec : QoQ profitability deterioates (INR b)
Tot. Inc.
26 26
16
19 18 28 17
8
PAT
PATM (%)
33
30
29
29 27
27 28
27
26
24
Exhibit 6: K-Sec market share remains stable QoQ (%)
2.9 2.9 2.9
2.7
2.5 2.5
2.6
2.5
2.2
2.9
2.7
2.4
2.3 2.3
2.8
2.9
2.7 2.7 2.7
21
Source: MOSL, Company
Source: MOSL, Company
Exhibit 7: Investment Banking: Earnings trend (INR m)
Tot. Inc.
PAT
Exhibit 8: Kotak AMC: Equity AUMs remain stable (INR b)
Eq. AUM
PMS AUM
Offshore AUM
240
217 211
210
157
132134134
120125
101
99 100 102
97
102
97
96
72 76 73 77 82
59 71
36 30 29 32
34 28 31 30 36 34 47
31 34
10 10
9
6 6 7 7 7 8
Source: MOSL, Company
Source: MOSL, Company
18 January 2016
4

Kotak Mahindra Bank
3QFY16 Conference call highlights
Macro related
Low commodity price will be significant positive for India. However, it will have
some impact on remittance flows, exports and commodities players
Expect bottoming out period around April-September 2016 at the macro level
Domestic financial savings which moved to risk assets (in 2015) may move to
risk free assets as the markets are not conducive
Business related
Focused on creating capacity both on liability and capital to capitalize on growth
opportunity. On loan growth focus remains on better risk adjusted returns and
not compromise on the credit quality
Bulk of decline in Asset management business is due one time operational
expenses
In KMPL lower value car sales is driving the car financing growth. Higher value
car sales growth remains muted
Decline in market volumes and lesser trading days led to drop in securities
business PAT
Guidance
Guidance for FY16 a) Credit cost of 80-85bp, b) 15% loan growth (adjusted for
stress loans of VYSB of ~6%). Cost to Income ratio will go below 50% in FY17.
KMB remains comfortable for loan growth of 1.5-2x of Nominal GDP growth.
Seeing good traction in consumer Urban and moving up the credit rating in
terms of corporate.
NIMs are unlikely change in ensuing quarters despite competition to rise in the
high quality
Looking at raising stress asset fund for potential opportunities in coming months
On integration with VYSB
In the final stages of integration in two major segments a) Technology and b)
Organization Structure
Synergies have started to flow through VYSB - SA deposits are growing by ~30%
YoY. Average quarterly customer additions are going up by ~3%.
Despite adding front line staff employee expenses are well controlled as low
hanging fruits are available at the supervisory level
Expects the full integration to get over by May 2016
Maintains the total integration guidance of INR2b of which INR1.42b already
spent. People, process and technology etc. is proceeding as per plan. Even
integration of support staff is already over
On digital side
Mobile transaction in December 2015 at INR23b in terms of value vs INR10b in
April 2015. Bank has 6.8% market share (in value terms) in November 2015.
Digital value payment transaction have crossed 1.5m in December 2015
50% of Term Deposits are booked online by customers
18 January 2016
5

Kotak Mahindra Bank
Mobile volume transactions crossed INR40b per month. No of trades on mobile
app crossed over 0.3m per month
Via App 7% of the brokerage is being contributed
14% of the renewals and 40% of the switch request in the life insurance business
is coming via digital platform
MF provides Factsheet on mobile first of its kind
Others
Strong growth in others in KMPL is due to financing of capital market
transactions (LAS)
Hardly any profits from ARD division in this quarter
Employee strength on the standalone basis at 31,000 (30,400 in 2Q) and at
group level at 45,000. Decline in employee expenses is due to adding more
employees at front end and getting tighter supervisory role
Valuation and view
Excess capitalisation is
leading to (tier-I ratio of
~15%) relatively lower RoE
of ~13% over FY16/18
Our SOTP-based target
price is INR720 (3.5x FY17
consol. BV)
Merger with eIVBL places KMB in a sweet spot with strong presence across
geographies, products and healthy capitalization (T1 of ~15%). The merged
entity is the fourth largest private sector bank with a loan book of ~INR1.4t and
market share of 1.8%+ of loans. Further, KMB’s conglomerate structure places it
in a very sweet position to ride the up-cycle across financial services.
Improvement in macro-economic environment coupled with healthy
capitalisation leaves KMB in a strong position to lever on growth opportunities
in the economy. To leverage on its geographical expansion, the management is
focusing on product penetration, with higher emphasis on Agriculture (will help
in priority sector loans), small business loans (untapped opportunity; creating
niche for itself) and mortgage loan. CV loans are bottoming out and likely to
show traction in ensuing quarters. We cut estimates by ~5% over FY17/18 to
factor in lower loan CAGR (incl. eIVBL ) of ~20% over FY15/18. PAT CAGR is
expected to be ~20%.
Post-merger with eIVBL , share of lending business in steady state profitability is
likely to increase to ~83% vs. 81%. Capital light nature of capital market related
businesses can provide upside to ROE if there is a strong improvement in
business cycle.
Our SOTP is INR720 (based on pro-forma merger with eIVBL ) – 3.5xFY17E cons.
BV. Backed by higher capitalization, diversified business loan book, strong risk
management and presence across financial services KMB historically traded at a
premium multiples to peers despite relatively lower ROE. While we are positive
on the business, valuations at 3.2x/27x Cons BV/EPS (pro-forma merged basis)
limits the upside. Maintain
Neutral.
18 January 2016
6

Kotak Mahindra Bank
Exhibit 9: Kotak Mahindra: SOTP Valuation (FY17-based)
Lending Business
Kotak Mahindra Bank
Kotak Prime (Car and other loans)
Kotak Investment Company (LAS)
Asset Management Business
Domestic Mutual Fund
Alternative Assets
Offshore Funds
Capital Markets related Business
Kotak Securities
Kotak Investment Banking (KMCC)
Kotak Life Insurance
Target Value
Current market cap.
Upside (%)
Value
Value
INR per
(INR B)
(USD B)
share
1,175
17.7
644
1,036
15.6
567
110
1.7
60
29
0.4
16
58
0.9
32
37
0.6
21
8
0.1
7
13
0.2
4
53
0.8
29
50
0.8
27
3
0.0
1
30
0.5
16
1,316
19.9
721
1,218
18.4
667
8.1
8.1
Source: MOSL, Company
% To Total Rationale
89
79
4x FY17E Core NW, ~1.5% RoA and ~14% Core RoE
8
2.5x FY17E Net Worth, ~15% Core RoE
2
3x FY17E Net Worth
4
3
5% of FY17E Avg. AUM of INR750b
1
12% of FY17E AUM of INR63b
1
5% of FY17E AUM of INR265b
4
4
15x FY17E Earnings; Implied ~2x Core BV
0
1x FY17E Free Networth
2
100
Implied 3.5x PBV; ROE of ~13%
Exhibit 10: We cut our earnings estimates by ~5% to factor in lower loan growth
INR b
FY16
Net Interest Income 68.8
Other Income
27.5
Total Income
96.4
Operating Expenses 55.2
Operating Profits
41.2
Provisions
9.8
PBT
31.4
Tax
10.8
Standalone PAT
20.6
Consolidated PAT
35.1
Loans
1,284
Deposits
1,439
Margins (%)
4.1
SA RoA (%)
1.1
Core RoE (%)
9.0
Old Est.
FY17
78.8
34.8
113.6
59.7
53.9
7.8
46.2
15.9
30.2
47.5
1,566
1,726
4.1
1.4
12.0
FY18
96.2
43.0
139.2
70.2
69.0
8.0
61.0
21.1
40.0
60.2
1,942
2,106
4.2
1.5
14.0
Revised Est.
FY16 FY17 FY18
68.5
77.1
92.8
26.2
33.5
41.7
94.6 110.5 134.5
54.6
59.0
69.3
40.1
51.5
65.2
9.7
7.8
7.2
30.4
43.8
58.0
10.5
15.1
20.0
19.9
28.7
38.0
33.5
45.1
57.1
1,230 1,476 1,831
1,389 1,639 1,983
4.1
4.1
4.2
1.1
1.4
1.5
8.7
11.5
13.5
FY16
-0.5
-4.9
-1.8
-1.1
-2.7
-0.8
-3.3
-3.3
-3.3
-4.5
-4.2
-3.4
Change (%)
FY17
-2.2
-3.9
-2.7
-1.2
-4.4
0.0
-5.2
-5.2
-5.2
-5.2
-5.7
-5.1
FY18
-3.5
-3.0
-3.4
-1.2
-5.6
-10.2
-4.9
-4.9
-4.9
-5.2
-5.7
-5.8
Source: MOSL, Company
Exhibit 11: Lending business driving estimate cut
Old Est.
FY16 FY17 FY18
Kotak Mahindra Bank (Standalone) 20.6 30.2 40.0
Kotak Mahindra Prime
5.1
5.8
6.7
Kotak Mahindra Investments
1.5
2.0
2.6
Lending Business
27.2 38.1 49.2
International subsidiaries
1.5
1.7
1.9
Kotak Mahindra AMC & Trustee Co 0.9
1.2
1.4
Kotak Investment Advisors
0.0
0.1
0.1
Asset Management Business
2.4
2.9
3.4
Kotak Securities
3.1
3.9
4.6
Kotak Mahindra Capital Company 0.3
0.3
0.3
Capital Market Business
3.4
4.1
5.0
Consol. PAT excluding Kotak Life 33.0 45.2 57.6
Kotak OM Life Insurance
2.3
2.5
2.8
Consolidation Adjust.
-0.2 -0.1 -0.1
Consol. PAT Including Kotak Life 35.1 47.6 60.2
INR b
Revised Est.
FY16 FY17 FY18
19.9 28.7 38.0
5.0
6.0
6.9
1.4
2.0
2.5
26.4 36.7 47.4
1.2
1.4
1.6
0.6
0.9
1.0
0.0
0.0
0.0
1.8
2.2
2.6
2.7
3.3
4.0
0.2
0.3
0.3
2.9
3.6
4.3
31.0 42.6 54.3
2.4
2.6
2.9
0.2 -0.1 -0.1
33.5 45.1 57.1
Change (%)
FY16 FY17 FY18
-3.3 -5.2 -4.9
-1.7 3.2
3.3
-2.1 0.6 -1.9
-3.0 -3.6 -3.7
-28
-15
-6.1
-24
-12
-5.7
-25
-12
-5.7
-4.5 -5.2 -5.2
Source: MOSL, Company
18 January 2016
7

Kotak Mahindra Bank
Exhibit 12: KMB Group: Earnings Estimates
KMB - Consolidated (INR M)
Lending Business
Kotak Mahindra Bank
Kotak Mahindra Prime (car finance)
Kotak Mah. Investments (lending)
Capital Market
Kotak Securities
Kotak Investment banking (KMCC)
Asset Management Business
Kotak AMC and trustee co
International Subsidiaries (AMC and IB)
KMIA (alternative assets management)
Sub Total
Growth YoY
Om Kotak Life Ins (from FY06 Onwards)
Consolidated PAT (Incl. Insurance)
Growth YoY
Consolidation Adjustments
Reported PAT Per MI and AFF
*Including ING Vysya Bank
FY2011
14,786
11,367
3,179
240
2,338
1,819
519
1,009
173
509
327
18,133
22
1,014
19,147
24
269
18,878
FY2012
19,415
15,414
3,849
153
1,318
1,258
59
405
154
-110
361
21,137
17
2,030
23,167
21
99
23,068
FY2013 FY2014 FY2015E FY2016E FY2017E FY2018E
24,380
26,930
30,387
26,351
36,719
47,394
19,737
21,603
24,250
19,894
28,676
37,989
4,307
4,907
5,077
5,026
6,006
6,868
336
420
1,060
1,430
2,038
2,537
1,312
1,743
3,030
2,858
3,636
4,348
1,145
1,603
2,900
2,650
3,340
4,008
167
140
130
208
296
340
401
660
480
1,750
2,220
2,558
35
410
-290
600
870
1,008
60
70
520
1,150
1,350
1,550
307
180
250
0
0
0
26,093
29,333
33,897
30,960
42,575
54,300
23
12
16
-9
38
28
1,900
2,390
2,280
2,394
2,633
2,897
27,993
31,723
36,177
33,354
45,208
57,197
21
13
14
-8
36
27
-1.0
-179
30
-590
125
125
33,504
45,083
57,072
28,172
31,693
36,767
Source: MOSL, Company
Exhibit 13: Kotak Group Earnings Snapshot (% of total)
Lending Business
Kotak Mahindra Bank
Kotak Mahindra Prime (car finance)
Kotak Mah Investments (lending)
Capital Market
Kotak Securities
Kotak Investnment banking (KMCC)
Asset Management Business
Kotak AMC and trustee co
International Subsidiaries (AMC and IB)
KMIA (alternative assets management)
Sub Total
Om Kotak Life Ins (from FY06 Onwards)
Consolidated PAT (Incl Insurance)
Less: Cons. Adj, MI and Affliates etc
Consolidated PAT (Post Adjustments)
*Including ING Vysya Bank
78.4
60.3
16.9
1.3
12.4
9.7
2.8
5.4
0.9
1.7
96.2
5.4
101.6
1.6
100.0
84.8
67.4
16.8
0.7
5.8
5.5
0.3
1.8
0.7
1.6
92.4
8.9
101.2
1.2
100.0
87.0
70.5
15.4
1.2
4.7
4.1
0.6
1.4
0.1
1.1
93.1
6.8
99.9
-0.1
100.0
86.2
69.2
15.7
1.3
5.6
5.1
0.4
2.1
1.3
0.6
93.9
7.7
101.6
1.6
100.0
83.1
66.3
13.9
2.9
8.3
7.9
0.4
1.3
-0.8
0.7
92.7
6.2
98.9
-1.1
100.0
78.7
59.4
15.0
4.3
8.5
7.9
0.6
5.2
1.8
2.7
0.0
92.4
7.1
99.6
-0.4
100.0
81.4
63.6
13.3
4.5
8.1
7.4
0.7
4.9
1.9
-0.5
0.0
94.4
5.8
100.3
0.3
100.0
83.0
66.6
12.0
4.4
7.6
7.0
0.6
4.5
1.8
0.2
0.0
95.1
5.1
100.2
0.2
100.0
Source: MOSL, Company
18 January 2016
8

Kotak Mahindra Bank
Exhibit 14: Financials: Valuation metrics
66
Rating
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
RoA (%)
RoE (%)
(INR) (USDb) FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17
ICICIBC*
Buy
223
19.6 20.7 24.8 7.1
5.4
131 149 1.12
0.90 1.49 1.54 14.1 15.0
HDFCB
Buy
1,029
39.1 49.1 59.3 21.0 17.4 285 331 3.61
3.11 1.88 1.86 18.4 19.3
AXSB
Buy
374
13.4 33.9 40.8 11.0
9.2
216 249 1.73
1.50 1.61 1.65 16.7 17.5
KMB*
Neutral
667
18.5 19.2 26.0 34.7 25.6 183 209 3.64
3.20 1.11 1.40 13.9 14.8
YES
Buy
656
4.2
57.3 74.5 11.4
8.8
325 385 2.02
1.71 1.60 1.70 18.9 21.0
IIB
Buy
896
8.0
39.0 50.1 23.0 17.9 293 337 3.05
2.66 1.92 2.04 16.7 15.9
DCBB
Under Review
73
0.3
5.9
6.9 12.4 10.6
61
68
1.20
1.08 0.95 0.93 10.2 10.8
FB
Neutral
48
1.3
3.9
4.7 12.3 10.1
48
52
1.00
0.93 0.77 0.83 8.4 9.5
JKBK
Neutral
69
0.5
16.2 18.0 4.3
3.8
138 152 0.50
0.45 1.00 1.02 12.3 12.4
SIB
Buy
18
0.4
2.5
3.1
7.1
5.9
29
31
0.63
0.58 0.55 0.58 9.4 10.3
Private Aggregate
105.1
16.5 13.6
2.41
2.12
SBIN (cons)*
Buy
181
21.3 23.2 31.0 7.3
5.4
229 254 0.74
0.66 0.67 0.78 10.9 12.7
PNB
Under Review
91
2.7
15.9 22.8 5.8
4.0
215 235 0.43
0.39 0.50 0.64 7.8 10.1
BOI
Neutral
93
1.1 -21.1 9.3
-4.4 10.0 341 350 0.27
0.26 -0.26 0.10 -6.3 2.7
BOB
Buy
127
4.4
11.6 19.3 10.9
6.6
176 191 0.72
0.66 0.36 0.55 6.9 10.5
CBK
Under Review
178
1.4
34.8 57.3 5.1
3.1
566 610 0.31
0.29 0.31 0.46 6.5 9.8
UNBK
Buy
112
1.2
32.1 43.1 3.5
2.6
308 344 0.36
0.33 0.55 0.66 11.2 13.2
OBC
Under Review
105
0.5
36.4 50.0 2.9
2.1
467 505 0.23
0.21 0.45 0.56 8.0 10.3
INBK
Buy
90
0.7
20.2 29.5 4.5
3.0
277 300 0.32
0.30 0.48 0.62 7.5 10.2
CRPBK
Neutral
38
0.1
12.6 18.7 3.0
2.1
137 152 0.28
0.25 0.42 0.57 9.5 12.9
ANDB
Buy
51
0.5
17.8 22.8 2.9
2.2
180 196 0.28
0.26 0.55 0.62 10.3 12.2
IDBI
Neutral
55
1.3
5.3
8.5 10.4
6.5
146 153 0.38
0.36 0.23 0.34 3.7 5.7
DBNK
Neutral
35
0.3
1.5 10.0 24.1
3.5
120 128 0.29
0.28 0.06 0.38 1.2 8.0
Public Aggregate
35.5
8.5
5.5
0.57
0.53
HDFC*
Under Review 1,134
27.1
35
41
19.9 14.9 165 188 4.18
3.23 2.42 2.51 23.6 22.3
LICHF
Buy
463
3.5
34
42
13.8 11.0 182 216 2.55
2.15 1.48 1.54 19.9 21.2
DEWH
Buy
191
0.8
26
33
7.3
5.8
179 204 1.07
0.94 1.27 1.29 15.6 17.2
IHFL
Buy
657
4.2
53
68
12.3
9.7
274 302 2.40
2.17 3.73 3.85 24.9 23.6
GRHF
Buy
234
1.3
7
8
35.2 28.2
24
28
9.93
8.29 2.13 1.98 28.3 27.8
REPCO
Buy
580
0.5
24
35
24.6 16.8 151 182 3.84
3.19 2.08 2.28 16.8 20.7
RECL
Under Review
185
2.8
63
57
2.9
3.2
301 345 0.62
0.54 3.21 2.45 22.8 17.6
POWF
Under Review
162
3.2
54
52
3.0
3.1
285 323 0.57
0.50 3.08 2.63 20.5 17.2
SHTF
Buy
765
2.6
62
73
12.3 10.5 457 515 1.67
1.49 2.08 2.29 14.0 15.0
MMFS
Buy
216
1.8
12
15
17.9 14.1 109 120 1.98
1.80 1.93 2.22 11.5 13.3
BAF
Buy
5,496
4.4
224 276 24.5 19.9 1,351 1,582 4.07
3.47 3.12 2.92 19.9 18.8
MUTH
Buy
175
1.1
19
24
9.4
7.4
140 155 1.25
1.13 2.60 2.85 14.0 16.1
SKSM
Buy
478
0.9
25
34
19.5 14.1 107 141 4.45
3.38 5.55 5.59 25.8 27.2
NBFC Aggregate
55.4
12.7 11.8
2.20
1.95
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
Source: MOSL, Company
18 January 2016
9

Kotak Mahindra Bank
Financials and valuations (KMB+EIVBL - Proforma-merged)
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Non Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Consolidated PAT (incl VYSB)
Change (%)
2012
100,370
63,162
37,208
19.9
16,471
53,679
18.2
29,450
24,229
23.6
1,688
22,541
7,127
31.6
15,414
35.6
22,885
21.4
2013
129,041
81,598
47,443
27.5
18,875
66,318
23.5
34,825
31,493
30.0
2,758
28,735
8,998
31.3
19,737
28.0
28,014
22.4
2014
139,722
84,991
54,731
15.4
22,668
77,399
16.7
40,353
37,046
17.6
4,545
32,501
10,898
33.5
21,603
9.5
31,228
11.5
2015
155,462
94,007
61,455
12.3
27,853
89,307
15.4
48,236
41,071
10.9
4,399
36,673
12,423
33.9
24,250
12.3
36,571
17.1
2016E
163,727
95,261
68,466
11.4
26,177
94,643
6.0
54,578
40,065
-2.5
9,691
30,373
10,479
34.5
19,894
-18.0
33,504
-8.4
2017E
179,925
102,865
77,061
12.6
33,468
110,528
16.8
58,998
51,530
28.6
7,750
43,780
15,104
34.5
28,676
44.1
45,083
34.6
(INR Million)
2018E
210,269
117,442
92,827
20.5
41,710
134,537
21.7
69,335
65,202
26.5
7,204
57,998
20,009
34.5
37,989
32.5
57,072
26.6
Balance Sheet
Y/E March
Net Worth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
2012
123,309
737,319
24.0
244,498
27.0
222,920
46,828
1,126,673
58,651
342,823
21.7
678,159
28.1
9,508
37,532
1,126,673
2013
144,646
923,628
25.3
283,534
16.0
269,219
51,542
1,385,301
65,226
471,517
37.5
802,410
18.3
9,640
36,508
1,385,301
2014
197,401
1,002,891
8.6
325,865
14.9
225,641
57,905
1,479,986
118,060
422,053
-10.5
888,565
10.7
16,315
34,994
1,479,986
2015
219,994
1,240,148
23.7
412,995
26.7
205,411
67,119
1,732,672
96,930
513,313
21.6
1,069,718
20.4
16,204
36,507
1,732,672
2016E
235,917
1,388,965
12.0
506,910
22.7
215,682
79,200
1,919,765
101,635
461,982
-10.0
1,230,175
15.0
16,452
109,520
1,919,765
2017E
263,591
1,638,979
18.0
633,637
25.0
248,034
93,456
2,244,060
117,022
508,180
10.0
1,476,210
20.0
16,700
125,948
2,244,060
(INR Million)
2018E
300,252
1,983,165
21.0
792,046
25.0
297,641
112,147
2,693,205
141,918
558,998
10.0
1,830,501
24.0
16,948
144,840
2,693,205
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
E: MOSL Estimates
11,771
2,899
1.71
0.43
75.4
13,283
3,205
1.63
0.40
75.9
17,037
6,756
1.90
0.76
60.3
22,884
10,722
2.12
1.00
53.1
31,338
13,319
2.51
1.08
57.5
31,105
12,442
2.08
0.84
60.0
(%)
33,425
13,370
1.81
0.73
60.0
18 January 2016
10

Kotak Mahindra Bank
Financials and valuations (KMB+EIVBL - Proforma-merged)
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Consolidated ROE
Other Ratios (%)
Int. Expense/Int.Income
Non Int. Inc./Net Income
Cost/Income
Empl. Cost/Op. Exps.
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
2012
10.8
12.8
7.3
7.4
7.0
3.4
4.0
2013
11.0
13.1
7.8
7.6
7.1
3.5
4.1
2014
10.5
12.4
7.7
7.0
6.8
3.5
4.1
2015
10.4
12.1
7.8
7.0
6.8
3.4
4.1
2016E
9.9
10.9
7.0
6.2
5.7
3.6
4.1
2017E
9.7
10.5
6.8
5.9
5.3
3.8
4.1
2018E
9.5
10.3
6.5
5.6
5.0
3.9
4.2
14.0
1.5
14.8
14.8
1.6
15.0
12.7
1.5
13.4
11.7
1.5
13.0
8.7
1.1
10.6
11.5
1.4
12.7
13.5
1.5
14.1
62.9
30.7
54.9
51.7
92.0
33.2
46.5
63.2
28.5
52.5
52.4
86.9
30.7
51.1
60.8
29.3
52.1
51.4
88.6
32.5
42.1
60.5
31.2
54.0
49.7
86.3
33.3
41.4
58.2
27.7
57.7
51.8
88.6
36.5
33.3
57.2
30.3
53.4
50.4
90.1
38.7
31.0
55.9
31.0
51.5
51.5
92.3
39.9
28.2
Valuation
Standalone Book Value (INR)
Change (%)
Consolidated BV (INR)
Change (%)
Price-BV (x)
Consolidated EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
56.1
89.6
65.8
104.6
82.2
126.3
120.1
164.5
4.1
20.1
33.3
0.4
0.0
129.2
7.6
182.2
10.7
3.7
18.4
-8.5
36.3
0.3
0.0
144.4
11.7
206.4
13.3
3.2
24.7
34.6
27.0
0.5
0.0
164.5
13.9
237.0
14.8
2.8
31.3
26.6
21.3
0.6
0.0
12.4
14.7
16.0
0.2
0.2
0.2
18 January 2016
11

Kotak Mahindra Bank
Corporate profile: Kotak Mahindra Bank
Company description
Kotak Mahindra Bank (KMB) is part of the larger
Kotak Mahindra Group led by Mr. Uday Kotak,
Founder and Managing Director of the Bank. The
group has a strong presence across financial
services value chain. Notably, KMB is the only bank
in India’s corporate history to be converted into a
bank from a non-banking finance company. The
bank has pan-India presence with 1298 branches
and 1,987 ATMs as on December 31, 2015.
Recently, KMB merged with EIVBL in an all-stock
deal.
Exhibit 10: Sensex rebased
Exhibit 15: Shareholding pattern (%)
Sep-15
Promoter
DII
FII
Others
33.8
4.2
34.7
27.3
Jun-15
33.9
3.7
35.4
27.1
Sep-14
40.1
2.0
34.7
23.2
Exhibit 16: Top holders
Holder Name
ING Mauritius Investments I
Europacific Growth Fund
Canada Pension Plan Investment Board - Managed
Sumitomo Mitsui Banking Corporation
National Westminster Bank Plc As Depositary Of First
% Holding
6.4
4.8
3.9
3.6
2.0
Note: FII Includes depository receipts
Exhibit 17: Top management
Name
Uday Kotak
C Jayaram
Dipak Gupta
Jaimin Bhatt
Shanti Ekambaram
Designation
Executive Vice Chairman & MD
Joint Managing Director
Joint Managing Director
CFO
CPresident Corporate and IB
Exhibit 18: Directors
Name
Shankar Acharya*
C Jayaram
Dipak Gupta
Asim Ghosh*
Amit Desai*
Name
Prakash Apte*
N P Sarda
Uday Kotak
S Mahendra Dev*
Farida Khambata
*Independent
Exhibit 19: Auditors
Name
S B Billimoria & Co
Type
Statutory
Exhibit 20: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
18.4
24.7
31.3
Consensus
forecast
20.1
27.9
36.1
Variation
(%)
-8.6
-11.4
-13.3
18 January 2016
12

Kotak Mahindra Bank
NOTES
18 January 2016
13

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Kotak
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Mahindra Bank
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KOTAK MAHINDRA BANK LTD
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18 January 2016
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