Kotak Mahindra Bank
BSE SENSEX
31,904
S&P CNX
9,873
20 July 2017
1QFY18 Results Update | Sector: Financials
CMP: INR980
TP: INR1,153(+18%)
Buy
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Strong all-around performance; Merger synergies yielding results
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
KMB IN
1,839
1,366.3 / 20.0
1019 / 692
-3/18/11
2001
69.9
Financials & Valuations (INR b)
Y/E March
2018E 2019E
NII
93.9 112.1
OP
72.7 90.6
Cons. NP
61.7 78.1
Cons. EPS (INR)
32.4 41.0
EPS Gr. (%)
20.9 26.5
Cons. BV. (INR)
232
272
Cons. RoE (%)
15.0 16.3
RoA (%)
1.8
2.0
P/E(X) (Cons.)
30.2 23.9
P/BV (X) (Cons.)
4.2
3.6
2020E
135.3
113.2
96.6
50.8
23.7
321
17.1
2.0
19.3
3.1
Standalone results:
PAT grew 30% YoY to INR9.1b (in-line). Core operating
profit grew strongly by 30% YoY, led by healthy NII growth (17% YoY; NIMs
strong at 4.5%), acceleration in fee income (+43% YoY) and pristine asset
quality (stable GNPAs at 2.6%). KMB holds more than requisite provisioning
in relation to its exposure of INR2.36b to the 12 accounts identified by the
RBI for bankruptcy proceedings under NCLT (four accounts inherited from
ING Vysya Bank). Loan growth came in at 18% YoY (+6% QoQ; +15% in
4QFY17), led by robust growth in CV (+6% QoQ, 35% YoY), corporate banking
(+21/8% YoY/QoQ) and unsecured loans (+24/5% YoY/QoQ).
Other highlights:
a) CASA ratio remained stable QoQ at 44%, despite
moderation in CA deposits, led by robust SA mobilization (+44/6% YoY/QoQ).
b) SMA2 increased 11bp QoQ to 0.21%; OSRL fell 21% to 6bp.
Other businesses:
a) Profitability at its capital market business improved to
INR1.3b (+57% YoY), led by 108% YoY PAT growth of K-Sec to INR1.25b. b) K-
Sec market share declined 30bp QoQ to 1.9%. c) Overall AUM increased 8%
QoQ (+37% YoY), led by strong inflows in equity AUM (+92% YoY).
Valuation and view:
With the completion of merger integration with eIVBL,
synergies are likely to flow in. Strong presence across geographies/products
and healthy capitalization (T1 of ~19%) place the bank in a sweet spot to
capitalize on growth opportunities and gain market share. KMB’s premium
multiples are likely to sustain, considering strong growth and operating
leverage available across businesses, and a clean loan portfolio. Comfort on
asset quality remains the highest, with no SDR/5:25, negligible SMA2 (21bp)
and OSRL (6bp). At our SOTP of INR1,153, KMB will trade at 4.2x 2019E
consol. BV.
Buy.
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
Subham Banka
(Subham.Banka@MotilalOswal.com); +91 22 6129 1567
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: Quarterly performance v/s our estimates and reasons for deviations (INR m)
Kotak Bank (standalone)
Net Interest Income
% Change (Y-o-Y)
Operating Profit
% Change (Y-o-Y)
Net Profit
% Change (Y-o-Y)
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 (Y-o-Y)
1QFY18A
22,456
17.0
15,954
21.3
9,127
23.0
1,320
450
50
1,250
170
150
0
1,030
-80
13,467
25.3
1QFY18E
22,241
15.9
15,821
20.3
9,188
23.8
1,400
500
120
1,020
250
240
40
795
-50
13,503
25.6
v/s Est.
1
1
-1
Comments
-6
-10
-58
23
-32
-38
30
0
Modest Loan growth
Sharp decline in profitability
Sharp improvement in profitability
Sharp decline in profitability
Sharp improvement in profitability
Source: MOSL, Company
Lending business: Healthy loan growth and strong key operating
metrics; stable asset quality maintained
Overall CASA ratio stood
stable QoQ at 43.9%
Healthy loan growth; robust CASA growth continues
On a standalone basis, loans grew 5% QoQ and 18% YoY, driven by robust
growth in CV segment (+6% QoQ, +35% YoY), followed by 24%/21% YoY growth
in small business/corporate banking books.
KMPL’s PAT grew 3% QoQ (+10% YoY). Consolidated loan growth was at 19%
YoY.
SA deposits grew 6% QoQ and 44% YoY. SA deposits as a proportion of overall
deposits stood at 26.9% (21.8% a year ago). Overall CASA ratio was stable QoQ
at 43.9%.
Strong emphasis on digital
initiatives is driving down
cost structure of the bank
Strong NIMs, healthy fee income and controlled opex drive strong core
performance
Calculated NIM contracted 10bp QoQ, but increased 13bp YoY to 4.5% as robust
CASA growth led to 90bp YoY decline in calculated cost of funds from 6.23% to
5.33%.
Contribution of fee income to profitability remained high (+43% YoY), which,
coupled with cost containment (+16% YoY), led to robust operating profit
growth of 21% YoY.
Net stress loans including
SMA2 accounts at ~152bp
Net stress loans remain one of the lowest in the system
While challenges continue in the economy, KMB reported stable asset quality
performance, with net stress loans increasing only marginally by 9bp QoQ to
152bp (one of the lowest in the system).
The bank has negligible stress in the book in terms of OSRL (6bp) and SMA2
accounts (21bp), demonstrating the robust risk management of the bank.
20 July 2017
2

Kotak Mahindra Bank
Proportion of equity AUM
increased to 21% of overall
AUM v/s 15% in 1QFY17
Healthy performance in non-lending business
Capital market-related business PAT was at INR1.3b, driven by strong
profitability in the securities division. K-sec net profit increased 108% YoY to
INR1.25b; its market share declined QoQ to 1.9%.
Asset management business reported PAT of INR320m, flat YoY.
Overall AUM increased 6% QoQ (+37% YoY), led by strong inflows in equity AUM
of 13% QoQ (+92% YoY). Domestic AUM grew 13% QoQ and 61% YoY.
Life insurance profit increased 45% YoY to INR1b.
Exhibit 3: Domestic AUM increased 61% YoY (+13% QoQ)
Debt
Offshore Funds
Equity
Alternate assets
PMS
Insurance
Exhibit 2: Growth in auto loans was sluggish in the quarter
Auto Loans (INR b)
Other Loans (INR b)
17 17 18 20 18 19 18 18 15 15 15 14 14 14 15 14 13
5 4
8 10 10 10 9 9 9 7 6 6 6 11 10 9 6
17 16
23 25 22 21 19 17 22 1 2
16 16 17
18
2 5 1 18 1 19 22 26 1 1 1 1 1 1 1 20 21
1 6 1
5
1 1
6 7 9 10 1 14 14 14 14 15 16 14
12
52 51 48 45 47 43
40 36 41 39 42 39 41 43 42 43 44
Source: MOSL, Company
Source: MOSL, Company
Exhibit 4: K-Sec: PAT grew 108% YoY (INR b)
Tot. Inc.
26 27 28
PAT
30 29 27
33
27
PATM (%)
29
25
34
3330 33
Exhibit 5: K-Sec market share declined 30bp QoQ to 1.9%
2.9
2.7
2.5
2.2
2.4
2.3 2.3
2.8
2.9
2.7 2.7 2.7
2.6
2.4
2.3
2.2 2.2
1.9
26
24
23
8
Source: MOSL, Company
Source: MOSL, Company
Exhibit 6: Investment banking earnings trend (INRm)
Tot. Inc.
PAT
Exhibit 7: Kotak AMC: Equity AUMs trending higher (INRb)
320
Offshore AUM
293
283
240
215
210 217 211 211205
240244
125 157
132134134
120
193 186
101 96 99 100 97 102
97
102
166
143
59 71
30
36 34 47
34 34 28 31 30
10 10 10 11 12 13 14
8 9
Eq. AUM
PMS AUM
Source: MOSL, Company
Source: MOSL, Company
20 July 2017
3

Kotak Mahindra Bank
1QFY18 conference call highlights
Asset quality
Guidance:
FY18 credit cost should be lower than that in FY17 (61bp).
4 of the 12 accounts were not NPLs at the time of ING merger due diligence, but
were recognized as stressed accounts at that time. These accounts were already
classified as GNPL before 4QFY17.
Balance sheet related
Management expects ~20% loan growth in FY18.
Kotak Prime – margins in car financing were under pressure earlier, but have
improved over the past six months.
While the CV loan book grew 40%+ YoY, disbursements were up only 8% YoY.
The CE loan book has grown faster than the CV loan book, both QoQ and YoY
(although from a smaller base).
Strong customer acquisition in low-to-mid size market corporates and
deepening penetration in large corporates drove corporate growth this quarter.
Tractor sales/disbursements in the past few months have been strong, but
collections are still lagging. KMB has gained market share in this segment.
At a business level, the company segregates its loan book into consumer,
commercial and wholesale segments. The loan book is roughly equally split
among these three segments. YoY loan growth for 1QFY18 – consumer: 20%,
Commercial: 14-15%, Wholesale: 21%.
Sustainable NIM going forward according to management is 4.25%.
P/L related
Sustainable NIM going forward according to management is 4.25%.
Other highlights
According to management, mutual funds are gaining share of high quality credit
from banks.
Management clarified that they continue to look for inorganic opportunities,
notably in the stressed assets space.
Sustainable NIM going forward according to management is 4.25%
Valuation and view
Maintain Buy with a TP of
INR1,153 (4.2x consol.
FY19E BV)
Merger with eIVBL places KMB in a sweet spot with strong presence across
geographies, products and healthy capitalization (tier 1 of ~19%). The merged
entity is the fourth largest private sector bank with a loan book of ~INR1.4t.
Further, KMB’s conglomerate structure places it in a very sweet position to ride
the up-cycle across financial services.
Emerging opportunities for mid-size private banks post demon, coupled with
healthy capitalization, leave KMB in a strong position to capitalize. To leverage
on its geographical expansion, 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. Post initial merger-related hiccups, most products have started witnessing
healthy traction.
4
20 July 2017

Kotak Mahindra Bank
Operating leverage is expected to kick in the expanded underutilized capacity.
Higher refinancing opportunities, increased product offering on the combined
network and product penetration to eIVBL customers will keep loan growth
healthy. On a lower base, we are factoring in loan CAGR of ~24% over FY17-20E.
We expect PPoP (adjusted) CAGR of ~23% over FY17-20E, largely driven by
stable/marginally decline in margins and operating leverage. Large part of
current year credit cost was driven by eIVBL portfolio, and credit cost has
normalized and expected to remain under check. With just 21bp of SMA2
accounts, no 5:25 and SDR on balance sheet, comfort on asset quality remains
the highest.
Post-merger with eIVB, share of lending business in steady state profitability is
likely to increase to ~84%, providing much-needed stability to earnings. Capital
light nature of capital market and asset management businesses can provide
upside to RoE if there is strong improvement in business cycle. Green shoots of
the same are visible post demon. We expect consolidated RoEs to improve to
~15-16% by FY18 on the back of strong improvement in banking business RoAs
to ~1.8%.
Backed by higher capitalization, diversified business loan book, strong risk
management and presence across financial services, KMB has historically traded
at a premium multiples to peers, despite relatively low RoE. We are positive on
the business with the expected operating leverage from eIVBL. At our SOTP of
INR1,153, KMB will trade at 4.2x FY19E consolidated BV.
Buy.
Exhibit 8: Kotak Mahindra: SOTP valuation FY19-based
Value
(INR B)
1,904
1,689
164
50
99
63
14
22
117
106
10
74
2,194
1,866
18
Value
(USD B)
28.2
25.1
2.4
0.7
1.5
0.9
0.2
0.3
1.7
1.6
0.2
1.1
32.5
27.7
18
INR per
share
1,000
888
86
26
52
33
12
7
61
56
5
39
1,153
980
18
% To
Total
87
77
7
2
5
3
1
1
5
5
0
3
100
Rationale
4x FY19E Core NW, ~1.8% RoA and ~16% Core RoE
3x FY19E Net Worth, ~14% Core RoE
3x FY19E Net Worth; ~25% ROE
5% of FY19E Avg. AUM of INR1.25T
12% of FY19E AUM of INR116b
7% of FY19E AUM of INR318b
20x FY19E Earnings; Implied ~2.5x Core BV
3x FY19E Free Networth
implied 4.2x PBV; ROE of ~15%
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 (%)
Source: MOSL, Company
20 July 2017
5

Kotak Mahindra Bank
Exhibit 9: We largely maintain our earnings estimates
INR b
Old Est.
FY18
FY19
Net Interest Income 93.8
111.0
Other Income
41.7
50.9
Total Income
135.5 161.9
Operating Expenses 62.5
71.9
Operating Profits
73.0
90.0
Provisions
8.0
7.8
PBT
65.0
82.3
Tax
22.1
28.0
Standalone PAT
42.9
54.3
Consolidated PAT
62.0
77.7
Loans
1,660 2,075
Deposits
1,732 2,182
Margins (%)
4.47
4.47
SA RoA (%)
1.85
1.99
Core RoE (%)
13.2
13.5
FY20
133.8
62.2
196.0
83.7
112.3
9.6
102.7
34.9
67.8
95.9
2,594
2,749
4.39
2.03
14.8
Revised Est.
FY18
FY19
FY20
93.9
112.1 135.3
42.3
51.6
63.0
136.2 163.7 198.3
63.5
73.1
85.0
72.7
90.6
113.2
8.2
7.8
9.6
64.5
82.9
103.6
21.9
28.2
35.2
42.6
54.7
68.4
61.7
78.1
96.6
1,660 2,075 2,594
1,810 2,281 2,874
4.45
4.45
4.37
1.84
1.99
2.04
13.1
13.6
14.9
Change (%)
FY18 FY19 FY20
0.2
1.0
1.1
1.5
1.3
1.2
0.6
1.1
1.2
1.7
1.7
1.6
-0.3
0.7
0.8
2.6
0.0
0.0
-0.7
0.7
0.9
-0.7
0.7
0.9
-0.7
0.7
0.9
-0.5
0.5
0.7
0.0
0.0
0.0
4.5
4.5
4.5
Source: MOSL, Company
Exhibit 10: We largely maintain estimates at the consolidated level
INR b
Old Est.
FY18 FY19 FY20
Kotak Mahindra Bank (Standalone) 42.9 54.3 67.8
Kotak Mahindra Prime
6.0
7.0
8.0
Kotak Mahindra Investments
2.6
3.6
4.6
Lending Business
51.5 64.9 80.4
International subsidiaries
1.1
1.5
1.9
Kotak Mahindra AMC & Trustee Co 1.0
1.3
1.6
Kotak Investment Advisors
0.2
0.2
0.3
Asset Management Business
2.3
3.0
3.8
Kotak Securities
4.3
5.3
6.5
Kotak Mahindra Capital Company 0.6
0.7
0.8
Capital Market Business
4.9
6.0
7.3
Consol. PAT excluding Kotak Life 58.8 73.9 91.5
Kotak OM Life Insurance
3.5
4.0
4.6
Consolidation Adjust.
-0.1 -0.1 -0.1
Consol. PAT Including Kotak Life 62.1 77.8 96.0
Revised Est.
FY18 FY19 FY20
42.6 54.7 68.4
6.0
7.0
8.0
2.6
3.6
4.6
51.2 65.3 81.0
1.1
1.5
1.9
1.0
1.3
1.6
0.2
0.2
0.3
2.3
3.0
3.8
4.3
5.3
6.5
0.6
0.7
0.8
4.9
6.0
7.3
58.5 74.3 92.2
3.5
4.0
4.6
-0.1 -0.1 -0.1
61.8 78.2 96.7
Change (%)
FY18 FY19 FY20
-0.7 0.7
0.9
0.2
0.2
0.4
-0.5
0.6
0.8
2
-1
0
-0.1
-0.6
-0.2
0.5
0.5
0.7
-0.4 0.5
0.7
Source: MOSL, Company
20 July 2017
6

Kotak Mahindra Bank
Exhibit 11: KMB group Earnings Estimates
Kotak Mahindra Bank (Standalone)
Kotak Mahindra Prime
Kotak Mahindra Investments
Lending Business
International subsidiaries
Kotak Mahindra AMC & Trustee Co
Kotak Investment Advisors
Asset Management Business
Kotak Securities
Kotak Mahindra Capital Company
Capital Market Business
Consol. PAT excluding Kotak Life
YoY Growth (%)
Kotak OM Life Insurance
Consolidation Adjust.
Consol. PAT Including Kotak Life
YoY Growth (%)
FY11
11,367
3,179
240
14,786
509
173
327
1,009
1,819
519
2,338
18,133
22
1,014
-294
18,853
23
FY12
15,414
3,849
153
19,415
-110
154
361
405
1,258
59
1,318
21,137
17
2,030
-282
22,885
21
FY13
19,737
4,307
336
24,380
60
35
307
401
1,145
167
1,312
26,093
23
1,900
21
28,014
22
FY14
21,603
4,907
420
26,930
70
410
180
660
1,600
140
1,740
29,330
12
2,390
-492
31,228
11
FY15E
24,776
5,077
1,060
30,913
520
-290
250
480
2,900
130
3,030
34,423
17
2,290
-142
36,571
17
FY16
20,898
5,025
1,540
27,463
1,050
720
50
1,820
2,510
320
2,830
32,113
-7
2,510
-34
34,589
-5
FY17
34,115
5,150
1,960
41,225
860
560
125
1,545
3,610
460
4,070
46,840
46
3,030
-466
49,404
43
FY18E
42,587
6,014
2,629
51,230
1,118
1,042
175
2,335
4,333
563
4,896
58,461
25
3,485
-200
61,746
25
FY19E
54,693
7,013
3,604
65,309
1,453
1,303
225
2,981
5,313
677
5,990
74,280
27
4,007
-200
78,087
26
Source: MOSL, Company
Exhibit 12: KMB group earnings snapshot (% of total)
Kotak Mahindra Bank (Standalone)
Kotak Mahindra Prime
Kotak Mahindra Investments
Lending Business
International subsidiaries
Kotak Mahindra AMC & Trustee Co
Kotak Investment Advisors
Asset Management Business
Kotak Securities
Kotak Mahindra Capital Company
Capital Market Business
Consol. PAT excluding Kotak Life
Kotak OM Life Insurance
Consol. PAT Including Kotak Life
FY11
60
17
1
78
3
1
2
5
10
3
12
96
5
100
FY12
67
17
1
85
0
1
2
2
5
0
6
92
9
100
FY13
70
15
1
87
0
0
1
1
4
1
5
93
7
100
FY14
69
16
1
86
0
1
1
2
5
0
6
94
8
100
FY15E
68
14
3
85
1
-1
1
1
8
0
8
94
6
100
FY16
60
15
4
79
3
2
0
5
7
1
8
93
7
100
FY17
69
10
4
83
2
1
0
3
7
1
8
95
6
100
FY18E
69
10
4
83
2
2
0
4
7
1
8
95
6
100
FY19E
70
9
5
84
2
2
0
4
7
1
8
95
5
100
Source: MOSL, Company
20 July 2017
7

Kotak Mahindra Bank
Exhibit 13: Valuation metrics
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFC Bk
FB
DCBB
JKBK
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
GRHF
REPCO
DEWH
Housing Finance
RECL
POWF
Infra Finance
SHTF
MMFS
BAF
CIFC
SCUF
MUTH
SKSM
Asset Finance
NBFC Aggregate
Financials
FY19E
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Under Review
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
RoA (%)
FY19E
1.23
1.78
1.23
1.98
1.80
1.95
0.91
0.85
0.96
0.43
0.74
2.16
1.28
0.50
0.37
0.33
0.66
0.41
0.47
0.26
0.72
RoE (%)
FY18E
9.4
18.2
10.1
14.9
18.0
17.3
7.9
10.2
11.4
4.0
10.8
7.1
14.9
8.7
5.6
6.1
11.9
6.2
8.1
4.6
10.6
FY19E
10.1
19.0
15.4
16.1
19.5
18.5
8.8
10.5
11.8
7.0
12.7
10.1
17.5
10.0
7.5
9.0
13.2
9.1
10.5
5.4
11.1
(INR) (USDb) FY18E FY19E FY18E FY19E FY18E FY19E
301
30.0 15.6 17.9 13.6 11.0 146.6 159.2
1,708
67.3 67.1 79.4 25.4 21.5 387 448
540
19.3 23.8 40.3 22.7 13.4 245 278
980
28.3 32.2 40.4 30.4 24.3 232 271
1,571
11.1 90.7 114.6 17.3 13.7 541 632
1,562
14.6 61.9 76.8 25.2 20.3 383 446
61
3.3
3.5
4.2
17.5 14.7
46
49
119
3.1
5.5
6.8
21.8 17.5
62
68
193
0.9
8.4 10.4 23.1 18.6
83
93
84
0.7
4.4
8.0
19.2 10.5 112 118
28
0.6
2.9
3.7
9.9
7.7
28
30
169
0.9
4.8
7.4
34.9 22.7
70
77
539
3.1
18.0 24.2 29.9 22.3 128 148
291
157
151
162
352
154
149
330
39.3
5.2
2.6
5.9
3.1
1.7
0.8
2.5
17.9
10.3
13.7
18.4
30.1
24.6
17.1
33.2
23.3
14.5
22.0
22.5
47.0
34.5
21.4
38.0
14.5
15.3
11.0
8.8
11.7
6.2
8.7
9.9
11.0
10.8
6.9
7.2
7.5
4.4
7.0
8.7
230
187
233
162
498
315
382
327
249
199
255
179
540
345
404
356
FY18E FY19E FY18E
1.45 1.24 1.23
4.41 3.81 1.81
2.21 1.95 0.87
4.23 3.62 1.84
2.90 2.49 1.75
4.08 3.50 1.90
1.34 1.25 0.93
1.91 1.76 0.83
2.32 2.08 0.95
0.75 0.71 0.26
1.02 0.93 0.65
2.40 2.19 1.66
4.20 3.64 1.23
1.12
0.84
0.65
1.00
0.71
0.49
0.39
1.01
1.03
0.79
0.59
0.90
0.65
0.44
0.37
0.93
0.44
0.29
0.22
0.59
0.29
0.37
0.22
0.70
Under Review
Neutral
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
1,651
751
1,159
483
812
477
184
127
961
358
1,588
1,141
2,318
460
777
40.4
5.9
7.5
2.8
0.8
2.3
5.6
5.1
3.4
3.1
13.1
2.8
2.4
2.9
1.7
39.2 44.2 25.0
47.9 53.8 15.7
88.9 113.9 13.0
9.9 12.1 48.6
35.8 42.5 22.7
37.0 45.4 12.9
35.0
27.2
78.5
13.6
47.6
55.0
132.8
41.0
41.3
40.4
30.2
98.5
16.4
62.9
66.4
171.2
43.3
53.0
5.2
4.7
12.2
26.4
33.3
20.7
17.5
11.2
18.8
20.0
14.0
10.2
40.0
19.1
10.5
4.5
4.2
9.8
21.9
25.3
17.2
13.5
10.6
14.7
228
252
325
33
214
279
196
169
285
295
372
40
253
315
227
191
4.30 3.10 1.79
2.98 2.55 1.64
3.57 3.12 3.40
14.57 11.95 2.43
3.79 3.21 2.25
1.71 1.52 1.25
0.93
0.75
0.81
0.66
1.49
2.71
5.88
3.01
2.27
2.12
2.86
3.10
2.76
2.60
1.68
3.51
2.74
3.63
4.99
4.49
1.82
1.63
3.46
2.43
2.21
1.33
3.12
2.72
2.91
1.74
3.51
2.78
3.96
4.61
4.26
18.3
20.6
29.0
33.0
18.1
13.9
19.1
17.0
14.7
11.4
24.3
18.5
16.2
23.2
20.9
17.4
19.7
32.7
32.8
18.2
15.3
19.1
16.8
16.3
12.8
25.9
18.9
18.1
21.4
21.6
564 646 1.70
123 132 2.92
216 270 7.35
322 380 3.55
874 1,019 2.65
189 217 2.43
219 272 3.55
Source: MOSL, Company
20 July 2017
8

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 (%)
2011
68,838
37,798
31,040
15.5
14,355
45,395
15.3
25,793
19,602
1.1
2,887
16,715
5,347
32.0
11,367
41.5
18,853
23.3
2012
1,00,370
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
1,29,041
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
1,39,722
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
1,55,677
93,876
61,800
12.9
29,119
90,919
17.5
48,711
42,208
13.9
4,723
37,486
12,710
33.9
24,776
14.7
36,571
17.1
2016
1,63,842
94,838
69,004
11.7
26,122
95,126
4.6
54,715
40,411
-4.3
9,174
31,237
10,339
33.1
20,898
-15.7
34,589
-5.4
2017
1,76,989
95,728
81,261
17.8
34,772
1,16,033
22.0
56,185
59,848
48.1
8,367
51,481
17,366
33.7
34,115
63.2
49,404
42.8
2018E
1,93,973
1,00,057
93,916
15.6
42,329
1,36,244
17.4
63,530
72,715
21.5
8,190
64,525
21,939
34.0
42,587
24.8
61,746
25.0
(INR Million)
2019E
2,30,743
1,18,662
1,12,080
19.3
51,610
1,63,691
20.1
73,059
90,631
24.6
7,763
82,868
28,175
34.0
54,693
28.4
78,087
26.5
2020E
2,82,568
1,47,264
1,35,304
20.7
62,950
1,98,254
21.1
85,050
1,13,204
24.9
9,579
1,03,625
35,233
34.0
68,393
25.0
96,575
23.7
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
2011
2012
2013
2014
2015
2016
2017
98,261 1,23,309 1,44,646 1,97,401 2,20,521 2,39,625 2,76,179
5,94,552 7,37,319 9,23,628 10,02,891 12,40,148 13,86,430 15,74,258
19.5
24.0
25.3
8.6
23.7
11.8
13.5
1,92,491 2,44,498 2,83,534 3,25,865 4,12,995 5,27,764 6,92,646
21.1
27.0
16.0
14.9
26.7
27.8
31.2
1,58,709 2,22,920 2,69,219 2,25,641 2,05,411 2,09,753 2,34,269
47,124
43,125
47,809
54,053
67,119
86,790
85,836
8,98,646 11,26,673 13,85,301 14,79,986 17,33,198 19,22,598 21,70,542
49,924
58,651
65,226 1,18,060
97,457 1,08,797 2,25,720
2,81,797 3,42,823 4,71,517 4,22,053 5,13,313 5,12,602 4,50,742
22.6
21.7
37.5
-10.5
21.6
-0.1
-12.1
5,29,314 6,78,159 8,02,410 8,88,565 10,69,718 11,86,653 13,60,821
34.7
28.1
18.3
10.7
20.4
10.9
14.7
9,284
9,508
9,640
16,315
16,204
15,516
15,376
28,326
37,532
36,508
34,994
36,507
99,030
93,240
8,98,646 11,26,673 13,85,301 14,79,986 17,33,198 19,22,598 21,45,900
2018E
3,74,813
18,10,396
15.0
8,51,927
23.0
1,87,415
94,420
24,67,045
1,43,257
5,45,398
21.0
16,60,202
22.0
15,625
1,02,564
24,67,045
(INR Million)
2019E
4,26,958
22,81,099
26.0
10,48,253
23.0
2,06,157
1,03,862
30,18,075
1,81,469
6,32,661
16.0
20,75,252
25.0
15,873
1,12,820
30,18,075
2020E
4,92,163
28,74,185
26.0
12,90,328
23.1
2,16,465
1,14,248
36,97,061
2,22,558
7,40,214
17.0
25,94,066
25.0
16,121
1,24,102
36,97,061
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
Slippage Ratio
Credit Cost
PCR (Excl Tech. write off)
E: MOSL Estimates
11,567
3,029
2.15
0.57
1.15
0.56
73.8
11,771
2,899
1.71
0.43
0.90
0.21
75.4
13,283
3,205
1.63
0.40
0.97
0.33
75.9
17,037
6,756
1.90
0.76
1.58
0.27
60.3
22,884
10,722
2.12
1.00
2.51
0.62
53.1
28,381
12,620
2.36
1.06
2.68
0.63
55.5
35,786
17,181
2.59
1.26
1.51
0.48
52.0
43,245
19,460
2.57
1.17
1.60
0.40
55.0
49,190
22,135
2.34
1.07
1.40
0.30
55.0
(%)
58,567
26,355
2.23
1.02
1.40
0.30
55.0
20 July 2017
9

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
2011
9.5
11.4
6.3
5.6
5.2
3.9
4.3
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
10.5
12.0
7.7
7.0
6.8
3.4
4.2
2016
9.8
11.1
6.7
6.2
6.0
3.5
4.1
2017
9.6
10.5
7.6
5.6
5.6
3.9
4.4
2018E
9.2
9.8
7.5
5.3
5.1
3.9
4.4
2019E
9.2
9.5
7.3
5.3
5.0
3.9
4.5
2020E
9.1
9.5
7.0
5.3
5.0
3.8
4.4
13.5
1.4
15.5
14.0
1.5
14.8
14.8
1.6
15.0
12.7
1.5
13.4
11.9
1.5
13.0
9.1
1.1
10.9
13.2
1.7
13.8
13.1
1.8
15.0
13.6
2.0
16.3
14.9
2.0
17.1
54.9
31.6
56.8
53.9
89.0
32.4
47.4
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
60.3
32.0
53.6
48.9
86.3
33.3
41.4
57.9
27.5
57.5
51.5
85.6
38.1
37.0
54.1
30.0
48.4
49.3
86.4
44.0
28.6
51.6
31.1
46.6
47.1
91.7
47.1
30.1
51.4
31.5
44.6
47.1
91.0
46.0
27.7
52.1
31.8
42.9
47.7
90.3
44.9
25.8
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
48.6
76.9
56.1
89.6
65.8
104.6
82.2
126.3
120.4
164.5
6.0
20.1
48.9
0.4
0.0
130.6
8.5
181.9
10.5
5.4
18.9
-6.0
52.0
0.5
0.0
150.0
14.8
207.7
14.2
4.7
26.8
42.3
36.5
0.0
0.0
197.0
31.3
232.4
11.9
4.2
32.4
20.9
30.2
0.9
0.1
224.4
13.9
272.1
17.1
3.6
41.0
26.5
23.9
1.1
0.1
258.6
15.3
321.2
18.1
3.1
50.8
23.7
19.3
1.4
0.1
10.6
12.4
14.7
16.0
0.1
0.2
0.2
0.2
20 July 2017
10

Kotak Mahindra Bank
Corporate profile
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 1,333
branches and 2,032 ATMs as on March 31, 2016. In 2015,
KMB merged with EIVBL in an all-stock deal.
Source: MOSL/Bloomberg
Exhibit 1: Exhibit 1: Sensex rebased
Exhibit 2: Shareholding pattern (%)
Jun-17
Promoter
DII
FII
Others
30.1
8.2
40.2
21.5
Mar-17
32.1
7.8
38.6
21.5
Jun-16
33.7
5.2
35.5
25.6
Source: Capitaline
Exhibit 3: Top holders
Holder Name
CANADA PENSION PLAN INVESTMENT
BOARD - MANAGED BY IM2
EUROPACIFIC GROWTH FUND
ING MAURITUS INVESTMENTS I
FIRST STATE INVESTMENTS ICVC-STEWART
INVESTORS ASIA PACIFIC LEADERS FUND
SUMITOMO
MITSUI
BANKING
CORPORATION
% Holding
6.1
4.9
3.7
1.8
1.7
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 2: Top management
Name
Shankar Acharya
Dipak Gupta
Uday Kotak
Bina Chandarana
Designation
Chairman
Joint Managing Director
Executive Vice Chairman & MD
Company Secretary
Exhibit 3: Directors
Name
Amit Desai
Prakash Apte
Farida Khambata
S Mahendra Dev
Name
N P Sarda
C Jayaram
Mark Edwin Newman
Uday Chander Khanna
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
S R Batliboi & Co LLP
Type
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
FY20
MOSL
forecast
32.4
41.0
50.8
Consensus
forecast
32.5
40.0
49.5
Variation (%)
-0.4
2.5
2.6
Source: Bloomberg
Source: Capitaline
20 July 2017
11

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Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.
Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned
in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412
Pending Regulatory inspections against Motilal Oswal Securities Limited:
SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry
and adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have
requested to SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection.
List of associate companies of Motilal Oswal Securities Limited -Click
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Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research
receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues
Kotak Mahindra Bank
Disclosure of Interest Statement
Analyst ownership of the stock
No
Served as an officer, director or employee -
No
A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures
Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has
an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of
Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation
of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not
conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is
not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States.
Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S.
persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors").
This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors
and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and
therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in
the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
Varun.kumar@motilaloswal.com
Contact : (+65) 68189232
Office Address:21 (Suite 31),16 Collyer Quay,Singapore 04931
KOTAK MAHINDRA BANK
20 July 2017
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
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