Kotak Mahindra Bank
BSE SENSEX
35,512
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
10,895
KMB IN
Operating environment improving; Subs performance remains robust
1,840
Standalone results:
PAT grew 20% YoY to INR10.53b (5% miss) in 3QFY18.
1951.3 / 30.5
Operating profit grew 19% YoY, led by 17% YoY growth in NII and continued
1114/719
control on operating expenses.
-1/-5/15
Margin contracted another 13bp QoQ to 4.2%, while fee growth stood at a
2200
healthy 14% YoY. CASA deposits grew 34% YoY to INR843.9b, of which SA
69.9
20 January 2018
3QFY18 Results Update | Sector: Financials-Banks
CMP: INR1060
TP: INR1,220 (+15%)
Buy
Financials & Valuations (INR b)
Y/E MARCH
2018E 2019E
NII
97.3 120.6
OP
72.9
92.3
Cons. NP
62.3
79.1
NIM (%)
4.3
4.4
Cons. EPS (INR)
32.7
41.5
EPS Gr. (%)
22.0
26.9
Cons. BV. (INR)
248.9 289.6
Cons. RoE (%)
13.2
14.2
RoA (%)
1.6
1.7
Valuations
P/E(X) (Cons.)
32.4
25.5
P/BV (X) (Cons.)
4.3
3.7
2020E
148.6
115.7
103.2
4.5
54.2
30.5
342.9
15.8
1.8
19.6
3.1
deposits grew 52% YoY (+9% QoQ). However, the CASA ratio declined 110bp
QoQ (+470bp YoY) to 46.7%.
Absolute GNPA declined 2.6% QoQ, while the GNPL ratio improved by 16bp
QoQ to 2.31%. PCR (cal.) improved by 419bp QoQ to 53.9%. Restructured
loans stood stable at INR670m (4bp), while SMA2 accounts increased to
19bp of loans (INR3.08b) v/s 16bp in the previous quarter.
Loans grew 23% YoY (+4% QoQ), while deposits increased 21% YoY (+9%
QoQ). KMB guided for 20%+ loan growth, as it sees improving trends in the
micro environment. Share of core deposits (CASA+less than INR50m retail
TD) stood at 75% (77% in 2QFY18).
Subs performance remains robust:
a) KMPL reported PAT of INR1.48b
(+11% YoY), while Kotak Securities reported PAT of INR1.54b (+81% YoY). b)
Kotak Mahindra Capital, Life Insurance and Asset Management subs also
reported strong growth in net profit, driving consolidated net profit to
INR16.2b (+28% YoY). c) Asset management business’ average AUM
increased 8% QoQ (+46% YoY). d) K-Sec market share came in at 2% v/s
1.9% in 2QFY18.
Valuation view:
Share of KMB in consol. profit stands at ~65% (69% in
2QFY18), as growth in subsidiaries remains strong. We expect ~25%
earnings CAGR over FY17-20E, led by a revival in loan growth and controlled
opex. Strong presence across products and healthy capitalization (Tier1 of
~18%) place the bank in a sweet spot to capitalize on growth opportunities
and gain market share. We value KMB at INR1,220 per share, which
corresponds to 3.8x Mar-20E ABV for the lending business. Maintain
Buy.
3Q
20,503
16.1
15,277
26.8
8,798
38.6
1,330
480
70
850
220
160
0
680
12,668
33.9
4Q
21,614
16.4
17,020
42.5
9,765
40.3
1,330
560
110
1,210
210
130
0
1,010
14,045
33.2
1Q
22,456
17.0
15,954
21.3
9,127
23.0
1,320
450
50
1,250
170
150
0
1,030
13,467
26.2
FY18E
2Q
23,127
15.9
17,248
19.8
9,943
22.3
1,500
550
-10
1,180
280
230
0
1,000
14,413
19.9
FY17
3Q
4Q
27,737
28.3
21,533
26.5
12,842
31.5
1,850
961
90
1,755
315
403
0
1,091
18,224
29.8
81,261
17.8
59,848
48.1
34,115
63.2
5,150
1,960
460
3,610
860
560
125
3,030
49,404
42.8
97,256
19.7
72,936
21.9
42,442
24.4
6,150
2,461
490
5,725
1,085
1,163
0
4,091
62,344
26.2
FY18E
Quarterly Performance (INR m)
Y/E March
1Q
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
Conso. PAT
% Change (Y-o-Y)
19,191
20.1
13,150
120.3
7,420
291.0
1,200
400
230
600
130
190
110
710
10,669
106.5
FY17
2Q
19,954
18.9
14,401
37.8
8,133
42.8
1,300
530
50
960
310
70
10
630
12,023
27.4
23,937
16.7
18,201
19.1
10,532
19.7
1,480
500
360
1,540
320
380
0
970
16,240
28.2
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 3982 5540
| Anirvan Sarkar
(Anirvan.Sarkar@MotilalOswal.com); +91 22 3982 5505
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
| Parth Gutka
(Parth.Gutka@motilaloswal.com); +91 22 3010 2746
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 (INRm)
Actual vs Estimate
Kotak Bank (standalone)
Net Interest Income
% Change (Y-o-Y)
Operating Profit
% Change (Y-o-Y)
Net Profit
% Change (Y-o-Y)
Consol. PAT
% Change (Y-o-Y)
3QFY18A
23,937
16.7
18,201
19.1
10,532
19.7
16,240
28.2
3QFY18E
24,237
18.2
18,920
23.8
11,121
26.4
15,676
23.7
v/s Est. Comments
-1
-4
-5
Consol PAT was above our estimate due to robust
4
performance of the subsidiaries
Source: MOSL, Company
Lending Business: Broad-based loan growth; improving asset quality and
strong key operating metrics
Overall CASA ratio declined
to 46.7% from 47.8% in
2QFY18. Avg. SA balances
grew 60% YoY, whereas
avg. CA balances grew 21%
YoY
Healthy loan growth; robust CASA growth continues
Loans grew 23.1% YoY and 4.3% QoQ led by 37.4% YoY / 8.6% QoQ growth in
CV loans while small business and personal banking grew 9.7% QoQ and 45.1%
YoY. Home loan and LAP grew 5.2% QoQ and 23.5% YoY.
Kotak Mahindra Prime’s PAT grew 11% YoY while customer assets grew 23%
YoY.
SA deposits grew 51.6% YoY / 9.3% QoQ. SA deposits as a proportion of overall
deposits stood at 32.3% (25.8% a year ago). Overall CASA ratio declined 110bp
QoQ to 46.7%. CASA and TDs (below INR 50m) constitute 75% of the total
deposits
Weighted average SA rate for the quarter was 5.58%
Strong revenue growth, coupled with controlled opex, drives healthy core
performance
NIMs at 4.2% declined 30bp QoQ however healthy loan growth still enabled
16.7% YoY growth in NII.
Core fee income grew 14% YoY. Coupled with strong cost control (opex growth
at 12.6% YoY) this led to healthy operating profit growth of 19.1% YoY
Net stress loans remain one of the lowest in the system
While the challenges continue in the economy, KMB reported strong asset
quality performance with decline in GNPL.
The bank has negligible total net stress on the book. NNPA (1.09% of advances),
OSRL (INR6.7b, 4bp of advances) and SMA2 accounts (INR 3.08b, 19bp of
advances) together form 1.32% of advances.
Healthy performance in non-lending business
Profitability in securities business improved to INR1.54b, a 81.2% YoY growth
K-Sec market share stood at 2% (stable QoQ)
Asset management business reported growth of 65.2% YoY in PAT at INR380m
while the average AUM increased 8.3% QoQ (+45.7% YoY) – led by strong
inflows in Equity AUM which grew 110% YoY
Life insurance profit increased 42.6% YoY to INR 970m.
2
Bank’s digital initiatives
showing result in the form
of controlled opex.
Employee expenses grew
5% YoY.
Net stress loans including
SMA2 accounts at ~132bp
Proportion of Equity AUM
increased to 37.3% of
overall AUM v/s 25.8% in
3QFY17
20 January 2018

Kotak Mahindra Bank
Exhibit 2: Auto loans grew 15% YoY
Auto Loans (INR b)
Other Loans (INR b)
Exhibit 3: Domestic AUM increased 37% YoY (+8% QoQ)
Debt
Offshore Funds
Equity
Alternate assets
PMS
Insurance
18 20 18 19 18 18 15 15 15 14 14 14 15 14 13 12 12
5 4 4 3
10 10 9 9 9 7 6 6 6 11 10 9 6
17 16 17 18
17
17 18 18 19 22 26 23 25 22 21 19 1 22 1 2 1 2
1 1 1 1 1 16 1 20 21 24 26
1 1 1 1 1
6 6 7 9
14
1
10 12 14 14 14 14 15
48 45 47 43 40
36 41 39 42 39 41 43 42 43 44 42 39
Source: MOSL, Company
Source: MOSL, Company
Exhibit 4: K-Sec: PAT grew 81% YoY to 1.54b
Tot. Inc.
30 29
33
27 29
PAT
PATM (%)
33
24 23
25
30
33
34
34 34
Exhibit 5: K-Sec market share improved marginally
2.9
2.7
2.8
2.9
2.7 2.7 2.7
2.6
2.4
2.3
2.2 2.2
1.9 1.9
2.0
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)
Eq. AUM
PMS AUM
Offshore AUM
210 217
97
240
211 215 211 205
166 193
13 14
30
36
17
406
293 283
186
240
320
244
288
469
329
120 125
47 59
157
71
132 134 134 143
Source: MOSL, Company
Source: MOSL, Company
20 January 2018
3

Kotak Mahindra Bank
3QFY18 Conference call highlights
Balance Sheet and P&L Related
Outlook for the NIM:
Revenue growth is lagging loan growth for most of the
banks due to pressure on yields due to excess liquidity (between April to
December, there was surplus liquidity flowing into mutual funds, debt funds,
and thus, there were pressure on yields). As of now, liquidity is getting tighter;
wholesale funding gets dried out, and that is where CASA will come into play;
Pressure on NIMs will continue; LCR regime has moved to 90% from this quarter
onwards, and therefore, banks had to keep higher buffer in Q3; there is a cost
attached to for this, and therefore, there will be pressure on NIMs going
forward.
CASA outlook:
6% interest rates costs the bank INR1000cr annually on the PBT
level, but the bank has no plans to change the rates, as 6% interest rates is
gaining good traction and bank can leverage the customer base to cross sell.
Cross-selling:
Bank is focusing on customer-centric cross-selling on the asset
side of the balance sheet through digital means; the bank is in very early stage
for this sort of cross-selling. ~50% of distribution of insurance business and AMC
business comes from the bank’s customers and rest by other distributors. For
the securities business, 40% of customers come from the bank’s customers.
On SME lending:
Bank hasn’t seen any significant changes in the working capital
requirement post GST, as a lot of customers are still adjusting to the GST
requirements.
Weighted avg. cost of SA for this quarter is 5.58%.
Thoughts on Rural India: Tractor financing sales and CV financing portfolio have
shown healthy growth.
Launched credit card this quarter.
st
Effective 1 January, MCLR raised by 5bp.
30% of the book on fixed rate and MCLR is 70%.
Last 3 quarters have seen a lot of slippages from the SME sector, and therefore,
risk underwriting practices have improved, but slippages have bottomed out in
the SME book. Bank will do segmental lending in the SME space going forward.
Cost/Income ratio 47% - CI ratio is improving and the income size continues to
grow; cost doesn’t give a clear picture (between operational and others).
Slippages during the quarter were lesser than recoveries. Therefore, net
reduction in absolute GNPA.
Other Business Updates
Improving but challenging macro: a positive for Kotak Bank for loan growth: 20%
loan growth is very much sustainable.
Securities business, Investment Banking, AMC, Life insurance subsidiaries are
doing pretty good. 80% YoY PAT growth for this business. Constitutes about 23%
of the total PAT (at consol. level).
Kotak Prime: 70% of the business constitutes of car financing.
20 January 2018
4

Kotak Mahindra Bank
Exhibit 8: One year forward P/E
P/E (x)
65.0
50.0
35.0
20.0
5.0
29.5
22.5
7.2
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
50.3
6.1
4.7
25.1
15.6
3.3
1.9
0.5
Exhibit 9: One year forward P/B
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
5.3
3.6
2.9
2.2
1.1
3.8
Source: Company, MOSL
Source: Company, MOSL
Maintain Buy with a TP of
INR1,220 (3.8x Mar-20E BV)
Valuation and view
The share of bank in consolidated profits now stands at ~65% (69% in 2QFY18)
and we expect this to increase further as synergy benefits show up fully in FY18.
Strong presence across products and healthy capitalization (Tier1 of ~18%),
places the bank in a sweet spot to capitalize on growth opportunities and gain
market share.
Emerging opportunities for mid-size private banks post demon coupled with
healthy capitalization leaves KMB in a strong position to capitalize. 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.
Operating leverage is expected to kick in the expanded underutilized capacity.
Higher refinancing opportunities, increased product offering on the combined
network, customer acquisition through 811,cross ell to existing customers and
product penetration to eIVBL customers, will keep loan growth healthy. On a
lower base we are factoring loan CAGR of ~22% over FY17-20E. We expect PPoP
CAGR of ~25% over FY17-20E, largely driven by stable/marginally decline in
margins and operating leverage. Comfort on asset quality remains high with no
SDR/5:25, negligible SMA2 (19bp) and OSRL (4bp).
Capital light nature of capital market and asset management businesses can
provide upside to ROE if there is a strong improvement in business cycle. Green
shoots of the same are visible post demon. We expect consolidated ROEs to
improve to ~15-17% by FY20e on back strong improvement in banking business .
Backed by higher capitalization, diversified business loan book, strong under
writing practices and presence across financial services KMB historically traded
at a premium multiples to peers despite relatively lower ROE. We are positive
on the business with the expected operating leverage from eIVBL. We expect
KMB to deliver ~25% earnings CAGR over FY17-20E led by revival in loan growth
and controlled opex. At our SOTP of INR1,220 KMB will trade at 3.8x FY20E
Consolidated BV. Maintain Buy.
20 January 2018
5

Kotak Mahindra Bank
Exhibit 10: Kotak Mahindra Bank (FY20-based)
Value
(INR B)
1,970
1,706
197
66
128
173
161
12
144
89
2,326
2,019
15
Value
(USD B)
30.8
26.7
3.1
1.0
2.0
2.7
2.5
0.2
2.2
1.4
36.3
31.5
15
INR per
share
1,034
896
104
35
61
89
85
6
83
47
1,220
1,060
15
% To
Total
85
73
8
3
5
7
7
1
7
4
100
Rationale
3.8x FY20E Net Worth
3x FY20E Net Worth
3x FY20E Net Worth
5% of AUMs
20x FY20E Earnings
3x FY20E Free Networth
Lending Business
Kotak Mahindra Bank
Kotak Prime (Car and other loans)
Kotak Investment Company (LAS)
Asset Management Business
Capital Markets related Business
Kotak Securities
Kotak Investment Banking (KMCC)
Kotak Life Insurance
Subs value @ 20% discount
Target Value
Current market cap.
Upside (%)
Source: MOSL
Exhibit 11:
KMB Group: Earnings Estimates (INR m)
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 (%)
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
FY19E
42,442
53,460
6,150
7,013
2,461
3,604
51,053
64,077
1,085
1,342
1,163
1,453
0
0
2,248
2,795
5,725
6,533
490
677
6,216
7,210
59,515
74,081
27
26
4,091
4,704
-1,262
-200
62,344
79,084
26
27
Source: Company, MOSL
20 January 2018
6

Kotak Mahindra Bank
Exhibit 12: Valuation Matrix
66
Rating
FY20E
Private Banks
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFCB
FB
DCBB
JKBK
SIB
EQUITAS
RBK
PSU Banks
SBIN*
PNB
BOI
BOB
CBK
UNBK
INBK
Life Insurance
HDFCLIFE**
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
MCap
(INRb)
2,218
4,950
1,398
1,918
777
1,004
197
176
57
40
58
51
197
2,613
363
169
375
189
95
181
747
CMP
(INR)
TP
EPS (INR)
ABV (INR)
RoA (%)
RoE (%)
P/E (x)
P/ABV (x)
(INR) FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E FY19E FY20E
17.0
84.7
30.8
41.6
23.9
78.9
3.2
6.5
9.0
13.4
3.8
5.7
22.6
19.6
18.9
4.9
22.6
67.8
29.4
38.3
5.4
21.8
105.4
40.2
51.9
30.8
101.4
3.9
8.2
10.9
17.2
4.9
9.9
30.2
34.9
24.1
10.3
29.7
99.7
45.0
42.3
6.7
122
422
241
272
125
437
46
62
91
60
26
69
169
205
124
147
143
328
155
273
141
504
290
323
151
522
48
69
102
84
30
77
192
243
165
191
173
460
203
306
1.20
1.92
1.07
1.95
1.73
1.89
0.79
0.84
0.86
0.68
0.76
1.57
1.32
0.49
0.47
0.08
0.52
0.62
0.41
0.72
3.4
1.35
1.98
1.21
2.03
1.78
1.93
0.87
0.89
0.87
0.75
0.87
1.99
1.31
10.5
20.4
10.8
16.5
19.9
19.1
6.9
9.8
10.4
12.3
12.7
8.2
13.7
12.4
21.4
12.7
17.4
21.5
20.7
7.9
11.3
11.3
14.2
14.8
12.8
16.1
13.1
10.4
3.6
10.9
14.7
12.6
11.3
19.1
14.7
23.0
19.2
25.5
14.6
21.3
18.2
15.8
21.0
5.7
8.5
27.0
23.2
10.6
9.3
33.5
7.3
5.3
4.8
9.9
69.3
11.5
18.5
14.7
20.4
11.3
16.6
14.9
12.6
17.3
4.4
6.5
15.7
17.4
5.9
7.3
16.1
5.6
3.6
3.1
9.0
55.3
Source: Company, MOSL
2.0
4.6
2.5
3.9
2.8
3.9
1.3
1.7
2.1
1.3
1.2
2.3
3.1
1.0
1.4
1.1
1.2
1.1
0.9
1.4
1.8
3.9
2.0
3.3
2.3
3.2
1.2
1.5
1.9
0.9
1.1
2.0
2.7
0.9
1.1
0.9
1.0
0.8
0.7
1.2
354
370
1,951 2,150
590
680
1,060 1,179
348
410
1,683 2,076
59
65
103
149
189
188
76
100
32
38
155
209
525
665
309
176
165
166
362
141
381
372
415
250
175
217
366
153
438
370
0.80 8.0
0.54 9.0
0.15 1.8
0.60 9.4
0.82 11.3
0.56 9.1
0.69 11.2
3.5
19.1
20 January 2018
7

Kotak Mahindra Bank
Financials and valuations
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 (%)
Extra Ordinary Item
Adjusted PAT
Change (%)
Consolidated PAT (incl VYSB)
Change (%)
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
0
19,737
28.0
28,014
22.4
2013
3,733
7,466
144,646
148,379
148,379
923,628
25.3
283,534
16.0
269,219
47,809
1,389,034
65,226
471,517
37.5
802,410
18.3
9,640
36,508
1,385,301
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
0
21,603
9.5
31,228
11.5
2014
3,852
7,703
197,401
201,253
201,253
1,002,891
8.6
325,865
14.9
225,641
54,053
1,483,837
118,060
422,053
-10.5
888,565
10.7
16,315
34,994
1,479,986
2015
155,677
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
0
24,776
14.7
36,571
17.1
2015
9,116
7,724
211,405
220,521
220,521
1,240,148
23.7
412,995
26.7
205,411
67,119
1,733,198
97,457
513,313
21.6
1,069,718
20.4
16,204
36,507
1,733,198
2016
163,842
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
0
20,898
-15.7
34,589
-5.4
2016
9,172
9,172
230,453
239,625
239,625
1,386,430
11.8
527,764
27.8
209,753
86,790
1,922,598
108,797
512,602
-0.1
1,186,653
10.9
15,516
99,030
1,922,598
2017
176,989
95,728
81,261
17.8
34,772
116,033
22.0
56,185
59,848
48.1
8,367
51,481
17,366
33.7
34,115
63.2
0
34,115
63.2
49,404
42.8
2017
9,204
9,204
266,975
276,179
276,179
1,574,258
13.5
692,646
31.2
234,269
85,836
2,170,542
225,720
450,742
-12.1
1,360,821
14.7
15,376
93,240
2,145,900
2018E
205,263
108,007
97,256
19.7
40,022
137,278
18.3
64,343
72,936
21.9
8,434
64,502
22,060
34.2
42,442
24.4
0
42,442
24.4
62,344
26.2
2018E
9,522
9,522
355,677
365,199
365,199
1,873,368
19.0
889,850
28.5
255,787
101,408
2,595,763
142,653
676,730
50.1
1,661,563
22.1
16,914
97,902
2,595,763
(INR Million)
2019E
249,876
129,280
120,596
24.0
46,626
167,221
21.8
74,946
92,276
26.5
11,029
81,246
27,786
34.2
53,460
26.0
0
53,460
26.0
79,084
26.9
2019E
9,522
9,522
395,039
404,561
404,561
2,287,382
22.1
1,123,105
26.2
305,095
121,690
3,118,728
173,696
773,261
14.3
2,050,368
23.4
18,605
102,797
3,118,728
2020E
303,413
154,813
148,600
23.2
54,552
203,152
21.5
87,439
115,713
25.4
13,792
101,921
34,857
34.2
67,064
25.4
0
67,064
25.4
103,244
30.5
2020E
9,522
9,522
448,004
457,527
457,527
2,772,307
21.2
1,394,470
24.2
359,549
146,028
3,735,410
209,834
905,975
17.2
2,491,198
21.5
20,466
107,937
3,735,410
Balance Sheet
Y/E March
Share Capital
Equity Share Capital
Reserves & Surplus
Net Worth
Of which Equity Networth
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
(INR Million)
Asset Quality
Y/E MARCH
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
Slippage Ratio
Credit Cost
PCR (Excl Tech. write off)
PCR (Incl Tech. Write off)
2013
13,283
3,205
1.63
0.40
0.97
0.33
75.9
98.4
2014
17,037
6,756
1.90
0.76
1.58
0.27
60.3
0.0
2015
22,884
10,722
2.12
1.00
2.51
0.62
53.1
0.0
2016
28,381
12,620
2.36
1.06
2.68
0.63
55.5
0.0
2017
35,786
17,181
2.59
1.26
1.51
0.48
52.0
0.0
2018E
37,496
17,376
2.26
1.05
1.35
0.48
53.7
2019E
40,073
16,693
1.95
0.81
1.25
0.50
58.3
2020E
45,282
17,243
1.82
0.69
1.20
0.52
61.9
(%)
20 January 2018
8

Kotak Mahindra Bank
Financials and valuations
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
Fee Income/Net Income
Non Int. Inc./Net Income
Cost/Income
Empl. Cost/Op. Exps.
Busi. per Empl. (Rs m)
NP per Empl. (Rs lac)
* ex treasury
Asset-Liability Profile (%)
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
G-Sec/Investment Ratio
CAR
Tier 1
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
9.1
8.9
7.5
5.5
5.4
3.4
4.3
2019E
9.1
8.5
7.4
5.5
5.4
3.1
4.4
2020E
9.2
8.5
7.3
5.4
5.4
3.1
4.5
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
11.6
1.6
13.2
13.2
1.7
14.3
14.7
1.8
15.8
63.2
25.7
28.5
52.5
52.4
68.4
0.9
60.8
26.2
29.3
52.1
51.4
71.0
0.8
60.3
28.4
32.0
53.6
48.9
57.9
25.2
27.5
57.5
51.5
54.1
26.2
30.0
48.4
49.3
52.6
25.9
29.2
46.9
49.5
51.7
25.1
27.9
44.8
49.7
51.0
24.5
26.9
43.0
49.4
86.9
30.7
51.1
72.3
16.0
14.7
88.6
32.5
42.1
66.3
18.8
17.8
86.3
33.3
41.4
67.9
17.2
16.2
85.6
38.1
37.0
79.5
16.3
15.3
86.4
44.0
28.6
80.2
16.8
15.9
88.7
47.5
36.1
80.3
17.5
16.9
89.6
49.1
33.8
80.3
15.8
14.9
89.9
50.3
32.7
80.3
14.7
13.7
Valuation
Standalone Book Value (INR)
Change (%)
Price-BV (x)
Consolidated BV (INR)
Change (%)
Price-BV (x)
Consolidated EPS (INR)
Change (%)
Price-Earnings (x)
65.8
15.2
104.6
82.2
12.2
126.3
120.4
10.8
164.5
6.4
20.1
52.8
130.6
8.5
9.9
181.9
10.5
5.8
18.9
-6.0
56.2
150.0
14.8
8.6
207.7
14.2
5.1
26.8
42.3
39.5
191.8
27.8
5.5
248.9
19.9
4.3
32.7
22.0
32.4
212.4
10.8
5.0
289.6
16.3
3.7
41.5
26.9
25.5
240.2
13.1
4.4
342.9
18.4
3.1
54.2
30.5
19.6
14.7
16.0
20 January 2018
9

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.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Dec-17
Promoter
DII
FII
Others
30.1
9.0
39.4
21.6
Sep-17
30.1
8.5
39.9
21.6
Dec-16
33.6
8.5
36.8
21.1
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Canada pension plan investment board
Europacific growth fund
ING Mauritius investments i
Sumitomo Mitsui banking corporation
Capital world growth and income fund
% Holding
6.1
4.9
3.7
1.7
1.6
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Shankar Acharya
Dipak Gupta
Uday Kotak
Bina Chandarana
Designation
Chairman
Joint Managing Director
Executive Vice Chairman & MD
Company Secretary
Exhibit 5: 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
32.7
41.5
54.2
Consensus
forecast
25.0
30.9
38.6
Variation
(%)
30.7
34.3
40.4
Source: Bloomberg
Source: Capitaline
20 January 2018
10

Kotak Mahindra Bank
NOTES
20 January 2018
11

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Kotak Mahindra Bank
Disclosure of Interest Statement
Analyst ownership of the stock
Kotak Mahindra Bank
No
A graph of daily closing prices of securities is available at
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na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MSE); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS
(Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal
Commodities Broker Pvt. Ltd. offers Commodities Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private
Equity products
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