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Home > Kotak Mahindra Bank
Stock Info
Current price BSE 1039.90
Current price NSE 1040.00
Market Capitalisation 80120.88
Face value Rs. 5
EPS (TTM) Rs. 29.29
P/E 35.5
Sector Banking
No of shares 770467156
BSE 52 week high 1060.00
BSE 52 week low 588.00
NSE 52 week high 1059.60
NSE 52 week low 588.00
BSE Sensex 26560.15
Nifty 7936.05
Average Volume BSE 253755.30
Average Volume NSE 1058384.00
BSE Code 500247
NSE Symbol KOTAKBANK
Absolute returns
 
KOTAKBANK
SENSEX
1 Years
67.15%
42.49%
3 Years
154.79%
66.84%
4 Years
152.34%
45.08%

About the Company

Founded in 1985, Kotak Mahindra Bank (“Kotak” or the “Bank”) is one of India's leading banking and financial services organizations, offering a wide range of financial services ranging from commercial banking, stock broking, mutual funds, life insurance and investment banking. The Bank caters to the diverse financial needs of individuals and the corporate sector. It was previously known as Kotak Mahindra Finance Limited, a non-banking financial company.

For FY 2014, Kotak’s net interest margins stood at a healthy 4.97 % (4.70 % for FY 2013). For the same period, net NPA’s stood at 0.88 % (0.55 % for FY 2013). 32 % of total deposits with the Bank were in the form of low cost CASA (current account and savings accounts) deposits.

As at March 31, 2014, the Bank had a distribution network encompassing 605 branches and 1,103ATMs across 354 locations, compared to 438 branches and 961 ATMs last year. Its International offices are situated in Abu Dhabi, Dubai, London, Mauritius, New York and Singapore.

* The Equity Research Report presented below is based on a Fundamental Analysis of Kotak Mahindra Bank.

 

 

Latest Shareholding Pattern

* Kotak split its equity in the ratio of 1:2 on 13 Sept 2010. Dividend is adjusted to reflect the effect of split.

* Kotak split its equity in the ratio of 1:2 on 13 Sept 2010. EPS and P/E numbers are adjusted to reflect the effect of split.

Key Financial Figures

(Rs. Cr)
Consolidated
Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Interest earned 4,366.56 4,601.16 6,141.44 8,470.42 10,837.87 11,985.91
Interest expended 1,992.40 1,772.86 2,634.55 4,541.95 6,024.49 6,312.12
Net Interest Income 2,374.16 2,828.30 3,506.89 3,928.46 4,813.38 5,673.79
Other income 2,882.61 5,384.74 4,822.30 4,466.97 5,075.23 5,249.72
Operating expenses 3,910.79 5,799.45 5,934.19 5,640.20 6,561.27 6,919.04
Operating Profit 1,346.00 2,413.59 2,395.00 2,755.24 3,327.34 4,004.47
Provisions (other than provisions for tax) and contingencies 329.79 510.73 147.60 98.70 183.18 308.97
PBT 1,016.20 1,902.86 2,247.40 2,656.54 3,144.16 3,695.50
Tax 363.53 575.50 678.16 806.01 939.95 1,183.96
PAT (before Minority Interest and share of Associates) 652.67 1,327.36 1,569.24 1,850.53 2,204.21 2,511.54
Profit/ (loss) attributable to Minority Interest - - - - 49.33 62.17
Share of profit / (loss) of Associates - - - - (33.58) (15.62)
Consolidated Profit / (Loss) for the year 652.39 1,307.00 1,566.75 1,832.24 2,188.46 2,464.99
Consolidated
Particulars FY 2012 Q4 FY 2013 Q1 FY 2013 Q2 FY 2013 Q3 FY 2013 Q4 FY 2014 Q1 FY 2014 Q2 FY 2014 Q3 FY 2014 Q4 FY 2015 Q1
Interest earned 2,348.66 2,469.82 2,609.78 2,811.47 2,946.79 2,976.76 2,982.59 2,994.25 3,032.31 3,135.36
Interest expended 1,299.35 1,369.21 1,449.09 1,579.93 1,626.26 1,602.72 1,566.19 1,595.01 1,548.20 1,625.29
Net Interest Income 1,049.31 1,100.61 1,160.69 1,231.54 1,320.53 1,374.04 1,416.40 1,399.24 1,484.11 1,510.07
Other income 2,014.93 861.81 1,886.49 1,345.65 1,441.80 1,356.22 713.39 1,430.25 1,749.86 1,871.27
Operating expenses 2,310.78 1,304.36 1,799.97 1,683.59 1,773.34 1,625.72 1,160.09 1,878.54 2,254.69 2,322.82
Operating Profit 753.47 658.04 1,247.21 893.6 988.99 1,104.54 969.70 950.95 979.28 1,058.52
Provisions (other than provisions for tax) and contingencies 2.25 19.30 61.37 58.9 43.61 159.55 86.16 63.85 (0.59) 27.24
PBT 751.22 638.76 1,185.84 834.7 945.38 944.99 883.54 887.10 979.87 1,031.28
Tax 222.45 200.47 219.19 248.92 271.37 303.54 289.53 287.32 303.57 334.58
PAT (before Minority Interest and share of Associates) 528.77 438.29 966.65 585.78 674.01 641.45 594.01 599.78 676.30 696.70
Profit/ (loss) attributable to Minority Interest - - - 13.81 14.96 18.37 11.33 15.64 16.83 12.82
Share of profit / (loss) of Associates - - - (5.24) (6.55) (4.42) (0.25) (7.11) (3.84) (14.43)
Consolidated Profit / (Loss) for the year 520.93 443.48 502.17 577.21 665.60 627.50 582.93 591.25 663.31 698.31

Profitability Analysis

(%)
Consolidated
Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Net Profit Margin Ratio 12.42 16.16 18.84 22.04 13.85 14.57
Cost to Net Income Ratio 74.40 70.61 71.25 67.18 66.35 63.34
Other Income to Net Income Ratio 54.84 65.56 57.90 53.21 51.32 48.06
Consolidated
Particulars FY 2012 Q4 FY 2013 Q1 FY 2013 Q2 FY 2013 Q3 FY 2013 Q4 FY 2014 Q1 FY 2014 Q2 FY 2014 Q3 FY 2014 Q4 FY 2015 Q1
Net Profit Margin Ratio 12.12 13.16 21.50 14.09 15.36 14.80 16.07 13.56 14.14 13.92
Cost to Net Income Ratio 75.41 66.47 59.07 65.33 64.20 59.54 54.47 66.39 69.72 68.70
Other Income to Net Income Ratio 65.76 43.92 61.91 52.21 52.20 49.67 33.50 50.55 54.11 55.34

Net profit margin is arrived at by dividing profit after tax by the total income generated (i.e. interest earned plus other income) and shows what is left for the shareholders as a percentage of total income. 

 

Cost to net income ratio is particularly important in valuing banks. It is derived by dividing operating expenses by the net income generated (i.e. net interest income plus the other income). The ratio highlights the efficiency with which the bank is being run - the lower it is, the more profitable the bank will be. If this ratio rises from one period to the next, it means that costs are rising at a higher rate than income. Together these ratios help in understanding the cost and profit structure of the bank and analysing business inefficiencies. 

 

Other income largely constitutes of fee income such as commission and brokerage fees and client based merchant foreign exchange trade, service charges from account maintenance, transaction banking (including cash management services), syndication and placement fees, processing fees from loans and commission on non-funded products (such as letters of credit and bank guarantees) etc. Banks in developed countries derive nearly 50% of their income from these non-funded sources. A high other income to net income ratio is good for the bottom line (i.e. net profit) as income from this stream is derived without significant mobilisation of deposits and hence the cost associated with this income is relatively lower compared to interest income.

Key Balance Sheet Figures

(Rs. Cr)
Sources of Funds / Liabilities
Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Share Capital 345.67 348.14 368.44 370.34 373.30 385.16
Reserves & Surplus 6,176.88 7,562.80 10,594.51 12,530.70 14,876.49 18,690.85
Employee stock options grants 91.91 54.80 36.92 34.82 17.53 8.53
Net worth (shareholders funds) 6,614.45 7,965.75 10,999.87 12,935.86 15,267.33 19,084.53
Minority Interest 62.86 80.86 107.21 160.06 208.72 270.89
Deposits 13,821.84 21,819.18 27,312.98 36,460.73 49,389.14 56,929.75
Borrowings 11,979.02 13,885.70 22,073.32 29,194.69 36,171.96 29,007.14
Other liabilities and provisions 4,017.62 4,992.26 13,187.75 13,598.06 4,720.24 5,929.76
Policyholders’ Fund 3,738.04 6,371.07 - - 10,077.27 11,014.56
Total Liabilities 40,233.84 55,114.81 73,681.13 92,349.40 1,15,834.66 1,22,236.63
(Rs. Cr)
Application of Funds / Assets
Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Fixed Assets 338.34 610.41 597.00 611.87 616.48 1,260.67
Cash and balance with RBI 1,007.03 2,094.08 2,114.86 2,030.63 2,220.76 2,960.51
Balances with banks and money at call and short notice 430.47 412.73 879.40 1,545.20 2,297.49 3,682.60
Advances 22,497.62 29,724.29 41,241.95 53,143.61 66,257.65 71,692.52
Investments 13,313.03 19,484.78 26,048.99 31,658.43 40,907.24 38,791.05
Other Assets 2,643.94 2,785.10 2,795.51 3,356.22 3,531.63 3,845.87
Goodwill on consolidation (net) 3.42 3.42 3.42 3.42 3.42 3.42
Total assets 40,233.84 55,111.40 73,681.13 92,349.38 1,15,834.66 1,22,236.63

Efficiency Analysis

(%)
Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Advances / Loan Funds Ratio 87.20 83.25 83.51 80.94 77.44 83.42
ROE / RONW 9.86 16.41 14.24 14.16 14.33 12.92

Advances to Loan funds ratio: This ratio indicates the efficiency with which the bank is able to deploy the funds it mobilises and is arrived at by dividing the banks total advances by its total deposits (i.e. deposits + borrowings). A high advance to loan fund ratio indicates that the bank might not have enough liquidity to cover any unforeseen fund requirements; if the ratio is too low, banks may not be earning as much as they could be.

 

Return on Equity (ROE) or Return on Net Worth (RONW) : measures the amount of profit which the company generates on money invested by the equity shareholders (i.e. share capital + reserves and surplus). In short, ROE draws attention to the return generated by the shareholders on their investment in the business. ROE is widely used in comparing the profitability of the company with other companies in the same industry.

Valuation Analysis

Consolidated
Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Net Interest Income Rs. 2,374.16 2,828.30 3,506.89 3,928.46 4,813.38 5,673.79
Growth (%) - 19.13 % 23.99 % 12.02 % 22.53 % 17.88 %
PAT (Rs. Cr.) 652.67 1,327.36 1,569.24 1,850.53 2,204.21 2,511.54
Growth (%) - 103.37 % 18.22 % 17.93 % 19.11 % 13.94 %
Earnings Per Share – Basic (Rs. ) 9.45 18.84 21.73 24.81 29.44 32.19
Earning Per Share - Diluted (Rs. ) 9.43 18.64 21.60 24.67 29.33 32.14
Price to Earnings 15.00 20.08 21.15 21.99 22.21 24.99
Consolidated
Particulars FY 2012 Q4 FY 2013 Q1 FY 2013 Q2 FY 2013 Q3 FY 2013 Q4 FY 2014 Q1 FY 2014 Q2 FY 2014 Q3 FY 2014 Q4 FY 2015 Q1
Net Interest Income 1,049.31 1,100.61 1,160.69 1,231.54 1,320.53 1,374.04 1,416.40 1,399.24 1,484.11 1,510.07
Growth (%) - 4.89 % 5.46 % 6.10 % 7.23 % 4.05 % 3.08 % (1.21 %) 6.07 % 1.75 %
PAT 528.77 438.29 966.65 585.78 674.01 641.45 594.01 599.78 676.30 696.70
Growth (%) - (17.11 %) 120.55 % (39.40 %) 15.06 % (4.83 %) (7.40 %) 0.97 % 12.76 % 3.02 %
Earnings Per Share – Basic 7.04* 5.98* 6.76* 7.76* 8.93* 8.29* 7.59* 7.69* 8.62* 9.06*
Earning Per Share - Diluted 7.00* 5.95* 6.72* 7.72* 8.90* 8.26* 7.57* 7.67* 8.60* 9.05*
Price to Earnings - - - - - - - - - -
* Not annualised

Dividend History

Year Rate of dividend (of face value) Rs. Closing price* Date*
FY 2008 7.50 % 0.38 246.38 14 July 2008
FY 2009 7.50 % 0.38 291.58 14 July 2009
FY 2010 8.50 % 0.43 385.40 30 June 2010
FY 2011 10.00 % 0.50 474.95 12 July 2011
FY 2012 12.00 % 0.60 600.85 6 July 2012
FY 2013 14.00 % 0.70 700.75 4 July 2013
FY 2014 16.00 % 0.80 884.45 4 July 2014

* Closing Price as on the date of declaration of final (or last) dividend for the Financial Year.


The Company has maintained an average dividend yield of 0.12 % over the last 5 financial years.

Liquidity and Credit Analysis

Particulars FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Net Interest Margin Ratio (“NIM”) 5.80 5.80 5.20 4.80 4.70 4.97
Capital Adequacy Ratio 20.0 18.4 19.9 17.5 16.0 18.8
Net NPAs 1.2 1.1 0.4 0.53 0.55 0.88

NIM: Banks focus on lending or advancing money at a rate higher than the rate at which they accept deposits. Net Interest Margin is calculated by dividing the difference between Interest earned (on advances) and interest expended (on deposits) by the amount of (average) Invested Assets. If this ratio rises from one period to the next, it indicates that the bank is able to deploy its funds more efficiently which results in greater profitability.

 

Capital Adequacy Ratio (CAR): or Capital to Risk Weighted Assets Ratio (CRAR) is a measure of a bank's capital (net worth plus subordinated debt) expressed as a percentage of a bank's risk weighted credit exposures (loans).

 

Two types of capital are measured: tier I capital, which can absorb losses without a bank being required to cease trading (such as ordinary share capital and free reserves); and tier II capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors (such as long term unsecured loans and revaluation reserves which is taken at a discount of 55 % while determining its value for inclusion in Tier II capital).

 

Measuring credit exposures requires adjustments to be made to the amount of assets shown on a bank's balance sheet. This is done by weighting the loans made by a bank according to their degree of riskiness, e.g. loans to Governments are given a 0 %weighting whereas loans to individuals are weighted at 100 %. Similarly off-balance sheet items such as guarantees and foreign exchange contracts are also weighted for their riskiness. On-balance sheet and off-balance sheet credit exposures are added to get total risk weighted credit exposures.

 

As per the Basel II norms the minimum capital adequacy ratios that apply are:

 

Tier I capital to total risk weighted credit exposures to be not less than 4 %;

Total capital (Tier I plus Tier II less certain deductions) to total risk weighted credit exposures to be not less than 8%.

 

The RBI currently prescribes a minimum capital of 9 % of risk-weighted assets, which is higher than the internationally prescribed percentage of 8 %.

 

Applying minimum capital adequacy ratios serves to protect depositors and promote the stability and efficiency of the financial system.

 

For details on classification of tier I and tier II see http://rbidocs.rbi.org.in/rdocs/notification/PDFs/62CB300611FL.pdf

 

The Bank is well capitalised with an overall capital adequacy ratio (CAR) of 18.8 % for FY 2014, well above the benchmark requirement of 9% stipulated by Reserve Bank of India (RBI). Of this, Tier I CAR was 17.8 % (14.7 % for FY 2013), while the Tier II CAR was at 1.0 % (1.3 % for FY 2013).

 

NPA: Non Performing Asset or NPA is a classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Any rise in the percentage of NPAs results in a sharp decline in the overall profitability.

Ownership pattern

(%)
Shareholding March 2010 March 2011 March 2012 March 2013 March 2014
Promoter 48.23 45.57 45.32 43.79 43.58
FIIs 28.57 25.40 28.26 31.48 31.68
DIIs 4.97 5.44 4.66 2.13 1.85
Others 18.23 23.59 21.76 22.6 22.89

In its latest stock exchange filing dated 31 March 2014, Kotak reported a promoter holding of 43.58 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

 

At the same time, institutional holding in the Company stood at 33.53 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.

 

 


Final Score Based on Fundamental Analysis of Kotak Mahindra Bank
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