Banks and NBFCs

Kotak Mahindra Bank – Will it be the next out performer?

India's first Bank to receive licenses from RBI to work as a bank from working as NBFC

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(A) About

Kotak Mahindra bank is the flagship Company of the Kotak Group. It is amongst the fastest-growing Banks and the most admired Financial institutions in India.

Well, The Bank offers transaction banking, operates lending verticals, Manages IPOs and provides working capital loans.

The Principal business activities of the bank are organised consumer banking, corporate banking, treasury, and other financial services. Additionally, The Bank Along with its subsidiaries runs key businesses such as stock broking, Vehicle Financing, advisory services, asset management, life insurance and many more.

(B) Journey

(C) Board Members of Kotak Mahindra Bank Ltd

(i) Mr. Uday S. Kotak - Managing Director and CEO

Mr Uday Kotak (63) is the promoter of the bank. Mr Uday Kotak. Currently, he holds the position of Managing Director and CEO of the company. In addition, Mr Kotak holds a Bachelor’s degree in Commerce and an MMS degree from Jamnalal Bajaj Institute of Management Studies, Mumbai.

Mr Uday is attached to with company since its beginning. He served as directorship of the company many times. Even though, Under his leadership over the past 35 years, the Kotak Group established
a prominent presence in major areas of financial services.

Despite this, He has been a member of the International Advisory Board of GIC Private Limited, Singapore and the International Advisory Panel of Monetary Authority of Singapore, etc.

(ii) Mr Dipak Gupta - Joint Managing Director

Mr Dipak Gupta is currently serves as a position of Joint Managing Director in the company. He is 61 Years old. Furthermore, He completed his qualification in B.E. (Electronics), PGDM-IIM, Ahmedabad.

In addition, He earned a rich experience of over 35 years in the financial services sector. 29 years of which, have been with the Kotak Group.

He was appointed as Whole Time Director of Kotak Mahindra Finance Limited (“KMFL”) from 1st October, 1999 and continued to hold that position after the conversion of KMFL into the Bank.

Thereafter, He was re-designated as Joint Managing Director of the Bank from 21st July, 2011.

Mr Gupta was responsible for leading the Kotak Group’s initiatives into the banking arena. He was the Chief Executive Officer of Kotak Mahindra Prime Limited and prior to joining the Kotak Group, was with A. F. Ferguson & Co.

(iii) Mr KVS Manian - Whole-time Director

Mr KVS Manian is another senior Director who holds the command of Kotak Mahindra Bank. He is 60 years and holds the position of Whole Time Director in the company.

On the Qualification side, He is an electrical engineer from IIT (BHU) - Varanasi, Post Graduate in Financial Management from Jamnalal Bajaj Institute of Management Studies Mumbai and a Cost and Works Accountant.

In addition, Mr Manian has been instrumental in setting up and metamorphosing many business divisions into success stories in his over two-and-a-half decade association with the Kotak Group. He has played a pivotal role in Kotak’s journey from a Non-Banking Financial Company to a Bank.

Prior to his current role, Mr Manian scripted the retail-banking narrative of Kotak. He was the President of Consumer Banking - steering the Bank from a single branch to over 600 branches and more than 1,000 ATMs across the country in a span of 10 years.

For FY22, Mr KVS Manian received a Remuneration of Rs 69 Cr which is 0.20% of Net Sales and 0.57% of Net Profit.

(iv) Mr. Gaurang Shah - Whole-time Director

Mr Gaurang Shah is also a senior-level Director in the company. He is also 60 years old. On the Qualification side, Mr Shah did his post-graduation in M.Com and a did Chartered Accountant.

Mr. Shah held the position of Whole Time Director of the Bank from 1st November, 2019. He has
over 36 years of rich experience primarily in financial services, of which, over 24 years have been with the Kotak Group.

Mr. Shah is in charge of the Credit function of the Bank and is the Chairman of the Credit Committee of the Bank. additionally, He oversees the Insurance, Asset Management including Alternate Assets and Asset Reconstruction businesses.

Prior to this, Mr. Shah headed the Group Risk Management function. Mr. Shah played a key role in building the Group’s Consumer Banking and Life Insurance businesses and has held several positions of responsibility, including Head of Retail Assets at the Bank.

For FY22, Mr Gaurang Shah received a Remuneration of Rs 67 Cr which is 0.20% of Net Sales and 0.55% of Net Profit.

(D) Shareholding Pattern of Kotak Mahindra Bank Ltd

Kotak Mahindra Bank Ltd - Shareholding Pattern
Kotak Mahindra Bank Ltd - Shareholding Shareholder Public and Promoters

(E) Business structure of Kotak Mahindra Bank Ltd

Kotak Mahindra Bank has a very wide and diversified business portfolio. The company is in Financial activities for the past 35 years ago. Like others, Kotak is also in the Business of lending money and making money. But what makes Kotak different is the way of making money for itself and for investors together.

The Company is privileged with the highest Casa Ratio in the banking industry which helps the bank to lend money at a very competitive price.

In addition to its banking activities, its Group offers a significant array of other financial products and services as well, which the company operate through its subsidiaries. These products and services include banking, financing through NBFCs, asset management, insurance, broking, investment banking, wealth management and asset reconstruction.

(F) Product Portfolio of the Company

Kotak Mahindra Bank Ltd - Product Portfolio

(i) Wholesale Banking

Under Wholesales Banking, Company Caters to a wide range of corporate customer segments, including large Indian corporates, conglomerates, financial institutions, public sector undertakings, multinational companies, new-age companies, small and medium enterprises and realty businesses. It offers Corporate loans, Trade finance, Business Banking and many more.

(ii) Commercial Banking

The Commercial Banking business focuses on various customer segments with deeper coverage that goes beyond metro and urban centres, through an expanding network of branches and associates.

The business has specialized units which offer financial solutions in the areas of Commercial Vehicles, Construction Equipment, tractors and Agriculture business. It services the priority sector by providing finance for tractors, Crop loans, Small Enterprises and Allied agricultural activities, thereby helping the Bank meet its financial inclusion goal.

(iii) Consumer Banking

For Consumer Banking, KMBL Provides a bouquet of products and services like deposits, lending solutions and transaction services for retail customers, small businesses, NRIs, retail institutions, government departments and entities, backed by convenient, innovative and digital-first solutions.

(iv) Other Financial Services

In other financial services, KMBL basically offers products that are not related to usually banking but with other financial verticles. Under this, The Company focuses on offering products & services such as Broking, insurance, Investment, Mutual Funds etc.

(G) Loan Advances to Customers

Kotak Mahindra Bank Ltd - Loan Book

Kota Loan Book is spread among almost every sector. Its Loan book consists of Loans to Home Loans and LAP loans, Consumer Banks, Credit Cards, Agriculture, SMEs and many more which can be assumed a healthy Loan Book.

In 2021, The Large share of loan is lend in Home Loan sector that accounting for ~28% followed by Corporate Banking at 24%. Although, Consumer Banking and Agriculture sector that accounts for 9-10%.

(H) Revenue Breakup

Kotak Mahindra Bank Ltd - Revenue Breakup

Kotak Mahindra Bank's major revenue derives from the Insurance segment i.e, 28% (an increase of 2% from PY). Insurance Segment comprises Life and General Insurance business of its Subsidiary Companies.

After that, Retail Banking contributes 24% of revenue. Retail Banking includes Lending, Branch Banking and Credit card services.

  • Under the Lending subhead; usually Loan are provided for Commercial vehicle finance, personal loans, home loans, agriculture finance, and other loans/services.
  • whereas, in Branch Banking Retail borrowings cover savings, current and term deposit accounts and services including the distribution of financial products.

However, it's Corporate/Wholesale banking Contributes 21% of revenue in which working capital finance, medium-term finance, trade finance, foreign exchange services, and other transaction banking services are used to offer.

(I) Geographic Presence

Kotak Mahindra Bank Ltd - Geographical Presence

Kotak has a wide distribution network of branches and franchises across India which enables them to reach out to a wide customer base.

As of 2022, Kotak Bank has 1700+ Bank Branches and more than 2705 Bank ATMs.

Despite that, The Company also have an international banking unit in Gujarat International Finance Tec-City (GIFT City), a bank branch in Dubai International Financial Centre (DIFC), and international offices in New York, London, Mauritius, Dubai, Singapore, and Abu Dhabi.

(K) Market Share

Kotak Mahindra Bank Ltd - Market Share Credit Cards

In the Banking industry, HDFC bank has the Highest Market Share in Credit Card with 21.07%. SBI ranks 2nd in the list with 19.02%.

Currently, Kotak accounts for a 5.27% market share lesser than the HDFC, SBI, ICICI and Axis.

Despite the fact that Kotak Mahindra Bank has a market share of a mere 5% in the credit card market, it has witnessed 64% YoY growth in the month of June 2022 (highest in the Industry).

Kotak Mahindra Bank Ltd - Market Share in in other Segments

Over the period, Kotak is one of the faster banking players that has increased its market share in various segments. Kotak continues to capture greater market share in almost Financial segments because of enabling and empowering Digital Ecosystem.

(I) Operational Parameters

Kotak Mahindra Bank Ltd - CASA Ratio

From past 10 years, Company grew its CASA Ratio exponentially. Even today Kotak has the highest CASA ratio in the Indian Banking Industry.

A higher CASA ratio indicates a lower cost of funds because banks do not usually give any interest on current account deposits and the interest on saving accounts is usually very low 3-4%.

So if the bank has a higher CASA, It could be considered more proficient and profitable than other banks.

Kotak Mahindra Bank Ltd - CAR Ratio

Like Kotak has the highest CASA, here's the story same, It has the highest Capital Adequacy ratio as well.

Kotak has 22.70% CAR against HDFC Bank 18.9%, ICICI Bank 19.16% and Axis 18.54%.

Kotak Mahindra Bank Ltd - Advances

Over the years Advances to customers grew significantly. In June month, the company witnessed growth across all areas.

On YoY basis (June 2022), Retail Micro Finance registered 101% growth (from 1812cr to 3650cr). Furthermore, 77% Each growth was recorded in consumer durables and Credit Cards.

Kotak Mahindra Bank Ltd - Deposits
Kotak Mahindra Bank Ltd - GNPA & NNPA

(J) Cost Structure

Kotak Mahindra Bank Ltd - Cost Structure As % of Net sales

21% of expenses incurred on Employee costs, and selling and administrative expense accounts for 14% of Net sales. whereas other expenses collectively account for ~57%.

(K) Financial Parameters

Kotak Bank Ltd - Financial Parameters
  • Kotak Sales grew at 14% CAGR over past 10 years. In 2021 company witnessed negative sales due to Covid-Pandemic.
  • However PAT grew at Decent 22% CAGR over 10 years.
  • Additionally, the operating margins also de-grew.
  • PATM(%) increased significantly because of focusing on operational activities that led to proficiency in profits.

(L) Management Discussion and Highlights

(i) Performance

  • The bank has reported 53% increase in the net profit at Rs 2755.39 crore, with the NII growth of 19% to Rs 6160.05 crore in the quarter ended June 2022.
  • Non-interest income declined 45% to Rs 2494.66 crore and net total income fell 11% to Rs 8654.71 crore in the quarter ended June 2022. The expense ratio was lower at 57.3%, while the tax rate eased to 26.4% in the quarter ended June 2022

(ii) Deposits & Advances


  • The average current deposits grew to ₹55,081 crores during Q1 FY23 v/s ₹46,341 crores for Q1 FY22, up 19% YoY.
  • The cost of the savings account was 3.59% in Q1 FY23 v/s 3.73% in Q1 FY22. CASA (current account savings account) & TDs below ₹5 crores as a percentage of total deposits was 88% during the quarter as compared to 92% during Q1 FY22.
  • The net customer additions in Q1 FY23 were ~1.8 million. Their customer base as at 30th June 2022 was 34.5 million.


  • Advances as on 30th June 2022 grew by 29% YoY.
  • The commercial vehicle industry witnessed robust growth during the quarter as compared to Q1FY22. Disbursements were considerably higher and demand for finance was on the back of replacement demand for the vehicles.
  • Their retail lending products showed robust growth during the quarter and at the consumer assets aggregate level, they grew by ~44% YoY and ~6% QoQ.
  • Their mortgages business grew by ~46% YoY. They continued to see a growth in demand for home loans during the quarter and continued to focus on enhancing customer experience & acquiring quality customers to strengthen the market share in this segment.
  • Unsecured retail advances (including retail micro finance) were at 7.9% of total advances as on 30th June 2022 as compared to 5.6% as on 30th June 2021.
  • Digitally sourced credit cards increased by 220% YoY during the quarter. Credit cards advances grew by ~77% YoY to ₹6,819 crores in Q1 FY23.

(iii) Digital Strategy & Initiatives

  • The bank saw 150% YoY transaction volume growth during the quarter. Additionally, transaction
    value growth stood at 80% YoY.
  • During the quarter, 90-day active users grew by 40% YoY.

(iv) Outlook

  • Demand from construction equipment continued to remain strong and increased significantly on a YoY basis. Demand for equipment in the mining sector continued to show an uptick and utilization continued to remain strong. Their disbursements and market share increased during the quarter.
  • Demand for credit in their agri-division is expected to increase going forward against the background of a good monsoon. Customer cash flows continue to be good in this business.
  • They continue to grow their retail micro-finance book with a focus on semi-urban and rural markets and borrowers in the agri & allied segments. Collections and demand in this segment remained strong.
  • The consumer finance segment witnessed a good quarter across physical and digital distribution and they continued to focus and scale in this space.

(M) Strength and Weakness


(i) Strong capitalisation supported by healthy internal capital generation

The bank has subsidiaries that are in the lending, insurance, asset management and broking businesses. KMBL’s capitalisation remains strong on a consolidated basis as well with a common equity tier-I (CET-I) ratio of 23.0% (including Q1 FY2023 profits) as on June 30, 2022.

The subsidiaries are self-sufficient, in terms of capital requirement, and any capital support to them is expected to remain manageable in relation to the bank’s overall profits and capital.

(ii) Strong CASA deposit base leading to lower cost of funds

KMBL’s CASA growth slowed with the YoY growth at ~7 % in Q1 FY2023 (~12% YoY growth in FY2022, 15% in FY2021 and 24% in FY2020) and stood at Rs. 1.84 lakh crore.

Further, KMBL continues to operate with a marginally higher interest rate offering for term deposits compared to peer banks, which, in turn, supported the YoY growth of ~16% in term deposits in Q1 FY2023.

The overall share of CASA deposits in total deposits remained one of the highest in the industry at 58.1% as on June 30, 2022 although it moderated slightly from 60.2% as on June 30, 2021 largely due to the weaker growth in CASA deposits.

(iii) Profitability expected to remain strong despite elevated cost pressure

The decline in the cost of interest-bearing funds supported the steady expansion in the lending spreads, resulting in an improvement in the net interest margin (NIM) to 4.40% of average total assets (ATA) in Q1 FY2023 (4.0-4.1% in FY2020-FY2022).

However, a further improvement from this level is expected to remain limited as the lending spreads could come under pressure amidst the tighter liquidity conditions.

Noninterest income improved to ~2% of ATA in Q1 FY2023 (1.4% in FY2022, 1.5% in FY2021), supported by the growth in retail fees.

(iv) Asset quality metrics remain satisfactory

The fresh NPA generation remained at comparatively higher levels, following the onset of the pandemic, at 2.0-2.5% of standard advances in FY2021-FY2022.

While the annualised fresh NPA generation stood at 2.1% in Q1 FY2023, the rate of NPA generation is expected to gradually return to the pre-Covid levels of 1.2-1.7% seen during FY2017-FY2020.

The headline asset quality metrics remain satisfactory with gross NPAs (GNPAs; %) and net NPAs (NNPAs; %) at 2.24% and 0.62%, respectively, as on June 30, 2022.

Further, the share of the unsecured retail book, primarily comprising personal loans, microloans and credit cards, inched up to 7.9% as on June 30, 2022 from 5.6% as on June 30, 2021 although it remains low in relation to net advances.


(i) Incremental deposit mobilisation at competitive rates will be a monitorable

The deposit base has grown by ~10-12% on a YoY basis on an average over the last several quarters (with overall deposits at Rs. 3.16 lakh crore as on June 30, 2022), although book growth has seen a comparatively sharper rebound and increased to YoY growth of ~29% as on June 30, 2022 (excluding credit substitutes) from ~15% as on September 30, 2021.

Sustaining robust traction in advances will necessitate a stronger deposit build-up over the near to medium term. While KMBL has managed to improve its deposit base despite successive rate cuts (largely undertaken in FY2021), leading to the narrowing of the differential in the cost of funds with peer banks, its ability to do so in a tighter liquidity environment will remain critical for maintaining the cost advantage.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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