Kotak Mahindra Bank Share price and Fundamental Analysis

Company History

Kotak Mahindra Bank (the Bank) is the flagship company of the Kotak Group. It is one amongst the fastest growing banks and most admired financial institutions in India. The Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. The principal business activities of the Bank are organised into consumer banking, commercial banking, corporate banking, treasury, and other financial services.

The Bank along with its subsidiaries offers a comprehensive range of financial products and services to its customers. The key businesses are commercial banking, investment banking, stock broking, vehicle finance, advisory services, asset management, life insurance and general insurance. The Bank offers complete financial solutions for infinite needs of all individual & non-individual customers depending on the customer's need - delivered through a state of the art technology platform. They also offer investment products like Mutual Funds, Life Insurance, retailing of gold coins and bars etc. Apart from Phone banking and Internet banking, they offer convenient banking facility through Mobile banking, SMS services, Netc@rd, Home banking and BillPay facility among others.

The Depository services offered by the Bank allows the customers to hold equity shares, government securities, bonds and other securities in electronic or Demat forms. Their Salary 2 Wealth offering provides comprehensive administrative solutions for Corporates with features such as easy and automated web based salary upload process thereby eliminating the paper work involved in the process, a dedicated relationship manager to service the corporate account, customized promotions and tie ups and many such unique features.

The Bank offers comprehensive business solutions for the business community that includes the Current Account, Trade Services, Cash Management Service and Credit Facilities. Their Wholesale banking products offer business banking solutions for long-term investments and working capital needs, advice on mergers and acquisitions and equipment financing. The Bank addresses the entire spectrum of financial needs of Non-Resident Indians (NRIs). Their tie-up with the Overseas Indian Facilitation Centre (OIFC) as a strategic partner gives them a platform to share their comprehensive range of banking & investment products and services for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs).

The bank has overseas subsidiaries with offices in Mauritius, London, Dubai, Singapore, San Francisco & New York. The overseas subsidiaries are mainly engaged in investment advisory and investment management of funds, equity & debt trading, management of GDR/ FCCB issuances, broker & broker dealer activities and investments.

Kotak Mahindra Bank Ltd was incorporated in the year 1985 with the name Kotak Capital Management Finance Ltd. On April 8, 1986, the company's name was changed Kotak Mahindra Finance Ltd. They started bill-discounting activity. In the year 1987, they entered into lease and hire purchase market. In the year 1990, they started car finance division and during next year, they started investment banking division. Also they took over FICOM, one of India's largest financial retail marketing networks.

In the year 1994, the company formed Kotak Mahindra International in Mauritius and opened an office in Dubai. They formed Kotak Mahindra (UK) with office in London. In the year 1996, the car finance business was hived off into a separate company, namely Kotak Mahindra Primus Ltd and Ford Credit took a 40% stake in Kotak Mahindra Primus. In the year1998, they formed Kotak Mahindra Inc with office in New York. In the year 2001, Kotak Securities Ltd became a subsidiary company.

In February 2003, the company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval created banking history since Kotak Mahindra Finance Ltd is the first non-banking finance company in India to convert them into a bank as Kotak Mahindra Bank Ltd. In March 2003, they commenced banking operations. The Bank started their operations in New Delhi by inaugurating a branch. They entered into ATM sharing agreement with UTI Bank (now known as Axis Bank), in which the Bank customer's were free to access around 800 ATM's. They unveiled several home finance products options that include Home Loan, Home Equity Loan, Home Loan Transfer and Home Improvement Loans. Also, they launched online remittance services called FUNDS to HOME for Non-resident Indians.

In January 2005, the Bank opened 29th retail-banking branch at Mehsana in Gujarat. In February 2005, they launched Rajajinagar extension counter in Bangalore and launched free Mobile Banking facility. Also, they launched their branch at Chennai, Tamilnadu. In February 23, 2005, they opened their retail-banking branch in the business capital of Madhya Pradesh. In March 2005, they opened their eighth retail-banking branch at Napean Sea Road in Mumbai.

In May 2005, the Bank opened new retail-banking branch at Parry's Corner in Chennai. In June 2005, they opened two retail-banking branches in Delhi at Safdarjung Enclave and Punjabi Bagh. In October 4, 2005, the Bank acquired 40% stake in Kotak Mahindra Primus Ltd (KMP) held by Ford Credit International (FCI) thereby giving the Bank and their subsidiary, complete ownership of KMP. Simultaneously, they also sold their stake in Ford Credit Kotak Mahindra Ltd (FCKM) to FCI.

In September 2006, the Bank acquired 51% of the paid up Share capital of Kotak Mahindra Securities Ltd (KMSL) by way of preferential allotment of shares by KMSL to the Bank. In March 2007, the Bank entered into a subscription agreement with International Finance Corporation, whereby the Bank will issue Upper Tier II Subordinated Bonds by way of Debentures of the value of USD 45 million with the final maturity of over 15 years.

During the year 2007-08, the Bank increased 73 new full-fledged branches & 179 new ATMs, taking the network size to 178 branches and 314 ATMs. They added new products & services like Gold debit card, smart fee (a fee solution for Educational Institutions), a GPRS based mobile banking, bill presentment and payment facility, online term deposits etc to meet the needs of the customers.

During the year 2008-09, the Bank added 39 branches and 74 ATMs taking the total network size to 217 branches and 387 ATMs (including 175 off site ATMs). They introduced several new features like, Online password, two factor authentication, improved features for security of fund transfers, e-tax payment facility, auto payment of bills, PIN based IVR.

During the year 2009-10, the Bank added 32 branches, 77 off site and 28-onsite ATMs taking the total number of branches to 249 Nos, 252 Nos off-site ATMs and 240 Nos on-site ATMs. They had a debit card base of 829,876. They opened a representative office in Dubai. Also, they entered Ahmedabad Commodity Exchange as anchor investor.

In June 2010, the Bank entered into an agreement with Sumitomo Mitsui Banking Corporation, Japan for a preferential issue of 1.64 crore shares at Rs 833 per share which amounts to approximately 4.5% stake on a post-issue basis for Rs 1,366 crore.

During the year 2010-11, the Bank added 72 branches and 246 ATMs and ended the year with 321 Branches and 710 ATMs, and thereby increasing their presence to 183 locations. They also added over half a million new customers this year across core banking products of savings and checking account, term deposits, overdrafts and non-resident accounts.

During the year, the Bank's Treasury started Correspondent Banking Division to build and leverage on relationships with offshore banks for improving quality and international reach for their customers. Also, the Bank entered into a strategic arrangement with PVR Cinemas, one of the elite name in entertainment industry, to distribute credit card products aimed at upmarket customers.

In August 2011, the Bank entered into business cooperation arrangement with CIMB Group Sdn. Bhd., Malaysia (CIMB). In October 2011, Kotak Mahindra Capital Company Ltd, a subsidiary of the Bank and Evercore Partners, global investment banking advisory firm headquartered in New York, USA, entered into an exclusive strategic partnership for cross-border M&A advisory services between India and the United States, the United Kingdom and Mexico.

On 4 September 2012, Kotak Mahindra Bank Ltd. announced that it entered into a strategic alliance with Scotiabank, Canada's most international bank to provide financial services to people immigrating to Canada and to non-resident Indians (NRIs) and People of Indian Origin (PIOs) seeking bank accounts and other banking services in India. This alliance brings together the respective strengths of each bank to enable referrals for customers in Canada and India, subject to local banking regulations.

On 5 February 2013, Kotak Mahindra Bank Ltd. (KMBL) announced that it acquired a portfolio of approximately 6,000 business loans with a total loan outstanding of about Rs 700 crore from Barclays Bank PLC, India Branch and Barclays Investment and Loan (India) Ltd. The acquisition is in line with KMBL's strategy to add value to existing business lines as it strengthens business loans portfolio.

On 12 April 2013, Kotak Mahindra Bank Ltd (KMBL) announced that it has accepted an offer from Heliconia Pte Ltd, an affiliate of Government of Singapore Investment Corporation Pte Ltd (GIC), to subscribe to a preferential issue of 2 crore equity shares of KMBL, amounting to approximately 2.6% shareholding in the bank (as of 31 March 2013) on a post-issue basis. The proposed investment of Rs 1296 crore will be at a price of Rs 648 per share.

On 9 October 2013, the then Deputy Governor of Reserve Bank of India Dr. K. C. Chakrabarty formally inaugurated Kotak Mahindra Bank's (KMB) 500th branch located at Mumbai's Western suburb of Kandivali and its 1,000th ATM located at Jayanagar, Bengaluru.

On 30 May 2014, Kotak Mahindra Bank Ltd (KMBL) announced that Kotak Trustee Company Private Limited, a promoter group entity, has sold approximately 2.5 crore shares amounting to around 3.24% shareholding in KMBL. Post the transaction, the promoter holding in the KMBL dropped to 40.33%.

On 20 July 2014, Kotak Mahindra Bank Ltd (KMBL announced that it has entered into a Share Purchase Agreement (SPA) to purchase 15% equity stake in Multi Commodity Exchange of India Ltd (MCX), from Financial Technologies (India) Ltd (FTIL), for a consideration of Rs 459 crore. On 25 November 2014, Kotak Mahindra Bank announced its plan to foray into general insurance business.

Shareholders of Kotak Mahindra Bank at an Extraordinary General Meeting held on 7 January 2015 approved a scheme of amalgamation of ING Vysya Bank Ltd. with Kotak Mahindra Bank Ltd, with a share exchange ratio of 725 equity shares of Kotak Mahindra Bank Ltd. for every 1,000 equity shares of ING Vysya Bank Ltd. On 20 November 2014, Kotak Mahindra Bank and ING Vysya Bank Ltd. (IVBL) announced the scheme of merger. ING Vysya Bank Ltd was merged with Kotak Mahindra Bank with effect from 1 April 2015.

On 29 January 2015, Kotak Mahindra Bank announced that it agreed to invest 19.9% in Airtel M Commerce Services Limited (AMSL), which is in process of applying for Payment Bank License to Reserve Bank of India (RBI). AMSL is a subsidiary of Bharti Airtel Limited.

On 3 May 2016, Kotak Mahindra Bank announced the launch of its International Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City), district Gandhinagar.

On 1 September 2016, Kotak Mahindra Bank announced a strategic partnership with Biz2Credit, a leading US-based online marketplace for small business finance. Kotak Mahindra Bank will start leveraging the Biz2Credit platform and alliances to increase its Salaried Personal Loan book.

On 30 September 2016, Kotak Mahindra Bank announced that it has executed binding share purchase agreement to acquire 99.49% of equity shares of BSS Microfinance Private Limited (BSS), a Non-Banking Finance Company, classified as a NBFC-MFI, from existing shareholders for an aggregate all-cash consideration of Rs 139.2 crore. As of June 30, 2016, BSS has a networth of approximately Rs 73 crore and micro finance loans of Rs 483 crore in its books.

On 6 October 2016, Kotak Mahindra Bank announced that it has reduced its base rate by 10 basis points to 9.4% p.a. with effect from 7 October 2016.

On 11 November 2016, Kotak Mahindra Bank announced that it has received Reserve Bank of India's approval to set up its first overseas branch in Dubai International Financial Centre (DIFC), Dubai.

Kotak Mahindra Bank reduced its Marginal Cost of Funds based Lending Rate (K-MCLR) by up to 45 basis points (bps) with effect from 1 January 2017 for various tenors. The bank reduced its base rate by 10 basis points to 9.3% p.a. with effect from 6 January 2017.

On 29 March 2017, Kotak Mahindra Bank announced the launch of 811', India's unique full-service digital banking ecosystem on mobile that will drive the bank's organic growth agenda. 811 offers a zero balance savings account with zero charges for all digital transactions, where customers can earn up to 6% p.a. on their savings account balances. 811 offer a completely digital and paperless account opening experience across nearly 700 locations in India. It can be opened anywhere, anytime, within 5 minutes, using Kotak's mobile banking app.

The Board of Directors of Kotak Mahindra Bank (Kotak) at its meeting held on 30 March 2017 accorded its approval for fresh issue of up to 6.2 crore equity shares to augment the bank's capital base.

On 28 April 2017, Kotak Mahindra Bank announced that it has entered into an agreement to purchase the entire 26% equity stake held by Old Mutual plc, UK (OM) in Kotak Mahindra Old Mutual Life Insurance Limited (Kotak Life) for a consideration of Rs 1292.7 crore. After the completion of the transaction, Kotak Mahindra Group will hold 100% of the equity shareholding of Kotak Life. On 13 October 2017, the bank announced that it completed the transaction for acquisition of 26% equity stake held by Old Mutual plc, UK in Kotak Life.

On 18 May 2017, the Securities Issuance Committee of Kotak Mahindra Bank approved allotment of 6.2 crores equity shares to eligible qualified institutional buyers at issue price of Rs 936 per share aggregating to Rs 5803.20 crore. The QIP issued opened for subscription on 11 May 2017 and closed on 16 May 2017.

The Board of Directors of Kotak Mahindra Bank at its meeting held on 18 May 2017 approved increase in ceiling limit on the total shareholding of Foreign Institutional Investors (FIIs)/Foreign Portfolio Investors (FPIs) in the bank to 43% from 42%.

On 3 August 2017, Kotak Mahindra Bank announced that it kept interest rates on savings accounts unchanged for most of the slabs except on savings accounts balance above Rs 1 crore and up to Rs 5 crore. The interest rate on saving accounts balance above Rs 1 crore and up to Rs 5 crore was cut by 50 basis points to 5.5% from 6% with effect from 4 August 2017.

In August 2018, the Bank has issued and allotted 100 crore 8.10% Perpetual Non-Cumulative Preference Shares (PNCPS) of Rs 5 each amounting to Rs 500 crores.

In March 2019, the Bank has issued and allotted 1500 Senior Unsecured Rated Listed Redeemable Long Term Bonds in the nature of Non-Convertible Debentures bearing a face value of Rs 10 lakh each aggregating to Rs 150 crore.

KMIL on 26th April 2019 sold off its entire equity stake of 19.77% held in Matrix Business Services India Pvt. Ltd. an associate company of KMIL. Accordingly, Matrix ceased to be an associate company of KMIL & consequently of the Bank from that date.

As at 31st March 2019, the Bank has 4 associate companies comprising of Infina Finance Private Limited, Phoenix ARC Private Limited, Matrix Business Services India Private Limited, and ACE Derivatives & Commodity Exchange Limited, which ceased to be an associate company with effect from 26th April 2019.

In August 2018, the Bank completed its issuance of Perpetual Non-Convertible Preference Shares (PNCPS) resulting in dilution of promoter stake to 19.70% of the paid-up capital of the Bank. However, the Reserve Bank of India (RBI) communicated to the Bank that the PNCPS issuance does not meet their promoter dilution requirement. The Bank has, by way of abundant caution, in December 2018, filed a writ petition with the Hon'ble Bombay High Court to validate its position. The writ petition is pending.

During the year 2019, Kotak Securities (KS) launched FIT (Free Intraday Trading), a subscription based product, targeted at online customers. It also launched biometric based account opening process during the year. These resulted in a higher customer acquisition for the year. Besides, KS launched commodity brokerage services and direct mutual fund platform during FY 2019.

During the year 2019, Kotak Investments Advisors Ltd., (KIAL) has received new capital commitments of around Rs 50 billion. The aggregate domestic alternate assets managed by KIAL as on 31st March 2019 were Rs10547 crore. It managed 15 domestic funds during the year. It also advised 5 offshore funds during the year. During the year, KIAL successfully exited all investments in its Managed Account Fund.

The Bank had 1,600 branches (excluding GIFT and DIFC) and 2,519 ATMs as on 31 March, 2020. As on 31 March 2020, the bank has 19 subsidiaries and 4 associate companies under its roof.

Pursuant to approval of Board of Directors on 22 April 2020 and approval of shareholders on 25 May 2020, the bank undertook a Qualified Institutions Placement. On 30 May 2020, Bank allotted 6,50,00,000 equity shares of face value of Rs 5 each at an issue price of Rs 1,145 per equity share thereby raising Rs 74,42,50,00,000.

During the FY2020, Kotak 811 launches India's first zero-contact, video KYC savings account.

As of 31 December 2020, the Bank had 1603 branches and 2573 ATMs across the country.

As of 31st March, 2021, Bank had 1,604 branches and 2,598 ATMs, covering 781 locations. It launched 4 new Credit Card products namely White, Zen, Mojo, 811 Secured, in FY 2020-21.

As on 31st March, 2022, Bank had 1,700 branches and 2,705 Automated Teller Machines (ATMs) and Recyclers.

As at 31st March, 2022, Bank had 19 subsidiaries in various businesses.

During year 2021-22, Bank acquired 13,080,000 equity shares of Kotak Mahindra Pension Fund Limited from KMAMC on 17th May, 2020. Post-acquisition of equity shares, KMPFL became a direct subsidiary with the Bank holding 51%.

As of 31st March, 2023, Bank had 1,780 branches, 2,963 ATMs and Recyclers and 15,572 Micro ATM installations.

During the year 2022-23, the Bank acquired 100% of the issued and paid up capital of Sonata Finance Private Limited for a total consideration of approx. Rs 537 Crore effective on 10th February, 2023.