Neutral Kotak Mahindra Bank Ltd For Target Rs. 2,000 - Motilal Oswal Financial Services
Mr. Uday Kotak resigns from position of MD & CEO
Leadership transition begins at Kotak Bank
* Mr. Uday Kotak has resigned from MD & CEO position of the bank, effective 1st Sep’23, four months ahead of schedule. He will continue to serve as a non-executive director of the bank.
* Mr. Kotak, a founding member of the bank, has been part of the institution for the past 38 years. His contribution was thus pivotal in guiding the bank through its transition from being an NBFC to obtaining a banking license in 2003 and evolving as one of the most successful and reputed financial organizations in the country. Under Mr. Kotak’s leadership, the bank has become the fourth-largest private bank and has established a prominent presence across the financial services spectrum, including asset management, broking, investment banking, life insurance, etc.
* Mr. Kotak has cited significant personal and other family commitments, besides a sequenced leadership transition at the bank, as the key reasons behind his resignation from executive responsibilities. The terms for Mr. Prakash Apte (Chairman) and Mr. Dipak Gupta (Joint MD) will also end on 31st Dec’23. Thus, in order to have a more gradual transition, Mr. Kotak decided to step down four months ahead of schedule while Mr Dipak Gupta will be the interim MD and CEO till 31st Dec’23, subject to RBI approval.
* The bank has already submitted two names for the CEO role to the RBI and is waiting for the regulator’s approval. As per media reports, two senior management team members and whole-time directors, Mr. KVS Manian and Ms. Shanti Ekambaram, are the contenders for the top job.
Valuation & view: Kotak Bank has delivered steady performance over the years, with its RoE gradually improving to >14%. The bank has delivered robust traction in loan growth over FY21-23 at a ~19% CAGR and we estimate the bank to sustain a 17-18% CAGR over FY23-25E. Asset quality remains steady, and the strong CASA ratio will limit pressure on margins and enable a ~15% PAT CAGR over FY23- 25E. We retain our Neutral rating with a TP of INR2,000 (2.7x FY25E ABV and INR560 for subs).
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