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Kotak Mahindra Bank: Valuation and leadership transition evaluation

Oct 18, 2023

By: BlinkX Research Team

Recent developments at Kotak Mahindra Bank have sparked discussions surrounding both its valuation and leadership transition. As the stock currently trades below the Covid low Price-to-Book (PB) ratio, and with questions arising over Mr. Kotak's early resignation as CEO and the interim-CEO appointment, these concerns have garnered attention. The pressing questions include the identity of the new CEO, whether they will be an internal or external candidate, and the potential risks associated with Mr. Kotak's role as a non-executive director.

We must acknowledge that weaker growth in Current Account Savings Account (CASA) and loan figures have added to these concerns. However, it is vital not to overlook the stock's valuation, which stands at 2.5 times the 12-month forward PB, lower than its Covid lows but still maintains a 13% premium over competitors HDFC Bank and ICICI Bank. This premium is notably less than the 30% premium it held over HDFC Bank prior to the merger.

Clarity regarding the succession plan and any changes in the board's composition could be pivotal in driving a re-rating for Kotak Mahindra Bank.

As the situation unfolds, it is important for investors to keep a watchful eye on these developments and consider the potential impact of both the bank's valuation and its leadership transition.