Kotak Mahindra Bank Slumps Amid Rapid Analyst Downgrades

by | May 2, 2024 | 0 comments

Latest Kotak Mahindra Bank Shares Update:

The departure of joint managing director KVS Manian has taken a toll on Kotak Mahindra Bank, which saw its shares fall 4% in early trading. Shares were priced at INR 1,559 as of 9:35 am on May 2. Federal Bank shares rose 4% on speculation that Manian could join the company as MD; they reached INR 169.40 simultaneously.

Financial analysts have revised their forecasts for Kotak Mahindra Bank in the wake of these events, with many brokerages lowering their target prices. They are worried about the bank’s stability and digital capabilities after a number of high-profile departures over the past year. The Reserve Bank of India (RBI) dealt another blow to Kotak by banning new digital customer onboarding and credit card issuance, highlighting potential weaknesses in its information technology systems.

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Among Nuvama’s analysts, Jefferies cut the firm to “reduce,” setting a new target price of INR 1,530 from INR 1,800 previously. IIFL Securities has a sell rating and target price of INR 1,800 on the bank. It said Kotak is overvalued compared with peers and highlighted risks from further senior management exits given IIFL’s positive view on current top leadership Uday Kotak and Dipak Gupta.

Last year also saw high-level departures at the bank including chief executive Uday Kotak and joint MD Dipak Gupta. The CFO retired while CDO resigned in November. The resignations coupled with RBI measures may drag growth and op efficiencies for Kotak over next 12-18 months.

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Nuvama said that this turbulence may impact negatively on costs and profitabilities for kotak bank according to their latest analysis. They expect these bans to last atleast an year suggesting that kotbak might need work more on technology & compliance system in order regain momentum & catch up industry standards as per Nuvama revised valuation which is significantly below peers ie ICICI, Axis, HDFC Bank and select non-banking financial companies for investors looking beyond one year according to them.

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