Positive view maintained by most analysts as fundamentals look strong.
MUMBAI: Shares of Kotak Mahindra BankNSE -3.98 % ended down 3.7% at ₹1,241.05 on Friday after ING sold its remaining stake in the lender.
ING Mauritius Investment held 3.06% stake or 5.84 crore shares in Kotak Mahindra Bank as of December 31, 2018. The Dutch firm had also sold 1.3 crore shares of Kotak Mahindra Bank in November through a bulk deal at an average price of ₹1,130 per share.
Bulk deal data on NSE showed that ING Mauritius sold 5.84 crore shares at ₹1,225.14-1,228.51 per share. The name of the buyers was not disclosed.
The bank, after trading hours, told exchanges that ING’s representative on Kotak board, Mark Newman had quit with immediate effect. In the release, Newman, a non-executive non-independent director, said that ING has sold its remaining stake on Friday.
The fall in Kotak shares was accompanied by higher volumes. The total traded quantity of 46.65 lakh shares was significantly higher than the two-week average quantity of 0.86 lakh shares.
Analysts said the Bombay High Court hearing on March 12 on Kotak Mahindra Bank’s petition challenging Reserve Bank of India’s rejection of its approval to reduce promoter shareholding, will be the key event for the private bank. RBI had asked all banks to reduce promoter stake to 20% of paid-up capital by December 31, 2018 and to 15% by March 2020. Promoters held 30% in Kotak Mahindra Bank as of December quarter-end. “The court hearing in March will be the key event to watch out for. In the interim there will be some volatility in anticipation of a verdict,” said Digant Haria, AVP-Research at Antique Stock Broking.
Analysts said the Bombay High Court hearing on March 12 on Kotak Mahindra Bank’s petition challenging Reserve Bank of India’s rejection of its approval to reduce promoter shareholding, will be the key event for the private bank. RBI had asked all banks to reduce promoter stake to 20% of paid-up capital by December 31, 2018 and to 15% by March 2020. Promoters held 30% in Kotak Mahindra Bank as of December quarter-end. “The court hearing in March will be the key event to watch out for. In the interim there will be some volatility in anticipation of a verdict,” said Digant Haria, AVP-Research at Antique Stock Broking.
Despite this uncertainty over promoter shareholding, most analysts have a positive view on the lender. Bloomberg data shows 26 of the 40 analysts tracking the stock have a buy rating on it, nine have a hold rating and five analysts have a sell rating on the stock. The consensus target price is ₹1,336.43, implying a 7.7% upside from current levels.
“From a 12-18 months perspective, fundamentals look strong,” said Haria.
At a price-to-book value of 4.9 times, Kotak Mahindra Bank after HDFC BankNSE -1.16 %, Bandhan Bank and AU Small Finance Bank. “Better growth and improvement in RoE (return on equity) will be key in sustaining its premium valuation. Clarity on the dilution of its promoter stake is awaited,” said CLSA in a report after the bank’s third quarter results. The brokerage maintained buy rating on the lender with a target price of ₹1,500, and said it estimates a 21% compounded growth in earnings for the bank over FY18-FY21 period.
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“From a 12-18 months perspective, fundamentals look strong,” said Haria.
At a price-to-book value of 4.9 times, Kotak Mahindra Bank after HDFC BankNSE -1.16 %, Bandhan Bank and AU Small Finance Bank. “Better growth and improvement in RoE (return on equity) will be key in sustaining its premium valuation. Clarity on the dilution of its promoter stake is awaited,” said CLSA in a report after the bank’s third quarter results. The brokerage maintained buy rating on the lender with a target price of ₹1,500, and said it estimates a 21% compounded growth in earnings for the bank over FY18-FY21 period.
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