Kotak Mahindra Bank CMP: 427.

25

Nifty Series March 11, 2011

Key Triggers 3 month stock view vis-à-vis
- One of the best NIMs in the industry Nifty Performer
- Improving Asset Quality Bankex Outperformer
- Best placed to benefit out of capital market boom Expected price range – 3 Months Rs.382-Rs.441
Key Risks
- Banking business now getting focus, competition intensifying Post Breakout Levels
- Pressure on Margins Support Rs.350
- Too dependent on capital markets Resistance Rs.498

Company Background:

Established in 1985, the Kotak Mahindra group has been one of India's most reputed financial conglomerates. In February 2003, Kotak
Mahindra Finance Ltd, the group's flagship 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 itself in to a bank as Kotak Mahindra Bank Ltd. Today, it is one of the fastest growing bank and among the most admired
financial institutions in India. Kotak Mahindra Bank has over 245 branches and a customer base of over 8 lakhs. Spread all over India,
not just in the metros but in Tier II cities and rural India as well, it is redefining the reach and power of banking.
The bank offers personal finance solutions of every kind from savings accounts to credit cards, distribution of mutual funds to life
insurance products. Kotak Mahindra Bank offers transaction banking, operates lending verticals, manages IPOs and provides working
capital loans. Kotak Bank has one of the largest and most respected Wealth Management teams in India, providing the widest range of
solutions to high net worth individuals, entrepreneurs, business families and employed professionals. The bank offers several value
added services to customers including netcards, best compliments cards, Les Concierges, bill payments, home banking services,
mutual funds on net, electronic fund transfer on net, mutual fund on phone and other investment platforms. The bank’s experience has
been that different customers partake these at different magnitude, depending on their comfort for risk appetite and technology
friendliness. The bank has arrangements with UTI Bank and HDFC Bank under which its customers can use s everal hundreds of ATMs
of these banks across the city. There is a minor cost involved in the service. But the arrangement has brought in savings for the bank
by way of infrastructure costs.
The bank is one of the faster growing ones in the country. It is amongst the top five private banks in India. Though the bank is relatively
young as compared to its peers, the group to which the bank belongs is a pioneer in the finance business. Assets managed/ advised by
the Group as on December 31, 2010 was Rs. 510 b n (December 31, 2009 Rs.524 bn; September 30, 2010 Rs.497 bn;March 31, 2010
Rs.452 bn). The group has a network of close to 2,000 branches and franchises across the country servicing close to 8.3 mn customer
accounts.
Key Promoter
Mr. Uday S. Kotak
Mr. Uday Kotak is the Executive Vice-Chairman and Managing Director of the Bank, and its principal founder and promoter. Mr. Kotak
is an alumnus of Jamnalal Bajaj Institute of Management Studies. In 1985, when he was still in his early twenties, Mr. Kotak thought of
setting up a bank when private Indian banks were not even seen in the game. First Kotak Capital Management Finance Ltd (which later
became Kotak Mahindra Finance Ltd), and then with Kotak Mahindra Finance Ltd, Kotak became the first non-banking finance
company in India's corporate history to be converted into a bank. Over the years, Kotak Mahindra Group grew into several areas like
stock broking and investment banking to car finance, life insurance and mutual funds. Among the many awards to Mr. Kotak's credit are
the CNBC TV18 Innovator of the Year Award in 2006 and the Ernst & Young Entrepreneur of the Year Award in 2003. He was featured
as one of the Global Leaders for Tomorrow at the World Economic Forum's annual meet at Davos in 1996.

Kotak Mahindra Bank

Kotak Mah Kotak Mahindra Kotak Kotak Mahindra Kotak Mah Kotak Mahindra Kotak Kotak Kotak
Investments Old Mutual Life Securities Capital Company International Prime Mahindra Private Equity Trustee
Ltd Insurance Ltd AMC Group Co Ltd

The Bank owns 100% stake in all subsidiaries (except Kotak Mahindra Old Mutual Life, where it holds 74% stake). Apart from the
above, Kotak Mah UK Ltd, Kotak Mahindra Inc, Kotak Investment Advisors Ltd, Kotak Mahindra Trusteeship Services, Kotak Forex
Brokerage, Kotak Mahindra Pension Fund, Kotak Mah Financial Services Ltd and Global Investment Opp Fund are also its 100%
subsidiaries.

Retail Research 1
Some of the other interests of the group apart from banking:

Kotak Mahindra Old Mutual Life Insurance Ltd: A 74:26 joint venture between Kotak Mahindra Bank Ltd and Old Mutual, Kotak Life
Insurance offers a wide choice of life insurance products such as unit-linked plans, traditional insurance policies and gratuity group
plans to credit-term plans for businesses. With the promise of complete financial independence, Kotak Life Insurance aims to bring
about a change in the mindset of today's informed insurance customer.

Kotak Securities Ltd: Kotak Securities is one of the largest broking houses in India with a wide geographical reach. Kotak Securities
operations include stock broking and distribution of various financial products including private and secondary placement of debt, equity
and mutual funds.

Kotak Mahindra Capital Company: Kotak Investment Banking (KMCC) is a full-service investment bank in India offering a wide suite of
capital market and advisory solutions to leading domestic and multinational corporations, banks, financial institutions and government
companies. Its services encompass Equity & Debt Capital Markets, M&A Advisory, Private Equity Advisory, Restructuring and
Recapitalization services, Structured Finance services and Infrastructure Advisory & Fund Mobilization.

Kotak Mahindra Prime Ltd: Kotak Mahindra Prime Ltd is among India's largest dedicated passenger vehicle finance companies. KMPL
offers loans for the entire range of passenger cars, multi -utility vehicles and pre-owned cars. Also on offer are inventory funding and
infrastructure funding to car dealers with strategic arrangements via various car manufacturers in India as their preferred financier.

Kotak International Business: Kotak International Business specializes in providing a range of services to overseas customers seeking
to invest in India. For institutions and high net worth individuals outside India, Kotak International Business offers asset management
through a range of offshore funds with specific advisory and discretionary investment management services.

Kotak Mahindra Asset Management Company Ltd: Kotak Mahindra Asset Management Company offers a complete bouquet of asset
management products and services that are designed to suit the diverse risk return profiles of each and every type of investor. KMAMC
and Kotak Mahindra Bank are the sponsors of Kotak Mahindra Pension Fund Ltd, which has been appointed as one of six fund
managers to manage pension funds under the New Pension Scheme (NPS).

Kotak Private Equity Group: Kotak Private Equity Group helps nurture emerging businesses and mid-size enterprises to evolve into
tomorrow's industry leaders. With a proven track record of helping build companies, KPEG also offers expertise with a combination of
equity capital, strategic support and value added services. What differentiates KPEG is not merely funding companies, but also having
a close involvement in their growth as board members, advisors, strategists and fund-raisers.

Kotak Realty Fund: Kotak Realty Fund deals with equity investments covering sectors such as hotels, IT parks, residential townships,
shopping centres, industrial real estate, health care, retail, education and property management. The investment focus here is on
development projects and enterprise level investments, both in real estate intensive businesses.

Shareholding Pattern
% Holding as on % Holding as on % Holding as on % Holding as on % Holding as on
Shareholding Pattern 31/12/2010 30/09/2010 30/06/2010 31/03/2010 31/12/2009
Promoter 45.61 45.79 48.17 48.23 48.27
FII 23.99 25.03 25.97 28.56 28.93
Other Institutions 5.84 6.22 6.39 4.98 4.78
Public and Non Institutions 24.56 22.96 19.47 18.23 18.02
Total 100.00 100.00 100.00 100.00 100.00
The Bank allotted 16400000 Preferential Shares on 11/08/2010 at Rs.833 per share (FV Rs.10) to Sumitomo Mitsui Banking Corporation (Source: Capitaline Database)

Investment Rationale:

Well placed to benefit out of economic growth

India’s macro economic indicators portend supernormal growth in financial services. Kotak Mahindra Bank (KMB) together with its
subsidiaries has a presence across financial services – lending, broking, investment banking, life insurance, asset management, and
proprietary investments. Given its integrated business model, an established brand and quality management, KMB is in a good spot to
benefit from the buoyancy in the sector.

India’s GDP would double to US$2t over the next six years, driven by accelerated growth in manufacturing and services. Changing
demographics in favor of a younger population in India, rising disposable incomes and changing mindset of people in favor of
consumption would be the key drivers of GDP growth, going forward.

The savings rate in India has been increasing since independence and has crossed 33.7% in FY10. The savings rate has accelerated
significantly over last 6-8 years in tandem with stronger growth in GDP. Higher GDP growth and increasing savings rate would lead to
higher investible surplus, which would further drive economic activity. Corporate savings have also increased significantly in the recent
past. As these savings get converted into investments (organic or inorganic), economic expansion would receive further impetus.

Retail Research 2
Most of India’s household savings is locked in bank deposits and government securities. Despite faster growth over the last couple of
years, the penetration of insurance, mutual funds and equity remains dismal. As financial literacy improves , regulations become
simplified, and marketing efforts by financial services companies intensify, we believe that insurance, mutual funds and equities would
gain traction.

KMB has a strong franchise in both the retail and corporate segments, which provides it significant business synergies. While strong
corporate relationships help it to gain access to high networth individual (HNI) clients, the influence that it has amongst a large base of
affluent retail clients strengthens its corporate relationships. The bank has been able to increase its presence across the nation rapidly.
The group with its varied experience and footprints across segments supports the bank in its total business. The number of branches at
the end of December 2010 for the bank and the group stood as follows:

Business Branches
Banking 298
Securities 1358
Life Insurance 203
Mutual Fund & Others 140
Total 1999

No of Branches

290

270

250

230

210

190

170
FY08 FY09 FY10 9MFY11

One of the best NIMs in the industry

KMB has been able to improve its NIM over the past years consistently and earns the best NIMs in the whole industry. However the
same has seen a marginal dip in FY11 though the overall NIMs are quite healthy. The bank has been in operation since the past eight
years only. Though comparatively young, the bank has performed exceedingly well in order to achieve such strong NIMs. The NIMs for
FY10 stood at 6.3% as against 6% in FY09 and the same for Q3FY11 stood at 5.4%. An increasing proportion of secured loans and a
rise in the cost of funds are leading to moderation in margins. The fact that it was able to withstand the global turmoil and still report
stronger NIMs is a witness to its impressive capability to compete in the Indian banking sector. The bank is looking to maintain its NIM
above the 5% levels going ahead. Though this may seem like a fall from the current levels, the NIMs above the 5%% levels would still
be a very healthy number when compared to the industry.

NIM%

6.4
6.2
6
5.8
5.6
5.4
5.2
5
FY07 FY08 FY09 FY10 Q1FY11 Q2FY11 Q3FY11

Retail Research 3
Improving asset quality

The bank has managed to report better asset quality at the end of FY10. It reported a Gross NPA of Rs 767.33 crs while the Net NPAs
were Rs 360.24 crs for FY10. Gross NPAs as a percentage of the total gross assets stood at 3.62% while the Net NPAs stood at 1.73%
of the net assets at the end of FY10. There has been an improvement in the quality of assets over the past few years for the bank. The
bank though increased its Gross NPAs on an absolute and percentage basis for FY10, managed to reduce the Net NPAs on both
absolute and percentage basis.

By the end of 9MFY11, the asset quality further strengthened. The Gross NPAs dropped both on an absolute and percentage basis. It
fell from Rs 751.14 crs in Q2FY11 to Rs 744.20 crs in Q3FY11 while the Gross NPA% stood at 2.53% as against 2.78% in Q2FY11.
The Net NPAs also behaved in the similar fashion. The Net NPAs stood at Rs 235.28 crs in Q3FYY11 as against Rs 253.01 crs in
Q2FY11. The Net NPA% stood at 0.81% in Q3FY11 as against 0.95% in Q2FY11. The improving performance on asset quality was
due to a fall in incremental slippages and higher recoveries and upgrades. The Gross and Net NPA % after peaking in FY09 has begun
to fall sharply.

Asset Quality

900.00 5.00

800.00 4.50

700.00 4.00
3.50
600.00
3.00
500.00
2.50
400.00
2.00
300.00
1.50
200.00 1.00
100.00 0.50
0.00 0.00
FY07 FY08 FY09 FY10 9MFY11

Gross NPA Net NPA GNPA% NNPA%

Wealth management business – a key focus

KMB has a wealth management unit within its elf, which focuses on HNIs. The group’s scale and reach, coupled with a strong brand has
enabled the bank to scale up its wealth management unit. It is currently the wealth manager/advisor to over 3,700 families and around
30% of the top-300 wealthy families in India. It is present in 14 cities, with about 110 relationship managers. With strong economic
prospects forecasted, we believe that wealth management should grow at a much stronger pace.

According to NCAER, India have more 400,000 households with investible assets of over Rs10m each. Wealth Management offers a
huge and highly profitable opportunity and very few Indian banks are currently focusing on this segment. KMB could continue to remain
a dominant player in this business, given its established relationships and synergies arising out of its IB and asset management
businesses.

Loan Book of the bank set to grow

The advances of the banks have grown decently over the past few years. It stood at Rs 28884.8 crs at the end of 9MFY11 as compared
to Rs 20775.05 crs at the end of FY10. The advances of the bank are set to grow in the coming years as the demand for funds have
increased over the recent past. This is despite the immense competition in the market for the bank especially in the form of PSU banks
that may lend for comparatively cheaper rates. The advances of the bank have grown steadily over the past few quarters for the bank
especially since Q1FY11.

Retail Research 4
 Advances

35000

30000

25000

20000

15000

10000

5000

0
Q1FY09

Q2FY09

Q3FY09

Q4FY09

Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

Q2FY11

Q3FY11
The loan book of the bank consists of lending to the corporate banking segment, CVs and CEs, Personal Loans, Mortgage Loans,
Agriculture finance, and other advances.

Advances Split: Rs Crs - standalone Q3FY11 Q2FY11 Q1FY11 Q4FY10 Q3FY10

CVs and CEs 5058.6 4536.2 4030.1 3693.5 3424.4
Personal Loans 1221.4 1147.0 1169.5 1315.0 1441.7
Mortgage Loans 6626.1 5983.2 5246.9 4711.6 4020.1
Agriculture Finance 3752.8 3328.3 2924.6 3088.6 2497.3
Corporate Banking 10407.4 9883.1 8324.4 6476.1 8476.4
Others 1818.5 1628.8 1493.1 1490.2 1545.7
Total Advances 28884.8 26506.6 23188.6 20775.0 21405.6

Advances – as per segmental classification (Standalone) Q3FY11 Q2FY11 Q1FY11

Retail 15446.80 14619.90 13604.40
Corporate 13375.80 11809.40 9487.60
Others 62.30 77.30 96.60
Total Advances 28884.90 26506.60 23188.60
Investment / Treasury Assets 14286.70 13935.20 15613.00
Total Advances and Investments 43171.60 40441.80 38801.60

Advances Split: Rs Crs - Consolidated Q3FY11 Q2FY11 Q1FY11 Q4FY10 Q3FY10

Commercial vehicles & Construction equipments 5058.60 4536.20 4030.10 3693.50 3424.60
Auto Loans 7993.50 7846.50 7064.40 6541.80 5885.90
Mortgage loans 6626.10 5983.20 5299.20 4765.00 4074.50
Personal loans 1226.80 1159.30 1192.70 1354.00 1492.40
Agriculture Finance 3752.80 3328.30 2924.60 3088.60 2497.30
Corporate Banking 11594.00 11038.90 9219.40 7194.30 8934.60
Others 3844.50 3622.50 3247.80 3087.00 3027.80
Total Advances 40096.30 37514.90 32978.20 29724.20 29337.10

The above table shows the advances split of the bank over the past few quarters. It can be observed here that the bank, over the past
one-year reduced its exposure to the personal loans and other segments while it has increased its exposure in the corporate banking
segment to a decent extent. CV and CE segment has however seen an increase in advances consistently and the bank is keen to
increase its exposure in this segment going ahead.

The capital adequacy ratio is comfortable (much above the 9% minimum) and the Bank need not raise equity funds in a hurry to
increase its lendings for some more quarters.

Retail Research 5
 Capital Adequacy Ratio
24

23

22

21

20

19

18

17
FY08 FY09 FY10 9MFY11

Standalone CAR% Group CAR%

Strong deposit franchise with growing CASA deposits set to continue fuelling the growth of KMB

The current accounts and savings account ratio (CASA) helps determine the cost of deposits of any particular bank. The proportion of
CASA to the total deposits becomes important in controlling the expenses liabilities of any given bank. The general trend observed
within the Indian banks in terms of their CASA is in the range of 30% to 45% of the total deposits.

Deposits and CASA%

30000 32
25000 31
20000 30
29
15000
28
10000 27
5000 26
0 25
Q1FY10

Q2FY10

Q3FY10

Q4FY10

Q1FY11

Q2FY11

Q3FY11

Total Deposits CASA%

The deposits of KMB have been growing handsomely over the past years. The CASA content in the total deposits have also been
growing constantly hence reducing the expense liability of the bank. The total deposits at the end of FY10 stood at Rs 19500 crs as
against Rs 13877 crs at the end of FY09. This is without considering the certificate of deposits. The higher proportion of the CASA in
the overall deposits has helped the bank contain its cost of deposits and hence reduce the overall interest expenses. For Q3FY11, the
total deposits stood including CODs stood at Rs 28288 crs as against Rs 22186 crs in Q3FY10 and Rs 28287 crs in Q2FY11. It can be
observed here that no significant increase was seen in the deposits during the third quarter as the entire banking industry in the country
faced a similar problem of depleting deposits during the quarter. Even though the bank has been able to maintain a good momentum in
the deposit growth over the past few years, the current situation and the industry outlook has created pressure in the deposit growth of
the bank.

The CASA as a percentage of total deposits stood at 31% at the end of FY10. In Q3FY11, the CASA% stood at 28% as against 31.9%
in Q2FY11 mainly due to the flat growth witnessed in deposits. The bank has been quite aggressive in the previous fiscal year in terms
of its overall branch network. The total branch network of the bank stood at 249 branches at the end of FY10. The same stood at 178
branches a couple of years ago. At the end of 9MFY11, the branch network of the bank stood at 298. The bank is looking to take the
total branches to 320 by the end of FY11 and to 500 branches by the end of FY12. With more branches to come up in the coming
years, the bank could witness further increase in the CASA ratio in the next couple of years.

Retail Research 6
Strong performance of the subsidiary companies

KMB’s subsidiaries include, Kotak Mahindra Prime, Kotak Securities, Kotak Mahindra Capital Company, Kotak Mahindra Life Insurance
and Kotak Mahindra AMC amongst others.

The group companies have performed pretty well over the years. The bank has been formed only few years ago, while some of its
group companies have been in for years now. Kotak Securities, one of the most respected brokerage houses in the country is a major
contributor towards the success of the group.

The key performance of the group companies is expected to continue growing in the coming years. This will add strength to the
consolidated figures of KMB going ahead. The key performances of some of the subsidiary companies:

Company Business Stake PAT Remarks

9MFY11 FY10
Kotak Mahindra
Capital Investment Kotak was named Best Investment Bank for Equity Finance in India in the
Company Banking 100% 23.96 21.85 Euromoney Real Estate Poll – 2010.
Total advances as on December 31, 2010 was up 40% y-o-y to Rs 10439.4
Kotak Mahindra Car Finance, crs. Net NPA of KMP as on December 31, 2010 stood at Rs 39.2 crs. Car
Prime Other Lending 100% 231.0 166.4 business net NPA ratio stood at 0.23% as on December 31, 2010.
For 9MFY11, the total income of the company stood at Rs 568.1 crs as
against Rs 650.6 crs in 9MFY10. Kotak Securities has a network of over
1,358 offices (own & franchisees) across 448 cities and towns a nd services
more than 6,33,000 secondary market customers. Kotak Securities
Kotak SecuritiesStock Broking 100% 145.8 260.1 accounted for 3.7% of total average daily market volumes for 9MFY11.
The total AUM of the company at the end of 9MFY11 stood at Rs 7800 crs
Kotak Mahindra as against Rs 5700 crs in 9MFY10. The total branch network however
Old Mutual Life reduced to 203 by the end of December 2010 as against 214 branches at
Insurance Life Insurance 74% 30.1 69.2 the end of December 2009
The fall in the profits of this company has been quite drastic, as the company
had witnessed huge losses in Q2FY11 and Q1FY11. Also the income of the
Kotak Mahindra Asset company continued to fall during the three quarters of FY11, which led to a
AMC Management 100% 9.0 65.5 substantial fall in the bottomline of the company.

Company Wise PAT

Company – Rs Crs Q3FY11 Q3FY10 Q2FY11 9MFY11 9MFY10 FY10
Kotak Mahindra Bank 187.87 142.38 194.70 569.48 358.60 561.11
Kotak Mahindra Prime 93.68 49.44 61.33 231.00 107.83 166.41
Kotak Securities 46.64 59.18 51.74 145.78 209.32 260.10
Kotak Mah Capital Company 7.62 1.58 7.31 21.85 10.53 23.86
Kotak Mahindra Old Mutual Life Insurance 23.61 19.33 13.44 30.13 24.80 69.22
Kotak Mahindra AMC and Trustee Company 7.24 22.85 -2.43 13.74 57.65 72.46
International Subsidiaries 8.20 22.56 12.26 36.13 66.45 80.34
Kotak Investment Advisors 5.44 11.46 10.52 26.80 32.74 39.75
Kotak Mahindra Investments 2.76 6.13 7.99 18.31 27.84 34.66
Others -0.05 -0.14 -0.11 -0.10 -0.31 -0.49
Total Consolidated PAT 383.03 334.78 356.76 1093.14 895.46 1307.44
Affiliates, Minority Int. and Other Adj. 0.54 -3.38 7.34 -17.78 -7.01 -0.44
PAT (after MI and Adj) 383.57 331.40 364.11 1075.37 888.45 1307.00
Source: Capitaline

Kotak Mahindra Asset Management Company – Asset Management

The Average AUM of the company at the end of 9MFY11 stood at Rs 29.9 Bn as against Rs 34.1 Bn in 9MFY10. The group companies
have been performing well over the last many years (except Kotak Mahindra AMC) and is expected to do well going ahead. Domestic
MF Debt rules the asset management book of the company with 45% of the overall assets under management coming from the sector.

Retail Research 7
 Asset Management
4% - Q3FY11
15%

45%

17%

10% 9%
Domestic MF Debt Domestic MF Equity Alternate Asset
Offshore Funds Insurance PMS

Kotak Securities – Stock Broking

For 9MFY11, the total income of the company stood at Rs 568.1 crs as against Rs 650.6 crs in 9MFY10. The PAT for 9MFY11 stood at
Rs 145.8 crs as against Rs 209.3 crs in 9MFY10. It clocked average daily volumes of around Rs 4600 crs during 9MFY11 compared to
around Rs 4000 crs during 9MFY10. Kotak Securities accounted for 3.7% of total average daily market volumes for 9MFY11.

Branches and Franchisee Avg Daily Volumes (Rs Bn)

1600 60 53
1358
1400 46
50
1200 1113
39
877 40 33
1000
783
800 30
600
20
400
10
200
0 0
FY08 FY09 FY10 9MFY11 FY08 FY09 FY10 9MFY11

Kotak Mahindra Old Mutual Life Insurance – Life Insurance

For 9MFY11, the company reported a net profit of Rs 30.1 crs as against Rs 24.8 crs in 9MFY10. The total AUM of the company at the
end of 9MFY11 stood at Rs 7800 crs as against Rs 5700 crs in 9MFY10. The total branch network however reduced to 203 by the end
of December 2010 as against 214 branches at the end of December 2009.

Adjusted Premium Equivalent

100%

80% 5.9
10.0
15.4 11.8
60% 1.3
1.2
40% 1.7
9.5 1.0
11.8
20% 9.4 5.3
0%
FY08 FY09 FY10 9MFY11
Individual Group Renewal

Retail Research 8
Healthy key ratios of the bank

Some of the key financial ratios of the bank have been healthy and impressive at the end of 9MFY11. The bank at the end of 9MFY11
reported a CAR of 18.7% with tier 1 ratio of 16.5%, a healthy one and much above the minimum requirement of 9% by the RBI. The
RONW of the bank stood at 15.6% in 9MFY11 marginally lower than 16.9% in 9MFY10. The Provision Coverage ratio of the bank was
healthy at 72% at the end of 9MFY11. The credit deposit ratio of the bank stood at a healthy 87% at the end of FY10. As at March 31,
2010, excluding the acquired stressed assets, the gross non-performing assets of the Bank stood at Rs. 498.3 crs (2.38% of advances)
while the net non-performing assets stood at Rs. 257.2 crs (1.25% of advances). Another impressive ratio of the bank has been the
cost to income ratio. KMB reported a CI Ratio of 47.84% in FY10 down from 66.76% in FY09. However at the end of 9MFY11, the ratio
was slightly higher at 53.67%, though still healthy. Going ahead if the bank can bring down its cost income ratio further, it could boost
the bottomline of the bank significantly.

Consolidated Ratios:
Particulars FY08 FY09 FY10 9MFY11
NIM 5.60% 6.10% 6.30% 5.40%
BVPS 84.5 94.3 113.6 142.6
RONW 22.30% 10.50% 18.20% 15.60%
ROAA 2.9% 1.6% 2.7% 2.0%
Group CAR 20.20% 22.80% 19.30% 17.60%
CAR Standalone 18.70% 19.90% 18.40% 18.70%
Tier 1 CAR Standalone 14.50% 16.00% 15.40% 16.50%
AUM - Rs Bn 365 339 452 510
Advances - Rs Bn 220 225 297 401
Total Assets - Rs Bn 406 402 551 700
Net NPA% 0.33% 1.18% 1.14% 0.51%
Source: Bank Presentation
Industry Scenario

Banking Sector in India

The evolution of the modern commercial banking industry in India can be traced to 1786 with the establishment of the Bank of Bengal in
Calcutta. Three presidency banks were set up in Calcutta, Bombay and Madras. In 1860, the limited liability concept was introduced in
banking, resulting in the establishment of joint stock banks. In 1921, the three presidency banks were amalgamated to form the Imperial
Bank of India, which took on the role of a commercial bank, a bankers’ bank and a banker to the Government. The establishment of RBI
as the central bank of the country in 1935 ended the quasi-central banking role of the Imperial Bank of India. In order to serve the
economy in general and the rural sector in particular, the All India Rural Credit Survey Committee recommended the creation of a state-
partnered and state sponsored bank taking over the Imperial Bank of India and integrating with it, the former state-owned and state
associate banks. Accordingly, the State Bank of India (“SBI”) was constituted in 1955. Subsequently in 1959, the State Bank of India
(Subsidiary Bank) Act was passed, enabling the SBI to take over eight former state-associate banks as its subsidiaries. In 1969, 14
private banks were nationalized followed by six private banks in 1980. Since 1991, many financial reforms have been introduced
substantially transforming the banking industry in India.

The banking system in India is significantly different from that of other Asian nations because of the country’s unique geographic, social,
and economic characteristics. India has a large population and land size, a diverse culture, and extreme disparities in income, which
are marked among its regions. There are high levels of illiteracy among a large percentage of its population but, at the same time, the
country has a large reservoir of managerial and technologically advanced talents. Between about 30 and 35 percent of the population
resides in metro and urban cities and the rest is spread in several semi-urban and rural centers. The country’s economic policy
framework combines socialistic and capitalistic features with a heavy bias towards public sector investment. India has followed the path
of growth-led exports rather than the “export led growth” of other Asian economies, with emphasis on self-reliance through import
substitution. These features are reflected in the structure, size, and diversity of the country’s banking and financial sector. The banking
system has had to serve the goals of economic policies enunciated in successive five -year development plans, particularly concerning
equitable income distribution, balanced regional economic growth, and the reduction and elimination of private sector monopolies in
trade and industry. In order for the banking industry to serve as an instrument of state policy, it was subjected to various nationalization
schemes in different phases (1955, 1969, and 1980). As a result, banking remained internationally isolated (few Indian banks had
presence abroad in international financial centers) because of preoccupations with domestic priorities, especially massive branch
expansion and attracting more people to the system. Moreover, the sector has been assigned the role of providing support to other
economic sectors such as agriculture, small-scale industries exports, and banking activities in the developed commercial centers (i.e.,
metro, urban, and a limited number of semi-urban centers).

The banking system’s international isolation was also due to strict branch licensing controls on foreign banks already operating in the
country as well as entry restrictions facing new foreign banks. A criterion of reciprocity is required for any Indian bank to open an office
abroad. These features have left the Indian banking sector with weaknesses and strengths. A big challenge facing Indian banks is how,
under the current ownership structure, to attain operational efficiency suitable for modern financial intermediation. On the other hand, it
has been relatively easy for the public sector banks to re-capitalize, given the increases in non-performing assets (NPAs), as their
Government dominated ownership structure has reduced the conflicts of interest that private banks would face.

Retail Research 9
The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve
Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable
efforts to improve regulation in the sector. The sector now compares favorably with banking sectors in the region on metrics like growth,
profitability and non-performing assets (NPAs). A few banks have established an outstanding track record o f innovation, growth and
value creation. This is reflected in their market valuation. However, improved regulations, innovation, growth and value creation in the
sector remain limited to a small part of it. The cost of banking intermediation in India is higher and bank penetration is far lower than in
other markets. India’s banking industry must strengthen itself significantly if it has to support the modern and vibrant economy, which
India aspires to be. While the onus for this change lies mainly with bank managements, an enabling policy and regulatory framework
will also be critical to their success.

The failure to respond to changing market realities has stunted the development of the financial sector in many developing countries. A
weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies.

The banking industry is consolidating, both regionally and within individual countries. Continued local consolidation will most likely be
induced by existing economies of scale, in particular in retail banking, as well as by the competitive advantage that foreign-owned
banks enjoy due to premium consumer perception and better access to funding, in addition to frequently having a more sophisticated
product offering. The trend towards consolidation in the global financial services industry is stimulating the emergence of competitors in
the market offering broad ranges of products and services, broad access to capital, and greater operating efficiency and pricing power.
This is coupled with a shift from mere price competition to competition based on other factors such as innovation, customer service and
the range of products and services offered.

The number of customer transactions continues to grow at a considerably higher rate than the growth of the underlying balances or
accounts. Many banks are therefore seeking to reduce the cost of servicing individual transactions to maintain their profit margins.
Installing automated, secure transaction channels requires significant investment and therefore gives larger-scale banks a competitive
advantage. Despite widespread adoption by both banks and customers of these new transaction methods, the reduction in the use of
traditional transaction methods has been slower than expected with many banking customers preferring to use the old methods.
However, there is a trend among the younger portfolio of customers of increased use in system -aided self-service methods, particularly
for savings accounts, credit cards and simple investments. It is likely that the use of 24-hour self-service channels, such as ATMs,
internet, mobile phone and voice response units and the sophistication of products sold via such channels will increase, as such
services become increasingly commonplace. The growing importance of these channels may reduce the importance of extensive
branch networks and result in increased competition from other financial institutions. It may also lower barriers to entry into the market
for new competitors such as providers of direct or electronic banking services.

The banking sector in India has become increasingly more competitive in recent years. Public sector banks have lost their market share
to the more dynamic private sector banks and, to a lesser extent, to foreign banks. The scheduled commercial banks in India, unlike
their global counterparts, showed considerable resilience against the backdrop of global financial crisis and its effects on India’s
economy. While the balance sheet of public sector banks maintained their growth momentum, the private sector banks and foreign
banks registered a deceleration in growth rate. The profitability ratios of Indian commercial banks are relatively moderate but their core
recurring income and profits are on a rising trend. Public sector banks appear marginally less profitable than their private sector
counterparts, and foreign banks in India appear to be more profitable. Going forward, the increasing disintermediation and competition
for good quality credit could exert some pressure on revenue streams and margins. The robust deposit franchises of the larger Indian
banks and, in particular, the public sector banks, helps to ensure such banks sources of relatively cheap and stable funding and
provides them with a comfortable liquidity profile.

Recent Performance of the bank – Q3FY11

The operating performance of financing business was strong in 9MFY11 with robust advance growth and consistent decline in NPLs.
However, considering the high inflation and rising interest rate environment, management moderated loan growth target to 30% for
FY11 (from 35-40% earlier). Reported NIMs, which have also come off 90bps since Q4FY10 to 5.4%, are expected to sustain in the
5.0-5.4% range over FY10-12E. Earnings of capital market businesses will continue to reel under pressure due to increased
fragmentation, lower yields and redemption pressure.

On a standalone basis, the bank reported a 36.4% y-o-y jump in its interest income from Rs 832.41 crs in Q3FY10 to Rs 1135.40 crs in
Q3FY11. The interest expenses of the bank stood at Rs 563.92 crs in Q3FY11 as against Rs 345.76 crs in Q3FY10 and Rs 470.89 crs
in Q2FY11. The net interest income as a result jumped 17.43% on a y-o-y basis and 5.08% on a q-o-q basis to Rs 571.48 crs in
Q3FY11. For 9MFY11, the net interest income stood at Rs 1623.5 crs registering a jump of 21.88% y-o-y. The PAT of the bank at the
end of Q3FY11 stood at Rs 187.87 crs as against Rs 142.38 crs in Q3FY10 and Rs 194.71 crs in Q2FY11. For 9MFY11, the PAT stood
at Rs 569.48 crs as against Rs 358.60 crs in 9MFY10.

On a consolidated basis, the group reported a 39.60% y-o-y growth in its interest income from Rs 1184.70 crs in Q3FY10 to Rs 1653.80
crs in Q3FY11. The interest expenses of the group stood at Rs 730.87 crs as against Rs 444.92 crs in Q3FY10. The net interest
income of the group stood at Rs 922.93 crs in Q3FY11 as against Rs 739.78 crs in Q3FY10 while for 9MFY11 the net interest income
on a consolidated basis stood at Rs 2558.53 crs as against Rs 2044.40 crs in 9MFY10. The PAT of the group stood at Rs 383.57 crs
as against Rs 331.40 crs in Q3FY10 and for 9MFY11 it stood at Rs 1075.36 crs as against Rs 888.45 crs in 9MFY10.

Retail Research 10
Risks and Concerns

• The asset quality at the moment is impressive, but could deteriorate going ahead w ith increasing lending by the bank.

• The CASA of the bank needs to consistently grow as the business grows as this helps the bank reduce its cost of deposits. Other
private sector banks like Axis and ICICI have healthier CASA ratios.

• The cost to income ratio of the bank needs to be maintained at lower levels. Currently the cost income ratio of the bank is healthy but
not as good as many other banks hence it needs to improve its cost income ratio further.

• The bank has reported a fall in NIMs for period ended 31st December 2010. It is important that the bank is able to come out of the
same trend going forward and improve its NIMs in order to remain competent. If the bank is unable to get cheaper borrowing, the
spreads could narrow down thereby putting pres sure on the margins of the bank.

• Intense competition from global and local players in equity markets could pose a major challenge to KMB in maintaining its market
share and leadership position.

• The deposits have taken a beating for most banks in the country over the past couple of quarters and KMB has not been an
exception. If the trend continues and revival is not fast then it could impact the overall business of the bank negatively.

• Most of the business of the group is mainly dependent on the capital markets, though the dependence on an overall basis is falling
gradually. Hence in an event of downfall in the capital markets, the business of the group could get affected. 26% of its PBT in FY10
was derived from capital market activities.

Conclusion

Kotak Mahindra Bank is one of the leading private sector banks in the country. It follows a different model of business (banking and
equities). It has strong loan book growth and is expected to perform well going ahead. The bank from the current 300 branches is
expected to open another 200 and take the tally to 500 branches in another 12 months period. This will help the bank increase its
overall customer base and spread the network across the country.

Though the bank is comparatively new, the Kotak Group is well established in the financial services sector in the country. The bank
boasts of having a fine quality management. The bank has performed very well over the past few years, making it extremely
competitive in the industry.

The different parameters of the bank have been quite impressive for KMB by the end of FY10. The bank has a healthy CAR of 18.4%.
The Cost Income ratio of the bank has been quite impressive as it came down from the levels of 66% a year ago, to 47.84% by the end
of FY10. At the end of 9MFY11, the cost to income ratio of the bank stood at 53.67%. The management of expenses of the bank has
been quite impressive. The loan book has grown at a pace of 25% for the past 2 years and is expected to grow further going ahead with
more demands fo r funds arising out of the growing economy.

The NIMs of the bank stands atop all other banks at 6.33% for FY10 and at 5.4% at the end of Q3FY11. The bank could look to
maintain the NIMs in the range of 5% to 5.5% going ahead, however there is a huge pres sure on margins for all banks and maintaining
it in the aforesaid range could be a bit tough for KMB in the next couple of quarters.

The CASA ratio of the bank has also been quite impressive. It stood at 31% of the total deposits considering the certificate of deposits
at the end of FY10 while it stood at 35.4% at the end of Q3FY11. The Credit Deposit ratio of the bank at the end of FY10 stood at a
healthy 87%. The group companies of the bank have also performed quite well over the past few years. Kotak Securities, one of the
premium brokerage houses has done exceedingly well for the bank and remains one of the consistent contributors towards the group’s
success, however over the past few quarters it has not done well due to the lackluster performance of the equity markets. Also the bank
has done well in order to achieve a strong provision coverage ratio of 72%, which is above the minimum 70% requirement of RBI.
Going ahead as the bank is not required to increase its provisions substantially, the profits could see some more growth.

The bank is performing well as compared to its peers. It faces stiff competition from peers, both public and private banks. With the bank
looking to increase its overall branches, it could see a growth in the deposits and increase in the CASA ratio. The growing Indian
economy could help the bank in increasing its loan book as more demand for money is expected in the country going ahead.

At the CMP of Rs.427.25, the bank quotes at 2.6 times its FY12 E Consolidated ABV.

Retail Research 11
Financials
Standalone Results
Particulars Q3FY11 Q3FY10 % Chg Q2FY11 % Chg 9MFY11 9MFY10 % Chg
Interest Earned 1135.40 832.41 36.40 1014.72 11.89 3070.92 2374.86 29.31
Interest/Discount on Advances 878.44 645.43 36.10 776.14 13.18 2348.6068 1845.52 27.26
Income on Investments 248.91 186.67 33.34 234.48 6.16 708.86 528.3917 34.15
Interest on bal with RBI 7.96 0.13 5883.98 3.63 118.96 12.8418 0.533 2309.34
Others 0.09 0.18 -49.27 0.47 -80.93 0.6129 0.4165 47.15
Other Income 165.34 136.42 21.20 139.33 18.67 441.7396 376.7374 17.25
Total Income 1300.74 968.83 34.26 1154.05 12.71 3512.66 2751.60 27.66
Interest Expended 563.92 345.76 63.09 470.89 19.76 1447.42 1042.7642 38.81
Employee Expenses 198.49 132.61 49.67 168.74 17.63 532.8513 381.7992 39.56
Other Operating Expenses 223.61 161.93 38.09 187.66 19.16 575.5746 465.6491 23.61
Operating Expenses 422.10 294.55 43.30 356.40 18.43 1108.43 847.45 30.80
Total Expenditure 986.02 640.31 53.99 827.29 19.19 2555.85 1890.21 35.21
Net Interest Income 571.48 486.65 17.43 543.83 5.08 1623.50 1332.10 21.88
Operating Profit before Prov & Cont 314.72 328.52 -4.20 326.75 -3.68 956.82 861.39 11.08
Prov & Cont 42.66 119.28 -64.24 45.51 -6.26 144.261 358.3199 -59.74
PBT 272.06 209.23 30.03 281.25 -3.27 812.55 503.07 61.52
Tax 84.19 66.85 25.93 86.54 -2.71 243.0774 144.4693 68.26
PAT 187.87 142.38 31.95 194.71 -3.51 569.48 358.60 58.81
Equity 368.15 347.69 5.88 366.70 0.39 368.1507 347.6959 5.88
CAR - Basel II 18.66 17.01 9.70 19.43 -3.96 18.66 17.01 9.70
EPS 2.54 2.03 25.12 2.65 -4.33 7.9 5.12 54.30
Gross NPA 744.20 928.24 -19.83 751.14 -0.92 744.20 928.24 -19.83
Net NPA 235.28 467.52 -49.67 253.01 -7.01 235.2833 467.52 -49.67
Gross NPA% 2.53 4.25 2.78 2.53 4.25
Net NPA% 0.81 2.18 0.95 0.81 2.18
Return On Assets 0.38 0.40 0.44 1.26 1.12
Source: Capitaline

Segmental Financials
Particulars – Rs Crs (Standalone) Q3FY11 Q3FY10 Q2FY11 FY10 FY09

Segmental Revenue 1631.29 1196.49 1433.10 4840.66 4473.33

Corporate/Wholesale Banking 415.39 260.63 378.88 1156.39 887.93
Treasury and BMU 389.58 307.02 336.72 1126.23 833.21
Retail Banking 826.32 628.84 717.50 2558.04 2752.19
Less: Intersegmental Revenues 330.55 227.66 279.31 956.88 1134.71
Add: Unallocable Revenues 0.00 0.00 0.26 0.08 0.15
Total Segment Revenues 1300.74 968.83 1154.05 3883.86 3338.77
Segmental PBT 272.06 209.24 280.99 813.98 425.91
Corporate/Wholesale Banking 131.05 68.40 138.22 385.46 225.34
Treasury and BMU 57.26 106.31 55.21 367.46 129.29
Retail Banking 83.75 34.53 87.56 61.06 71.28
Less: Interest 0.00 0.00 0.00 2.88 0.00
Add: Other Income 0.00 0.00 0.26 0.00 0.15
Net PBT 272.06 209.24 281.25 811.10 426.06
Capital Employed 6377.03 4141.29 6136.90 4344.37 3758.76
Corporate/Wholesale Banking 1658.24 1010.19 1522.50 1142.23 986.96
Treasury and BMU 1870.15 1540.21 2073.72 1534.34 1244.93
Retail Banking 2848.64 1590.89 2540.68 1667.80 1526.87
Unallocated Net Assets 200.55 149.58 191.53 140.75 54.86
Total Capital Employed 6577.58 4290.87 6328.43 4485.12 3813.62
Source: Capitaline
Consolidated Results
Particulars Q3FY11 Q3FY10 % Chg Q2FY11 % Chg 9MFY11 9MFY10 % Chg
Interest Earned 1653.80 1184.70 39.60 1449.27 14.11 4418.72 3353.41 31.77
Interest/Discount on Advances 1277.60 904.40 41.26 1101.37 16.00 3365.26 2567.64 31.06
Income on Investments 350.75 265.25 32.23 330.45 6.14 997.83 744.84 33.97
Interest on bal with RBI 9.76 1.10 786.32 4.10 138.10 15.75 5.47 187.95
Others 15.69 13.94 12.55 13.35 17.54 39.88 35.46 12.45
Other Income 1014.67 1205.79 -15.85 1491.69 -31.98 3517.23 3687.18 -4.61

Retail Research 12
Profit on sale of investments 14.93 106.05 -85.92 377.94 -96.05 490.66 768.66 -36.17
Premium on Insurance Business 604.38 705.87 -14.38 726.30 -16.79 1876.92 1711.96 9.64
Other income 395.36 393.87 0.38 387.45 2.04 1149.65 1206.57 -4.72
Total Income 2668.47 2390.49 11.63 2940.96 -9.27 7935.94 7040.59 12.72
Interest Expended 730.87 444.92 64.27 606.03 20.60 1860.19 1309.01 42.11
Employee Expenses 396.72 312.27 27.04 373.22 6.30 1121.83 901.03 24.50
Policy Holders expenses 536.99 663.20 -19.03 992.78 -45.91 2090.93 2145.89 -2.56
Other Operating Expenses 407.97 363.51 12.23 400.42 1.89 1172.57 1012.04 15.86
Operating Expenses 1341.68 1338.98 0.20 1766.42 -24.05 4385.33 4058.96 8.04
Total Expenditure 2072.55 1783.89 16.18 2372.45 -12.64 6245.51 5367.97 16.35
Net Interest Income 922.93 739.78 24.76 843.24 9.45 2558.53 2044.40 25.15
Operating Profit before Prov & Cont 595.93 606.59 -1.76 568.51 4.82 1690.43 1672.62 1.06
Prov & Cont 53.43 125.63 -57.47 47.44 12.64 156.17 388.96 -59.85
PBT 542.49 480.97 12.79 521.07 4.11 1534.26 1283.66 19.52
Tax 161.46 147.97 9.11 157.97 2.21 470.49 382.18 23.11
PAT before minority interest 381.03 332.99 14.43 363.10 4.94 1063.77 901.48 18.00
Less: Minority Interest 6.14 5.02 22.19 3.49 75.92 7.84 6.45 21.52
Add: Share in Profits of Associates 8.67 3.43 152.97 4.53 91.43 19.43 -6.59 -395.06
Net Profit 383.57 331.40 15.74 364.14 5.33 1075.36 888.45 21.04
Equity 368.15 347.70 5.88 366.70 0.40 368.15 347.70 5.88
EPS 5.21 4.77 9.31 4.97 4.92 14.60 12.78 14.31
Gross NPA 863.70 1108.65 -22.09 904.32 -4.49 863.70 1108.65 -22.09
Net NPA 274.72 572.54 -52.02 331.96 -17.24 274.72 572.54 -52.02
Gross NPA% 2.12 -42.86 2.37 2.12 3.71
Net NPA% 0.69 -64.62 0.88 0.69 1.95
Return On Assets 0.60 -10.45 0.59 1.69 1.93
Source: Capitaline
Consolidated – P&L A/c
Particulars FY08 FY09 FY10
Interest Income 3648.39 4366.56 4601.16
Interest Expenses 1816.48 1992.39 1772.86
Net Interest Income 1831.91 2374.17 2828.30
Other Income 4220.95 3662.81 5507.77
Total Income 7869.34 8029.37 10108.93
Operating Expenses 2367.72 2492.62 2405.34
Staff Cost 1197.89 1192.51 1260.95
Other Operating Expenses 1169.83 1300.11 1144.39
Total Expenditure 4184.20 4485.01 4178.20
Operating Profit 3685.14 3544.36 5930.73
Depreciation 98.67 125.93 142.92
Provisions 2178.62 2402.32 3885.06
Profit before Taxes 1407.85 1016.11 1902.75
Taxes 449.12 363.44 575.39
Profit after Taxes 958.73 652.67 1327.36
Minority Interest -18.69 3.72 18.00
P/L of Associate Company 13.81 3.44 -2.36
Net Profit after Minority Interest 991.23 652.39 1307.00
Extra ordinary items 0.62 -1.00 -2.97
Adj. Net Profit after Tax 990.61 653.39 1309.97
Source: Capitaline
Consolidated – Balance Sheet
Financial Year (Rs. In Crs) FY08 FY09 FY10
LIABILITIES
Capital 344.67 345.67 348.14
Reserves & Surplus 5479.23 6176.88 7562.80
Equity Application Money 58.21 91.91 54.80
Minority Interest 51.23 62.86 80.86
Deposits 13691.93 13821.84 21819.18
Borrowings 12772.81 11979.02 13885.70
Other Liabitlies 8199.09 7755.66 11363.33
Total 40597.17 40233.84 55114.81
ASSETS
Cash & Bank Balances with RBI & Others 1690.42 1007.03 2094.08

Retail Research 13
Balances at short & call notices 1605.13 430.47 412.73
Advances 21984.68 22497.62 29724.29
Investments 12569.68 13313.03 19484.78
Fixed Assets 336.45 341.76 613.83
Other assets 2410.81 2643.93 2785.10
Total Assets 40597.17 40233.84 55114.81
Source: Capitaline
Standalone - Profit and Loss A/c
Particulars FY08 FY09 FY10 FY11E FY12E
Interest Income 2535.36 3065.14 3255.61 4142.12 5084.97
Interest Expenses 1309.56 1546.60 1397.47 1908.74 2335.38
Net Interest Income 1225.80 1518.54 1858.14 2233.38 2749.60
Other Income 601.08 575.49 628.24 595.00 676.00
Fee based Income 222.08 223.75 325.00 270.00 320.00
Treasury Income 72.68 13.10 114.00 125.00 136.00
Miscellaneous Income 306.32 338.64 189.24 200.00 220.00
Operating Income 1826.88 2094.03 2486.38 2828.38 3425.60
Operating Expenses 1156.35 1391.22 1189.39 1460.00 1700.45
Staff Cost 519.23 583.63 555.79 715.00 843.70
Other Operating Expenses 637.12 807.59 633.60 745.00 856.75
Operating Profit 670.53 702.81 1296.99 1368.38 1725.15
Provisions 272.79 276.78 485.89 200.00 300.00
Profit before Taxes 397.74 426.03 811.10 1168.38 1425.15
Taxes 103.79 149.93 249.99 350.51 441.80
Profit after Taxes 293.95 276.10 561.11 817.87 983.35
Source: Capitaline, HDFC Sec Estimates
Standalone - Balance Sheet
Financial Year (Rs. In Crs) FY08 FY09 FY10 FY11E FY12E
LIABILITIES
Capital 344.67 345.67 348.14 366.7 366.7
Reserves & Surplus 3249.03 3559.86 4191.80 6135.6 6713.0
Deposits 16423.65 15644.93 23886.46 31891.0 43168.5
Borrowings 5119.25 5904.07 6140.50 7100.5 8230.2
Other Liabitlies 3178.71 3257.34 2869.41 3206.0 3627.0
Total 28315.31 28711.87 37436.31 48699.8 62105.4
ASSETS
Cash & Bank Balances with RBI & Others 1683.49 995.35 2085.67 2708.5 3296.3
Balances at short & call notices 439.18 145.32 214.59 321.9 482.8
Advances 15552.22 16625.34 20775.05 27717.6 36558.7
Investments 9141.99 9110.18 12513.04 14610.9 17201.4
Fixed Assets 210.25 213.35 427.64 748.4 860.6
Other assets 1288.18 1622.33 1420.38 2592.6 3705.5
Total Assets 28315.31 28711.87 37436.37 48699.8 62105.5
Source: Capitaline, HDFC Sec Estimates
Key Financials and Ratios (Standalone)
Particulars FY08 FY09 FY10 FY11E FY12E
Net Interest Income 1225.80 1518.54 1858.14 2233.38 2749.60
% Growth 0.00 23.88 22.36 20.19 23.11
PBT 397.74 426.03 811.10 1138.38 1365.15
% Growth 0.00 7.11 90.39 40.35 19.92
PAT 293.95 276.10 561.11 796.87 941.95
% Growth 0.00 -6.07 103.23 42.02 18.21
EPS 4.26 3.99 8.06 10.87 12.84
% Growth 0.00 -6.34 101.79 34.83 18.21
BV 104.26 110.33 130.41 88.38 95.97
% Growth 0.00 5.82 18.20 -32.23 8.59
Adj BV 76.65 79.73 94.38 39.38 43.97
% Growth 0.00 4.02 18.38 -58.28 11.66
CASA % 28.43 32.72 26.74 29.05 31.77
% Growth 0.00 15.07 -18.29 8.66 9.34
Cost Income Ratio % 63.30 66.44 47.84 52.17 50.52
% Growth 0.00 4.96 -28.00 9.07 -3.16
Credit Deposit Ratio % 94.69 106.27 86.97 86.91 84.69

Retail Research 14
% Growth 0.00 12.22 -18.15 -0.07 -2.56
NIM % 5.08 5.33 5.62 5.19 4.97
% Growth 0.00 4.78 5.49 -7.67 -4.27
Source: Capitaline, HDFC Sec Estimates

One Year Forward PABV

700 5.0
600

Actual PABV
4.0
500
400 3.0
300 2.0
200
1.0
100
0 0.0
31/03/2008

15/05/2008

27/06/2008

08/08/2008

23/09/2008

07/11/2008

24/12/2008

09/02/2009

26/03/2009

15/05/2009

26/06/2009

07/08/2009

18/09/2009

06/11/2009

18/12/2009

04/02/2010

19/03/2010

05/05/2010

16/06/2010

28/07/2010

08/09/2010

21/10/2010

03/12/2010

17/01/2011

01/03/2011
Date

Daily Closing Price - LHS PABV - 2 - LHS PABV - 2.5 - LHS PABV - 3- LHS PABV - 3.5- LHS Actual P/ABV-RHS

Technical supports/resistances

Analyst: Tiju K Samuel (tiju.samuel@hdfcsec.com)

RETAIL RESEARCH Fax: (022) 3075 3435
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Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation. This
document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy
any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be
relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred to herein. We may from time to time
solicit from, or perform investment banking, or other services for, any company mentioned in this document. This report is intended for Retail Clients
only and not for any other category of clients, including, but not limited to, Institutional Clients

Retail Research 15