Mumbai: Private lender Kotak Mahindra Bank Ltd on Monday crossed Rs2 trillion market capitalization for the first time, making it only the fourth listed bank and 21st company to achieve this milestone in India.
Data from BSE showed that Kotak Mahindra Bank had a market capitalization of Rs2 trillion, after its shares rose 1.34% higher to hit a record high of Rs1,051. Earlier in the day, Kotak Mahindra Bank shares climbed 1.53% to an all-time high of Rs1,053 apiece.
The stock gained for the fifth consecutive session and rose nearly 5% in this period. So far this year, it has added 46%, while the BSE Bankex Index gains 31.5%.
Until now, 20 Indian companies have crossed this landmark. They are Reliance Industries Ltd (RIL), Tata Consultancy Services Ltd (TCS), HDFC Bank Ltd, ITC Ltd, Housing Development Corp. Ltd, Hindustan Unilever Ltd, Maruti Suzuki India Ltd, State Bank of India, Oil & Natural Gas Corp. Ltd, Infosys Ltd, Indian Oil Corp. Ltd, ICICI Bank Ltd, Bharti Airtel Ltd, Coal India Ltd, NTPC Ltd, Wipro Ltd, Sun Pharmaceutical Industries Ltd, NMDC Ltd, DLF Ltd and MMTC Ltd. However, the value for the latter nine firms have fallen below this mark due to correction in the stock prices.
Currently, RIL is the most valued company in India with a market cap of Rs5.29 trillion, followed by TCS and HDFC Bank with market cap of Rs4.70 trillion and Rs4.64 trillion, respectively.
Kotak’s stable asset quality with net non performing asset ratio of 1% and negligible restructured assets has helped the stock. A return on assets of over 2% and a net interest margin of above 4% too has aided the run-up in shares. It seems to be investors’ favourite, although it is trading at high valuations of nearly 5.5x its expected book value for FY18.
“Improved loan growth with stable non performing assets have given confidence to the investors,” said Kamlesh Shroff, founder, Omniscient Securities.
“Possibilities of value unlocking by listing of its subsidiaries in future remains a trigger over the medium term,” Shroff added.
On 5 September, JP Morgan upgraded the stock to overweight from neutral and increased its target price to Rs1,100 per share. JP Morgan upgraded its profit estimates by 23-30% for fiscal year 2018 and 2019.
“The bank is in a strong competitive position with a fortress balance sheet which drives 31% EPS from FY17-20 for the parent bank, which we value at 3.1x PBV and 20.7x PER (1yf). The subs are now at take-off point, in our view, and this gives its investors a diversified exposure across high-growth segments,” a JP Morgan report said.
Of the analysts covering the stock, 25 have a “buy” rating, 10 have a “hold” rating, while three have a “sell” rating, shows Bloomberg data.