Mutual funds
Mutual funds incurred a loss of Rs 4,281 crore as the Kotak Mahindra Bank stock plunged 10 percent following the RBI‘s imposition of a ban on customer onboarding through online and mobile banking, as well as issuing new credit cards.
On April 24, the RBI prohibited Kotak Mahindra Bank from enrolling new customers online or through mobile banking and from issuing new credit cards, citing concerns over its technology platform following a two-year examination.
As of March 2023, SBI Mutual Fund holds the largest stake in Kotak Mahindra Bank with approximately 7.52 crore shares valued at Rs 13,855 crore, now reduced to Rs 12,600 crore, resulting in a loss of over Rs 1,200 crore. Following SBI Mutual Fund, UTI Mutual Fund, HDFC Mutual Fund, and ICICI Prudential MF hold stakes, with UTI MF experiencing a loss of around Rs 486 crore, HDFC MF losing Rs 462 crore, and ICICI Prudential MF losing Rs 461 crore.
As of March, 36 mutual funds collectively hold Kotak Mahindra Bank stock, with an aggregate holding of approximately 25.63 crore shares valued at over Rs 47,229 crore.
Macquarie views the ban as a significant setback for Kotak Bank, particularly affecting its digital customer acquisition efforts. The bank’s 811 digital platform, which experienced notable increases in savings account openings and processed most unsecured products digitally, has been a key driver of growth, outpacing overall expansion with a 40 percent increase in the nine months of FY24, compared to the 18 percent overall growth.
Citi analysts anticipate that the RBI’s actions will impact the bank’s growth trajectory, net interest margin (NIM), and fee income. They have assigned a ‘neutral’ rating with a target price of Rs 2,040 per share. Jefferies, following the ban, downgraded Kotak Mahindra Bank to ‘hold’ and reduced the target price to Rs 1,970 per share. They foresee a resolution process akin to that of HDFC Bank, which lasted between nine to 15 months. Any extension beyond six months for Kotak could potentially impact revenues and costs.
Macquarie foresees a hindrance in medium-term growth due to the ban on digital onboarding and the bank’s constrained branch expansion. They suggest a possible de-rating similar to the experience seen with HDFC Bank. Macquarie maintains a ‘neutral’ stance with a target price of Rs 1,860 per share.
