Kotak Mahindra Bank shares tank 7%; Uday Kotak loses Rs 7,750 cr; target prices

Kotak Mahindra Bank Ltd (KMB) saw its shares plunging 7 per cent in Monday's trade, thanks to a miss on Q1 earnings by the private lender due to higher-than-expected margin decline and credit costs. This resulted in notional value of Uday Suresh Kotak's stake in the bank falling as much as Rs 7,750 crore within minutes.      

Kotak Mahindra Bank fell 6.95 per cent to hit a low of Rs 1,977.20 apiece today. In his name, Uday Suresh Kotak held 25.70 per cent stake in Kotak Mahindra Bank at the end of June quarter. This stake was worth Rs 1,01,038 crore today against Rs 1,08,588 crore on Friday.  

Stock analysts said higher than expected margin decline as a result of subdued growth in unsecured credit and EBLR book repricing impact and higher day count in previous quarter, Higher credit costs due to inch-up in slippages in MFI and retail CV dragged the numbers. 

"We incorporate higher credit costs and a higher margin decline in to our estimates which has led to 6 per cent/ 3 per cent reduction in our FY26/ 27 estimates. We introduce FY28 estimates and roll forward our valuations to Sep’27 leading to a target price of Rs 2,440, (vs 2,540 earlier) valuing the standalone bank at Sep’27 P/B of 2.4x and assigning a value of Rs 534 per share to subsidiaries. Maintain BUY," Antique Stock Broking. 

Nomura said slippages and credit cost were elevated at 1.7 per cent and 1.2 per cent, respectively. Kotak Bank's PAT was largely in-line with Nomura's estimate as the impact of higher credit cost and lower fee income was offset by lower opex and strong treasury income.

"We expect KMB to deliver RoA/RoE of 1.8-2 per cent/11-12 per cent over FY26-28F. KMB (core-bank) currently trades at 1.9x FY27 BVPS, and we see limited upside potential. We maintain Neutral with a lower target of Rs 2,150 (from Rs 2,200)," Nomura said.

PL Capital said  it tweaked its valuation multiple to 2.3 times from 2.4 times on expected March 2027 core adjusted book value (ABV). It slightly reduced its target on Kotak Mahindra Bank to Rs 2,350 from Rs 2,400.  ICICI Securities tweaked its target price to Rs 2,570 from Rs 2,620. This brokerage maintained 'Buy' but said higher stress impacting return on asset (RoA) is a risk.

For the quarter, higher trading gains and lower opex helped offset some pressure, Nuvama said noting that credit cost spike was driven by MFI, stress in retail CV (goods) and lower legacy recoveries.

"We are cutting EPS by 7 per cent/8 per cent for FY26E/27E. At 2.3x BV FY26E, the risk-reward is unfavourable given better earnings by peers. Our new target is Rs 2,020/2.1x BV FY26E. Management called out stress in small, retail CV and clarified there is no build-up of stress in the MSME portfolio, which is 100 per cent secured. Credit cost in MFI peaked in Q1FY26," Nuvama said.