MIRA
INFORM REPORT
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Report Date : |
22.03.2012 |
IDENTIFICATION DETAILS
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Name : |
KOTAK MAHINDRA BANK LIMITED |
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Formerly Known
As : |
KOTAK MAHINDRA FINANCE LIMITED (KMFL) |
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Registered
Office : |
36-38 A, Nariman Bhavan,
227, D, Nariman Point, Mumbai – 400 021, |
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Country : |
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Financials (as
on) : |
31.03.2011 |
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Date of
Incorporation : |
22.11.1985 |
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Com. Reg. No.: |
11-038137 |
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Capital Investment
/ Paid-up Capital : |
Rs.3684.358
Millions |
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CIN No.: [Company Identification
No.] |
L65110MH1985PLC038137
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TAN No.: [Tax Deduction &
Collection Account No.] |
MUMK01323A |
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PAN No.: [Permanent Account No.] |
AAACK4409J |
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Legal Form : |
A public limited
liability bank. The Bank’s shares are listed on the Stock Exchanges. |
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Line of Business
: |
Banking
Activities |
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No. of Employees
: |
Above 20500
(Approximately) |
RATING & COMMENTS
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MIRA’s Rating : |
Aa (72) |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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Maximum Credit Limit : |
USD 27000000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is an established
bank in private sector. It has been Promoted by well – known banker Mr. Uday
Kotak and well-known industrial house Mahindra and Mahindra (automobile
giant). Available information indicates high financial responsibility of the
Bank. Financial position is very good. Trade relations are fair. Payments are
correct and as per commitments. Subject can be
regarded as a promising business partner for any normal business
dealings. |
NOTES :
Any query related to this report can be made on
e-mail : infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – September 30, 2011
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Country Name |
Previous Rating (30.06.2011) |
Current Rating (30.09.2011) |
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A1 |
A1 |
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Risk Category |
ECGC Classification |
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Insignificant |
A1 |
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Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
LOCATIONS
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Registered Office : |
36-38 A, Nariman
Bhavan, 227, D, Nariman Point, Mumbai – 400 021, |
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Tel. No.: |
91-22-66581100/66056825 |
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Fax No.: |
91-22-22855577/66215757 |
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E-Mail : |
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Website : |
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Location : |
Owned |
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Head Office : |
Vinay Bhavya Complex, 4th Floor, 159 – A, |
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Tel. No.: |
91-22-66426666/ 66426300 |
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Fax No.: |
91-22-26542876/ 2824 |
DIRECTORS
As on 31.03.2011
|
Name : |
Dr. Shankar Acharya |
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Designation : |
Non Executive Part- Time Chairman |
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Name : |
Mr. Uday Kotak |
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Designation : |
Executive Vice Chairman and Managing Director |
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Name : |
Mr. Anand Mahindra |
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Designation : |
Director |
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Name : |
Mr. Deepak Gupta |
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Designation : |
Executive Director |
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Name : |
Mr. C. Jayaram |
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Designation : |
Executive Director |
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Name : |
Mr. Shivaji Dam |
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Designation : |
Director |
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Name : |
Mr. Sudipto Mundle |
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Designation : |
Director |
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Name : |
Mr. Asim Ghosh |
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Designation : |
Director |
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Name : |
Mr. Cyril Shroff |
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Designation : |
Director |
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Name : |
Mr. Prakash Apte |
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Designation : |
Director |
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Name : |
Mr. N P Sarda |
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Designation : |
Director |
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Name : |
Mr. Amit Desai |
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Designation : |
Director |
KEY EXECUTIVES
|
Name : |
Ms. Bina Chandarana |
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Designation : |
Company Secretary and Executive Vice President |
MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN
As on 31.12.2011
|
Category of Shareholder |
No. of Shares |
Percentage of
Holding |
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(A) Shareholding
of Promoter and Promoter Group |
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308,896,208 |
42.12 |
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26,897,060 |
3.67 |
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335,793,268 |
45.79 |
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Total shareholding
of Promoter and Promoter Group (A) |
335,793,268 |
45.79 |
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(B) Public
Shareholding |
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18,420,730 |
2.49 |
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19,992,211 |
2.71 |
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199,990,870 |
27.06 |
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238,403,811 |
32.26 |
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30,217,873 |
4.09 |
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35,149,164 |
4.76 |
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56,183,524 |
7.60 |
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42,231,929 |
5.85 |
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4,381,675 |
0.59 |
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4,358,680 |
0.59 |
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103,648 |
0.01 |
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1,06,112 |
0.14 |
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525,814 |
0.07 |
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32,800,000 |
4.44 |
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164,782,490 |
22.28 |
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Total Public shareholding
(B) |
403,186,301 |
54.52 |
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Total (A)+(B) |
738,976,569 |
99.92 |
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(C) Shares held
by Custodians and against which Depository Receipts have been issued |
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Public |
590,644 |
0.08 |
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|
590,644 |
0.08 |
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Total
(A)+(B)+(C) |
739,567,213 |
100.00 |
(1) Indian
Individuals / Hindu Undivided Family
Individual shareholders holding nominal share
capital up to Rs.0.100 millionBUSINESS DETAILS
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Line of Business : |
Banking
Activities |
GENERAL INFORMATION
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No. of Employees : |
Above 20500
(Approximately) |
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Bankers : |
Reserve Bank of |
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Banking
Relations : |
-- |
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Auditors : |
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Name : |
S.R. Batliboi and Company Chartered Accountants |
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Address : |
6th Floor, |
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Subsidiaries : |
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Associates : |
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CAPITAL STRUCTURE
As on 21.07.2011
Authorised Capital : Rs.4000.000
Millions
Issued, Subscribed & Paid-up Capital : Rs.3699.290 Millions
As on 31.03.2011
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
|
|
|
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|
800000000 |
Equity Shares |
Rs.5/- each |
Rs.4000.000 millions |
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Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
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|
|
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|
736871504 |
Equity Shares |
Rs.5/- each |
Rs.3684.358
Millions |
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FINANCIAL DATA
[all figures are
in Rupees Millions]
ABRIDGED BALANCE
SHEET
|
PARTICULARS |
31.03.2011 |
31.03.2010 |
31.03.2009 |
|
Capital and Liabilities |
|
|
|
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Capital |
3684.358 |
3481.415 |
3456.689 |
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Reserves and Surplus |
64280.362 |
41369.735 |
34679.490 |
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Employees' Stock Options (Grants) Outstanding |
369.172 |
548.017 |
919.086 |
|
Deposits |
292609.686 |
238864.671 |
156439.963 |
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Borrowings |
117239.484 |
61405.132 |
67340.106 |
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Other Liabilities and Provisions |
30323.596 |
28694.195 |
24283.405 |
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Total |
508506.658 |
374363.165 |
287118.739 |
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Assets |
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Cash and Balances with Reserve Bank of |
21077.242 |
20856.726 |
9953.533 |
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Balances with Banks and Money at Call and Short Notice |
3632.607 |
2145.915 |
1453.164 |
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Investments |
171214.395 |
125126.625 |
91101.805 |
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Advances |
293293.067 |
207750.541 |
166253.371 |
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Fixed Assets |
4256.073 |
4276.492 |
2133.560 |
|
Other Assets |
15033.274 |
14206.866 |
16223.306 |
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Total |
508506.658 |
374363.165 |
287118.739 |
PROFIT & LOSS
ACCOUNT
|
|
PARTICULARS |
31.03.2011 |
31.03.2010 |
31.03.2009 |
|
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I. Income |
|
|
|
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Interest earned |
43035.582 |
32556.249 |
30651.440 |
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Other Income |
6330.373 |
6282.400 |
2736.301 |
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Total |
49365.955 |
38838.649 |
33387.741 |
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II. Expenditure |
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Interest expended |
20584.854 |
13974.755 |
15465.975 |
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Operating expenses |
15533.202 |
11893.934 |
11964.229 |
|
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Provisions and
Contingencies |
5066.078 |
7358.903 |
3196.565 |
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Total |
41184.134 |
33227.592 |
30626.769 |
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III. Profit |
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Net Profit for the year |
8181.821 |
5611.057 |
2760.972 |
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Add: Surplus brought forward from previous year |
9659.053 |
6489.435 |
5281.691 |
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Total |
17840.874 |
12100.492 |
8042.663 |
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IV. Appropriations |
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|
|
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Transfer to Statutory Reserve |
2045.500 |
1402.800 |
690.300 |
|
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Transfer to Capital Reserve |
6.900 |
69.600 |
29.700 |
|
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Transfer to General Reserve |
409.100 |
280.600 |
138.050 |
|
|
Transfer to Investment Reserve Account |
(268.300) |
11.900 |
417.014 |
|
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Transfer to
Special Reserve u/s 36(1)(viii) of Income Tax Act,1961 |
290.000 |
400.000 |
-- |
|
|
Proposed Dividend |
368.831 |
296.613 |
259.553 |
|
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Corporate Dividend Tax |
43.645 |
(20.074) |
18.611 |
|
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Balance carried over to Balance Sheet |
14945.189 |
9659.053 |
6489.435 |
|
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Total |
17840.874 |
12100.492 |
8042.663 |
|
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|
|
|
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V. Earnings Per Share (Face Value of Rs. 5/-) |
|
|
|
|
|
Basic |
11.35 |
8.09 |
8.00 |
|
|
Diluted |
11.28 |
8.00 |
7.99 |
QUARTERLY /
SUMMARISED RESULTS
|
PARTICULARS |
30.06.2011 |
30.09.2011 |
31.12.2011 |
|
Type |
1st
Quarter |
2nd
Quarter |
3rd
Quarter |
|
Audited / UnAudited |
UnAudited |
UnAudited |
UnAudited |
|
Interest Earned |
13297.620 |
14646.490 |
16409.780 |
|
Income On Investments |
2863.590 |
3048.990 |
3338.170 |
|
Interest On Balances With Rbi Other Inter Bank Funds |
8.820 |
5.470 |
6.000 |
|
Interest / Discount On Advances / Bills |
10421.750 |
11590.840 |
13064.750 |
|
Others |
3.660 |
1.200 |
0.840 |
|
Other Income |
2286.620 |
2124.910 |
2819.620 |
|
Total Income |
15584.440 |
16771.400 |
19229.400 |
|
Interest Expended |
7619.320 |
8591.900 |
9895.280 |
|
Operating Expenses |
4104.560 |
4379.370 |
4897.980 |
|
Total Expenditure |
4104.560 |
4379.370 |
4897.980 |
|
Operating Profit Before Provisions and Contingencies |
3860.560 |
3800.140 |
4436.140 |
|
Exceptional Items |
0.000 |
0.000 |
0.000 |
|
Provisions and contingencies |
220.850 |
(23.610) |
307.240 |
|
Profit Before Tax |
3639.710 |
3823.740 |
4128.900 |
|
Tax |
1119.560 |
1223.640 |
1368.080 |
|
Profit After Tax |
2520.350 |
2600.100 |
2760.020 |
|
+/- Extraordinary Items |
0.000 |
0.000 |
0.000 |
|
+/- Prior period items |
0.000 |
0.000 |
0.000 |
|
Net Profit |
2520.350 |
2600.100 |
2760.820 |
LOCAL AGENCY FURTHER INFORMATION
CAPITAL
Pursuant to the approval granted by the Members at an Extraordinary General Meeting held on 27th July 2010 and receipt of other necessary approvals, in August 2010 the Bank allotted 16400000 equity shares of face value of Rs.10/- each to Sumitomo Mitsui Banking Corporation, a public company registered under the laws of Japan on a preferential basis at a price per equity share of Rs.833/- for a total consideration of Rs.13661.200 Millions.
In September 2010, each equity share of the Bank having a face value of Rs.10 was subdivided into two equity shares of the face value of Rs.5 each.
During the year, the Bank has also allotted 77,88,550 equity shares (adjusted for stock split number) arising out of the exercise of Employee Stock Options granted to the employees and Executive Directors of the Bank and its subsidiaries.
Post allotment of equity shares and sub-division of equity shares as aforesaid, the issued, subscribed and paid-up Share Capital of the Bank stands at Rs.3684.400 Millions comprising of 73,68,71,504 equity shares of Rs.5 each.
The Bank has a Capital Adequacy Ratio (‘CAR’) under Basel II as at 31st March 2011 of 19.92% with Tier I being 17.98%. At a consolidated level the CAR was 19.46% under Basel II.
During the year, the Bank has not issued any Capital under Tier II. As on 31st March 2011, outstanding Unsecured, Redeemable Non Convertible, Subordinated Debt Bonds was Rs.4657.000 Millions and outstanding Unsecured, Non-Convertible, Redeemable Debt Capital Instruments Upper Tier II stood at Rs.3366.800 Millions.
OPERATIONS
The Bank worked on a very balanced expansion plan of the network and added 72 branches and 246 ATMs and ended the year with 321 Branches and 710 ATMs, and thereby increasing the presence to 183 locations. The Bank added over half a million new customers this year across core banking products of savings and checking account, term deposits, overdrafts and non resident accounts.
The robustness of the network manifested in the healthy growth in demand and time liabilities. The momentum gained last year in terms of distribution of asset products from the network continued in the current year. The initiatives launched last year on higher end segment of customers through a branded programme titled “Privy League” continued to show encouraging results. The Bank maintained its ambition of becoming a bank of choice for the small and mid segment business enterprises and doubled the base of customers engaging in trade and foreign currency transactions. The increased network of ATMs benefited the Bank by bringing in much higher usage from non customers and growing the interchange income manifold.
The Bank continued to put significant focus in reaching out
to the NRI community last year.
The Bank implemented several initiatives aimed towards enhancing customer service and widening the product/ services bouquet. Some of the key ones being:
- Annual Combined Statement on Net Banking - Customers can now view and download their Annual Combined Statement for Savings and Current account, Investment and Demat holdings for the previous financial year. This will help customers to file Tax Returns, apply for loan etc.
- Card Protection Plan – The Bank in association with CPP Assistance Service Private Limited. offers card protection to protect all Kotak customers cards (Credit, Debit, ATM etc) against loss and resultant fraud.
- Multilingual
ATMs - Multilingual (English, Hindi and Marathi) on all ATMs in
- Recharge Services - This enables customers to recharge their pre-paid mobile and DTH services through Kotak Net Banking using Kotak Bill Pay.
- Statement Registration on Net Banking - Customers now have the option to register for their preferred statement frequency and mode option on Net Banking.
- The Bank has also taken steps to participate in the eco drive. An E-Statement campaign was run through the year aiming to convert the customers who have registered for monthly physical statements and quarterly physical statements to register for monthly E-Statements with the theme of ‘Save Trees, Save the Environment! Say no to Physical Statements’.
- Interbank Mobile Payment Service – This feature allows customers to transfer money instantly through mobile phone within own accounts and third party accounts within the IMPS member banks.
- Kotak Stock Ace - This is loan (overdraft) against securities product. Under this product the Bank provides an overdraft to customers against equity shares and mutual funds.
The last year saw several regulatory changes in the third party investment and insurance products space. While these regulatory interventions put a significant amount of revenue pressure the Bank recognises the opportunity to create a well differentiated business if it is able to create a more robust platform to advise its customers. Hence significant focus was put to creating processes with an objective to bring maximum transparency in the Bank’s sales process of these products and to bring more internal accountability to ensure appropriateness of sale as per customer suitability and risk profile. The Bank believes that its customers will benefit from such stringent internal standards and in the long run it will be able to build a sustainable and robust business model around these processes.
The Bank has always focussed on its employees as the key to building a sustainable franchise and has in the past won several awards as one of the best employers. Continuing with this emphasis the Bank launched an E-Learning platform for employees which again won accolades in the IBA Technology Awards. This platform enabled the Bank to introduce courses in real time. It also has features of individual learning plans, chat facilities to enable trainers and trainees to interact online, video streaming facility, online completion status tracking, etc. The Bank believes this will improve the quality of training inputs and will result in raising the service standards
The Bank took definitive steps towards risk control. These include set up of - N Vigil (Internal Cameras) in all the ATMs. This will ensure that the Bank has images of the customers who did the transactions at all times and can also facilitate during fraud investigations or customer complaints. A dedicated Risk Containment Unit has been put in place to do pre-on-boarding checks and transaction level checks to ensure conformity to AML guidelines and fraud prevention etc.
The Bank continued its in-depth coverage and servicing of large and mid market corporate clients during the year. The Bank was able to build significant franchise with many well known, reputed large corporate groups during this year while focusing on deepening existing clients through an array of customized and regular product offerings.
The year saw a strong trend in credit demand from the corporate and mid market business segments both for working capital and term facilities. This is in keeping with the strong underlying economic growth. The Bank was able to tap this opportunity and increase its share of business by offering a variety of products and services
The Bank added 160 new cash management service customers during the year by offering them technology driven working capital cycle enhancement and efficiency solutions to effectively enrich and optimize their cash flows and liquidity through an entire suite of CMS products and services. This has been made possible through constant innovation, continuous feedback sessions and a high degree of customization to cater to the dynamic and evolving industry scenario.
The Bank’s dedicated team of product solution experts strives to provide systemic structured solutions to suit to the customer’s needs. The indepth understanding of the customer’s business and the superior delivery models has helped in achieving high levels of customer satisfaction.
The Commercial Vehicle and Infrastructure sectors continued the growth momentum through the year aided by the positive IIP (Index of Industrial Production) and Agriculture growth numbers. Commercial Vehicle operator margins improved as a result of higher freight realisations, which offset the increase in diesel cost. The growth in the core sector and focus on infrastructure led to a healthy growth in the order book position of contractors in the Infrastructure space. As a result, disbursement numbers touched record levels as did the bottom line.
The year also saw good growth in bank lines in both the sectors.
The monsoon has been more than adequate this year. However the impact of the growing economy and increasing purchasing power of the rural population has meant a steep rise in prices of all agro commodities. Riding this boom the Agri Business of the Bank has shown a robust growth with the total portfolio slated to cross Rs.43000.000 Millions this year, up from last year’s portfolio of Rs.32000.000 Millions. This is a growth of 35% year-on-year. The Bank also ensured to reach the targeted norms for lending to the Agri sector as laid out by the regulator for the second year running.
The Agri business rode on an impressive growth in the tractor loans, commodity funding which doubled in portfolio size and an impressive growth in the working capital facilities to agro-processing sector. Delinquency levels in this portfolio have also been at all time lows and are even better than some of the other urban oriented advances indicating the financial strength of clients associated with agriculture who are riding the commodity price boom.
The Agri business has also become the corner stone for the Bank’s targets for meeting financial inclusion and lending to the weaker sections of the society such as small and marginal farmers, village artisans and other socially deprived sectors identified by the government. These advances now have crossed a level of 8% of the Bank’s total advances. The Bank is in the process of identifying more target segments in this sector to reach out to.
In the Home Finance business while there was strong growth in the first half of the year, the second half of the year saw stabilisation and slight drop in demand from customers. The Bank introduced innovative new products during the year such as part tenure fixed home loans and loan against property. The Bank branches continued to play an important part and evolved into a stable contributor month on month. There was an increased focus on existing Bank customers and their contribution among the secured asset products went up.
The Personal Finance business saw good growth and established the Bank as one of the leading lenders of unsecured loans in the market. High-ticket products continued to be the focus and were the biggest contributor to the overall volumes. The Personal Finance business also added new products to their existing bouquet of financial services for businessmen. Working capital products in Rs.5.000 Millions to Rs.15.000 Millions range (both fund based as well as non-fund based) were some of the new offerings.
The Bank resolved several NPA accounts pertaining to stressed assets acquisition. Supreme Court upheld the NPA assignment between banks and other financial institutions. This landmark judgment will further help in resolving several NPA accounts, which were litigated in several courts for the past few years. The NPA portfolio sale by banks continued to be sluggish and the serious pricing mismatch between the buyers and sellers continued, this year as well.
The Bank continued to invest in large single asset transactions, with good prospects of turnaround in stressed companies. Further, the Bank has diversified in buying large retail NPA loans from other banks.
During the year, the Bank saw a robust growth in its overall advances portfolio. This was primarily driven by the overall growth of the corporate sector, spurred by strong domestic consumption demand for their products post the recessionary period. A robust NPA management practice and strong internal controls, aided by a strong economic growth, has led to a reduction in the Bank’s gross/net NPAs
On Treasury side, the Bank has an active proprietary desk trading in all products such as Fixed Income, Money Markets, Derivatives, Foreign Exchange and Bullion. The Treasury plays an important role in balance sheet management and implementation of Funds Transfer Price between various business units. In the area of Debt Capital Markets (DCM) the Bank offered the following products: syndication of loans, bonds, mezzanine financing, promoter funding and acquisition financing and securitisation. During the year, the Bank’s Treasury started Correspondent Banking Division to build and leverage on relationships with offshore banks for improving quality and international reach for its customers.
The Bank’s credit card business has issued 1.5 lac cards and is in its third year of operations. The card design and product benefits have received overwhelming response from customers. The customer spends across all variants of cards have been amongst the top three in industry. The premium range of Then products – VISA Platinum and VISA Signature have driven the spends growth in the portfolio and it contributes to 34% of the spends while accounting for 12% of customer base. This has reaffirmed the customer acceptability of the product.
Credit card business clocked Rs.6000.000 Millions of total spends in the year with a book size of Rs.3000.000 Millions. Industry credit cards spends has shown sign of growth after last year’s recessionary economic conditions
The Bank entered into a strategic arrangement with PVR Cinemas, one of the elite name in entertainment industry, to distribute credit card products aimed at upmarket customers. This partnership opens up the opportunity to tap new customer segment hitherto untapped by the Bank.
The Bank’s technology team concentrated on innovation to provide new products and conveniences to the customers. This ranged from mobile to mobile payments (IMPs) to providing ATMs at remote locations on an “air card”.
System upgrades for continuous improvement in customer
experience were a focus. The excellence of the CRM and
In preparation of the planned Core Banking upgrade, the technology foundation has been enhanced. Service Oriented Architecture was introduced with the use of a world class product for system integration. Standard frameworks for digitization and internal development expedite deployment of new systems
SUBSIDIARIES
The Bank’s subsidiaries are established players in the different areas of financial services, viz. car finance, investment banking, stock broking, asset management and life insurance
While the Indian economy continued its growth path the businesses in which the subsidiaries operate had its own share of challenges on account of market fragmentation, change in market mix, dramatic regulatory changes and the like.
Kotak Mahindra Prime Limited, the car finance company
continues to have robust growth in lending coupled with fall in delinquencies.
Kotak Securities Limited, the stock broking company continued to face adverse
effects of changes in mix in market volumes shifting to the low-yield equity
derivative segment. The company also continues to face competition in the
market place due to continuous entry of new players. Kotak Mahindra Capital
Company Limited had a relatively better year, thanks to handling primary
issues. But nevertheless, the investment banking industry continues to face
pressure. Kotak Mahindra Asset Management Company Limited faced an outflow of a
large portion of liquid funds. Coupled with changes in regulations in the
mutual fund industry it had to tweak its business strategy. Kotak Mahindra Old
Mutual Life Insurance Limited had to deal with regulatory changes that changed
the direction of the industry. Business strategy, product mix and management of
costs had to be continuously worked upon to stay on course. Due to range bound
secondary equity markets and net outflows in many
MANAGEMENT DISCUSSION
and ANALYSIS
The economic environment in advanced economies indicated
some pick-up in growth in the second half of FY2010. However, the pace of
economic recovery remained uneven and the sustainability of the recovery
process remained in doubt. The emerging market economies (EMEs) recovered ahead
of the advanced economies. In
GDP growth started to indicate recovery trends, starting in the Q4 FY2010, when it grew by 8.6% from 7.3% in Q3 FY2010. This recovery trend sustained and also strengthened in the first and second quarters of FY2011, averaging at 8.9%. The third quarter indicated some slowing trends in the GDP growth, mainly on account of a slowing industrial growth, down to 5.7% compared to 11.7% in the first quarter of FY2011. Manufacturing sector’s growth weakened sharply from 13% in the first quarter to 5.6% in the third quarter on account of a base effect from the previous year as well as due to cyclical slowdown on account of higher interest rates. Services sector growth also weakened in the third quarter of FY2011 to 8.7%, compared to an average of 9.5% in the first half. A further softness of the GDP growth in the third quarter was prevented by a strong agricultural sector’s performance at 8.9%, compared to an average growth of 3.5% in the first half.
On the expenditure side, private consumption demand has stayed strong, indicated by its share in GDP remaining steady at around 60% in the first three quarters of the financial year. However, the investment demand is seen to be softening recently. The slowing investment trend is also indicated by the capital goods production trends in the Index of Industrial Production.
The RBI achieved a non-disruptive normalization of monetary policy from 19th March 2010 onwards, when the first 25 bps increase in the Repo and the Reverse Repo was announced by the RBI. RBI adopted a calibrated tightening of the policy interest rates and liquidity conditions. The RBI used CRR as a liquidity tightening measure and increased it from 5% in April 2009 to 6% at April 2010 end. The strategic and preferred shift towards a sustained deficit of liquidity in order to enhance monetary policy transmission was announced by the RBI in early July 2010. This was helped by the outflow of resources from the banking system due to payment by telecom companies to the Government on account of 3G spectrum auction, as also by a sharp increase in the demand for currency on account of high inflation
The Repo rate emerged as the operative policy rate for the tightening of monetary policy. The liquidity tightened significantly and was beyond Rs.1000000.000 Millions on instances. To bring down the severity of liquidity strain and ensure that the liquidity stress does not affect flow of credit to productive sectors of the economy, Reserve Bank of India (RBI) introduced a second LAF auction and reduced the mandatory requirement of SLR to 24%. Further, banks were allowed to borrow from the RBI by maintaining a shortfall in the SLR requirement by a maximum of 1% of NDTL without having to pay a penal interest
Despite the significant increase in the policy interest rates and also tight liquidity conditions, inflationary conditions have remained on the higher side. Headline WPI inflation had peaked at around 11% in April 2010. Due to the favourable base effect from the previous financial year and also some softening of the manufactured products price pressures, due to the past monetary tightening, headline WPI inflation exhibited a moderating trend till around November 2010 when it was 8.1%. However, renewed price pressures were seen from December onwards with the new drivers being fuel and non-fuel international commodity prices and demand-supply imbalances in some food items. As on March 2011, headline WPI was at 9.0%, with core inflation (inflation ex-food,-ex fuel) also firming up to 8.9%.
In the first half ofFY2011, the current account deficit (CAD) emerged as a significant policy concern. CAD aggregated to around US$30 bn in this period on the back of a widening trade gap and also a lower support from net invisibles. The enhanced risks arising out of the rising CAD were negated by robustness in the net capital flows, especially in the second quarter of FY2011 when FII flows surged to US$18.8 bn in a single quarter, compared to US$3.5 bn in the first quarter of FY2011. There was also a change in the composition of capital flows, with large increase in portfolio flows replacing FDI flows. Some of the concerns on the current account eased in the third quarter as the deficit fell to US$9.7 bn from US$16.8 bn in the previous quarter. This improvement was driven by a narrowing of the trade deficit as exports picked up sharply to grow at 39.8% in the third quarter with the improvement in the global demand. Further, invisible receipts were stronger than in the recent past quarters. However, in the third quarter, capital account surplus was lower, with FII inflows once again reducing on account of a global risk aversion on the back of European peripheral sovereign debt worries. All this led to the Balance of Payments surplus in the first three quarters of FY2011 to be restricted to USD$bn, almost unchanged from the first three quarters of the previous fiscal.
Awards and Recognitions
During the year the Bank won the following awards:
- The Bank was amongst the Top 25 “Best Employers in India 2011” by Hewitt Associates and the only bank amongst the Top 25. The Bank received this award for the third time in a row.
- Adjudged
second in BFSI sector and 23rd overall in “
- Awarded “Best Local Cash Management Bank” by Asiamoney 2010.
- Ranked No. 2 in
- Awarded “The Ingenious 100” Award by IDG
India’s CIO Magazine for Storage Virtualization.
- Ranked no. 1 in seventeen categories
including range of investment products/ advisory services – Euromoney.
- Awarded for Customer and Brand Loyalty
in Banking Sector at 4th loyalty
- Awarded “Best Call Centre Project” from
Asian Banker for a solution which integrates multiple contact centre across
several locations that enhances agent productivity
- Kotak Bank won IBA technology awards for
:
Best use of Technology in Training and e-learning Initiatives
Best Customer Initiative - CRM
Subsidiaries Highlights
1. Kotak Mahindra Prime Limited
Kotak Mahindra Prime
Limited (KMP) is primarily into car financing which includes financing of
retail customers of passenger cars, multi-utility vehicles and inventory and
term funding to car dealers. In addition to car finance, KMP also carries out
other lending activities which includes loan against securities, securitization
/ assignment of loans, corporate loans and developer funding.
The passenger car
market in
KMP’s gross advances
grew by 34% to Rs.112080.000 Millions in FY2011 from Rs.83790.000 Millions in
FY2010.
KMP continued to
focus on maintaining margins in the retail car finance business, fee based
income, controlling costs and credit losses, while improving its positioning in
the car finance market by scaling up business. KMP has been a part of the car
finance industry for more than 20 years. Over this period, it has carved out a
niche for itself and is considered a leader in the industry. KMP’s strong
relationship with key stake holders in the industry viz. manufacturers, dealers
and customers have helped its growth. Other lending activities have also
contributed positively towards the company’s growth
2. Kotak Securities Limited
The Sensex closed at 19,445 at the end of FY2011 (17,528 at the end of FY2010) with a high of 21,108 and a low of 15,960. Benchmark NIFTY closed at 5,249 and 5,833 respectively with a high of 6,338 and a low of 4,786. There was a significant change in the average daily volumes (ADV) year on year. ADV for cash segment reduced to Rs.186300 Millions in FY2011 from Rs.227840 Millions in FY2010. ADV for derivative segment increased to Rs.1164370 Millions from Rs.729380 Millions during same period. The year saw a significant skew in the market volumes towards derivatives.
The year saw a significant skew in the market volumes towards derivatives. The brokerage rates in the cash segment are higher than the derivative segment. Change in this mix is a key reason for lower brokerage income during the year. Second quarter of the financial year saw a surge of FII investments in the secondary markets with the investor confidence levels perceived to be high. KS continued to outperform other syndicate members in IPO and QIP offerings notching a higher market share. KS research continued to be recognized for its in-depth high quality financial modeling, width of stock coverage and valuable investment insights.
·
Awards and Recognitions:
KS received the
following awards during the financial year:
- Institutional Equities was named as the
‘Best Electronic Broker’ at Trade Tech India Awards 2011
- Awarded Best Broker in
- Voted as the Best Local Brokerage firm
by Asiamoney Brokers Poll for 2010, for the 5th year in a row
3. Kotak Mahindra Capital Company Limited
Kotak Mahindra Capital Company (KMCC) primarily operates as a full-service Investment Bank and is also a trading cum clearing member of the National Stock Exchange on all three segments viz. Cash, FandO and WDM.
Buoyancy in the capital markets led to domestic fund raising of Rs.803000.000 Millions through IPOs, FPOs Debt Offerings and QIPs. KMCC topped the league tables for public offers (IPOs, FPOs and Debt Offerings).
Success of earlier large MandAs led to increased cross-border MandA this year combined with equally large domestic MandA activity. During the year, the Company made considerable progress in deepening relationships with it alliance partners in key geographies and this will play a crucial role in business in the years ahead
In capital markets, KMCC was the lead manager to twelve out of the twenty six Initial / Follow on Public Equity Offerings (above Rs.2500.000 Millions)
·
Awards and Recognitions:
During the current year KMCC won the following awards:
- Best
Investment Bank in
- Best Domestic Equity House by Asiamoney, 2010 - for the third consecutive year
- Best
Equity House in
- Best
Bank for Equity Finance in
4. Kotak Mahindra Old
Mutual Life Insurance
Kotak Mahindra Old Mutual Life Insurance (Kotak Life
Insurance) is a 74:26 joint venture partnership between Kotak Mahindra Group
and Old Mutual Plc, an international savings, wealth management and Insurance
company based in
Kotak Life Insurance is in the business of life insurance, deferred annuity and providing employee benefit products to its individual and group clientele. The company has developed a multi-channel distribution network to cater to its customers and markets through tied, alternate, group and direct marketing channels on a pan-India basis.
The Indian life insurance industry underwent a transformation in 2010-11. The new ULIP regulations that came into force in September of the year changed the face of life insurance business with customer centricity and efficiency becoming the industry’s new buzzwords. These will continue to be the defining factors for developments in the new year, but at a much accelerated pace. New regulations have significantly enhanced the appeal of insurance products. Enhancing efficiencies and thereby productivity of delivery channels is the central challenge for insurance companies in the new regulatory environment. A significant proportion of life insurance is still sold through individual agents. Managing this channel effectively will be the key to ensuring persistency. In the new environment, focus of insurers has shifted from largescale expansion to sustained value creation and efficient use of capital. Special emphasis is now placed on cost management
FY2011 saw major changes in the company’s product portfolio. The ULIP basket underwent complete overhaul to meet the new regulatory norms, which came into effect from 1st September 2010. There was also renewed focus on non-ULIPS to increase their share in the overall product mix. During the year, the Company launched six new ULIPs conforming to new norms and discontinued with the old ULIPs. The non ULIP offering was bolstered along with the launch of e-Insurance portal through which a customer can buy life insurance online.
·
Awards and Recognitions:
Awarded the prestigious Enterprise Driving Growth and Excellence (EDGE) through IT Award, for the successful implementation of Kotak Rewards and Incentive System in 2010.
The company has initiated the zero paper initiative by implementing the first phase of email alerts to the customers. This ensures that basic alerts like renewal reminders, premium receipts etc are sent to customers on their registered email ids. Apart from being environmentally friendlier, this mode is also fast and efficient.
The company has initiated the zero paper initiative by implementing the first phase of email alerts to the customers. This ensures that basic alerts like renewal reminders, premium receipts etc are sent to customers on their registered email ids. Apart from being environmentally friendlier, this mode is also fast and efficient.
5. Kotak Mahindra
Asset Management Company Limited (KMAMC),
Kotak Mahindra
Trustee Company Limited (KMTC)
Kotak Mahindra Asset Management Company Limited (KMAMC) is the asset manager of Kotak Mahindra Mutual Fund (KMMF) and Kotak Mahindra Trustee Company (KMTC) is the trustee company.
Total AUM (Assets Under Management) of the industry fell from Rs.6139790 Millions in March 2010 to Rs.5922500 Millions in March 2011, a fall of 3.54% in FY2011. During the same period, AUM with Kotak Mahindra Mutual fund increased by 1.59% i.e. from Rs.240710 Millions in March 2010 to Rs.244550 Millions in March 2011.
Number of folios as on 31st March 2011 was over 9 lakh. KMAMC has a presence in 79 cities and 84 branches.
In terms of performance of the funds managed by KMAMC, short duration debt schemes of the fund performed well. During the year, Kotak Flexi Debt, Kotak Liquid Institutional Premium Plan and Kotak Gilt were awarded 5 Star ranking over three years by Value Research. Also, Kotak Flexi Debt and Kotak Floater Long Term have been ranked 7 star and have been awarded the Gold Award for ‘Best Performance’ in the category of ‘Open Ended Ultra Short Term-IP’ and ‘Open Ended Floating Rate Fund’ respectively for one year period ending 31st December 2010. Kotak Bond Regular has been awarded most Consistent Performer (based on the annual performance of the past 10 years) in the NDTV Profit Mutual Fund Awards 2010.
The distribution is trying to realign its business models
with the new paradigm introduced with the abolition of entry loads in FY2010.
The industry on its part is undertaking all
6. Kotak Mahindra
Pension Fund Limited
Kotak Mahindra Pension Fund Limited has been appointed as a Pension Fund Manager (PFM) by the Pension Fund Regulatory and Development Authority (“PFRDA”), on 30th April 2009 for managing the funds under New Pension System (NPS), as per the terms of the Investment Management Agreement
The Company manages seven schemes, and the combined assets under management on 31st March 2011 were Rs.33.000 Millions. PFRDA has introduced new scheme “NPS LITE” to promote small savings specifically targeting the weaker and economically disadvantaged sections of the society.
The pension business is currently at a nascent stage of operations and considering this fact and the low rates of management fees, the company has made a net loss of Rs.6.300 Millions in FY2011.
INTERNATIONAL
SUBSIDIARIES
The Bank has overseas subsidiaries with offices in
The international subsidiaries were mainly engaged in
investment advisory and investment management of funds, Equity and Debt Trading,
management of GDR/FCCB issuances, broker and broker dealer activities and
investments. A new subsidiary namely Kotak Mahindra Financial Services Limited
(KMFSL) was set up in November 2009. KMFSL was established under the aegis of
the Dubai International Financial Centre (DIFC). Post setting up of KMFSL, the
international subsidiaries are now providing wealth advisory services also to
high networth individuals outside
Assets managed/ advised by the international subsidiaries closed the year at US$ 1,904 million (2010: US$ 1,568 million).
The year was a difficult one with many
Hardening of US interest rates and range-bound performance
of Indian capital markets during the year had an adverse impact on income rom
proprietary investments comprising of fixed income and
Kotak Investment
Advisors Limited
Kotak Investment Advisors Limited (KIAL) is the investment manager / advisor for private equity and realty funds
The aggregate alternate assets managed /advised by KIAL as at 31st March 2011 was around Rs.50310 Millions (US$ 1.12 billion). The Company manages five domestic funds and advises three offshore funds.
1. Private Equity
Funds
(a)
India Growth Fund (IGF) was set up as a unit scheme of Kotak SEAF India Fund with investors from select institutional and high net worth investors, from both India and abroad, on a private placement basis. IGF has made 15 investments across diversified sectors such as logistics, technology services, retail, media and entertainment, engineering, bio-technology, textiles, aviation, telecom and power infrastructure and financial exchanges.
(b) Kotak
Kotak India Venture Fund I (KIVF-I) is a domestic fund with the objective of making investments primarily in companies operating in Biotechnology and Life Sciences sector. The Fund has made three investments till date. During the year KIVF-I divested fully from one investment.
(c) Kotak
Kotak India Growth Fund II is aimed at investing in mid sized Corporates with a growth orientation. KIGF-II has made six investments till date
2. Realty Funds
(a) Kotak Mahindra
Realty Fund
The primary objective of KMRF is to invest in and provide
finance to real estate sector and allied services sectors in
Kotak
(b) Kotak Alternate
Opportunities (
Kotak Alternate Opportunities (
Outlook
Kotak Mahindra Group’s results for the financial year
demonstrate the strong fundamental growth in the
CMT REPORT (Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts,
1] INFORMATION ON
DESIGNATED PARTY
No records exist designating subject or any of its beneficial owners,
controlling shareholders or senior officers as terrorist or terrorist
organization or whom notice had been received that all financial transactions
involving their assets have been blocked or convicted, found guilty or against
whom a judgement or order had been entered in a proceedings for violating
money-laundering, anti-corruption or bribery or international economic or
anti-terrorism sanction laws or whose assets were seized, blocked, frozen or
ordered forfeited for violation of money laundering or international
anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No available
information exist that suggest that subject or any of its principals have been
formally charged or convicted by a competent governmental authority for any
financial crime or under any formal investigation by a competent government
authority for any violation of anti-corruption laws or international anti-money
laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.50.59 |
|
|
1 |
Rs.80.34 |
|
Euro |
1 |
Rs.67.14 |
SCORE & RATING EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
8 |
|
PAID-UP CAPITAL |
1~10 |
8 |
|
OPERATING SCALE |
1~10 |
8 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
8 |
|
--PROFITABILIRY |
1~10 |
8 |
|
--LIQUIDITY |
1~10 |
8 |
|
--LEVERAGE |
1~10 |
8 |
|
--RESERVES |
1~10 |
8 |
|
--CREDIT LINES |
1~10 |
8 |
|
--MARGINS |
-5~5 |
- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
NO |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
72 |
This score serves as a reference to assess SC’s credit risk and
to set the amount of credit to be extended. It is calculated from a composite
of weighted scores obtained from each of the major sections of this report. The
assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
- |
NB |
New Business |
- |
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.