Kotak Bank

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   This discussion is being continued from the thread Kotak Bank - All in one

Let me get the ball rolling in valuing the various businesses of KMB. 

Please note that some of the assumptions made by me could be totally off the mark and I would really appreciate it if TEDdies point it out. 

     Kotak Mahindra Prime 

          Total Advances FY07 4100 cr 
          Total Advances by Bajaj Auto Finance 2650 cr 
          Market Cap of BAF      1402 cr 

          Market Cap of KM Prime     2170 cr 

     KM Prime has recently moved into Personal loans as well and I believe that it is a much better managed company than BAF. 

     Kotak Securities 

          Revenue     834 cr 
          PAT          255 cr 

          Motilal Oswal 
                    Revenue     360 cr 
                    PAT          65 cr 
                    Market cap     1800 cr 

Based on simple PAT comparisons with Motilal, Kotak Securities should have a market cap of 7200 cr but KS has much better margins than Motilal. 

I think a better comparison of Kotak Securities + Kotak Prime would be with Indiabulls Financials. 

     Indiabulls 
          Revenue     1244 cr 
          PAT          443 cr 
          Market Cap     11,240 cr 

          KS + KPrime 
          Revenue     1278 cr 
          PAT          312 cr 

          I think its safe to value KS+KPrime at 10,000 cr which is at a slight discount to Indiabulls.       
          Market Cap of Kotak Securities     7830 cr 

     Kotak Mahindra Capital 

          This is the Investment banking business of KMB 
          Revenues     205.17 
          Profit          67.87 
          EPS          2.08 
          MCap @30PE      2036 cr 

     Kotak Mahindra Asset Management 

          AUM          12,100 cr 
          MCap @5%      605 cr 

     International Subsidiaries 

          PAT          35.01 cr 
          EPS          1.07 
          MCap @30 PE 1050 cr 

     KM Investment + Equity Affiliates – Minority Interest 

          PAT           12.62 cr 
          EPS          0.39 
          MCap @20 PE 100 cr 

     Kotak Insurance 

          This is currently a loss making division, so I have used the HDFC figures (AV Nuvo thread) for valuations purpose 

          HDFC Premium     1570 cr 
          Valuation          5400 cr 

          Kotak Premium     971 cr 
          MCap @50% discount 1670 cr 

     Kotak Private Equity 

          It is very difficult to value the Private Equity biz because the profits from it are not going to come in the near future. Nevertheless, if one were to look at the funds under mgmt, 1100 cr, and predict that it will be able to triple its investments over the next 4 years then the earnings of the PE division would be 110 cr per year ( 20% of profits ) which means an EPS of Rs 3.4 and @25 PE it would translate into a market cap of 2767 cr. 

Notes: 
1.     Kotak plans to launch couple of more PE funds over the next 6-12 months but I haven’t taken that into consideration. 
2.     Some of the Kotak PE investments have been in Shobha developers, Lemon tree hotels & Pantaloon Home Solutions. 

Total Market cap of ALL the subsidiaries          18,266 cr 
Current Market cap of Kotak Mahindra Bank   19,301 cr 
=> Market cap of KM Bank (standalone)         1000 cr 
     PAT of KM Bank (standalone)                      141 cr 
=> PE of KM Bank (standalone)                       4.45 !!! 

Apart from the fact that one is getting KM Bank at such a cheap valuation, another hidden trigger the Asset Reconstruction portfolio of about 4000 cr that can generate a huge windfall of profits. 

Edited by basant - 07/Jun/2007 at 12:25pm