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Deeptha Rajkumar

KOCHI, Dec 30

KOTAK Mahindra Finance (KMF) has been firming up steadily over the past one month in anticipation of the company announcing commencement of banking operations. The stock, which was around Rs 129 levels in the first week of November, is now trading at around Rs 168-171 levels.

KMF had received clearance from the Reserve Bank of India in February 2002 to become a bank within a year. When contacted, company officials told Business Line that the company would commence banking operations anytime between January and March 2003.

According to market talk, reports of the company bidding for SICOM has enthused interest in the stock. KMF had sent in an EOI (expression of interest) to the Government regarding the same. KMF and Videocon have been short-listed. The company was looking to receive further intimation on this by end-January, sources said.

As part of its operations, the bank will target retail, small and medium enterprises (SMEs) and large corporates to expand business. "We already have an existing client base comprising the above three segments and propose to build up on that," sources said. The bank is also planning to implement `Flexcube' core banking solutions.

Given that it is essentially illiquid, stockbrokers said that the price movement has been gradual. "Almost 55 per cent plus of the stock is very closely held between Mr Udai Kotak and the Mahindras. As such it is not a volatile stock," a broker said.

Equity analysts maintain that any further upside in the stock will only occur post-commencement of its banking operations and any positive announcement thereafter.

Company officials, however, denied rumours that KMF was looking at a strategic partner. "At the time of conversion and commencement of operations we are not going in for any strategic tie-ups etc," sources said.

The bank will start its operations with a net worth of around Rs 500 crore- Rs 555 crore. It is also looking to mobilise a large number of people as staff for its head office and its branches (KMF proposes to roll out branches, in phases) across the country. Sources, however, said that given the fact that the bank would be `building in people", it would be difficult to put a number on the total staff to be recruited.

According to analysts the stock could witness some pressure on this account, as this may result in a dip in its operating margins. "The stock could come in for some selling pressure with lower profit growth in the near term due to rise in operating cost," an analyst said.

The stock ended the day marginally weaker at Rs 168.65 on the BSE with 56,944 shares being traded. On the NSE, the stock closed at Rs 170.75 with 14,851 shares being traded. While 94 per cent of the traded shares were presented for delivery on the BSE, the corresponding ratio on the NSE was 80 per cent.

As of September-end, the promoters' stake in the company stood at 63.58 per cent while Indian public's 22.53 per cent. Foreign institutional investors have 8.01 per cent stake and mutual funds including UTI hold 2.45 per cent in KMFL.

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