Kotak Mah Bank slips 60% from its Jan high

CNBC-TV18’s Executive Editor, Udayan Mukherjee - The rumour (about Kotak Mahindra Bank) has been in the market for the last many sessions; one pink paper has reported it. All of us try to be responsible journalists and do not report till we get enough evidence. But the market does not have any such responsibility factor or obligation. Rumours fly thick and fast. If you just ask anybody on the street for the last many sessions they will tell you that there is something bad which is going to come out of Kotak Mahindra Bank, which is why the stock has taken a beating.

Nobody quite knows, somebody is talking about – of course no confirmation from the management at all and no basis right now that we have for this. But everybody is talking about some subprime like mark to market or markdown, which will be reported soon. The pink paper talks about again without any confirmation from the management talks about the possibility of an RBI’s scrutiny of its balance sheet, equity market exposure.
 
So net-net the market has a bad feeling at the pit of its stomach that something bad is coming. But it’s not able to put its finger on exactly what. Part of the reason could have been the ICICI Bank’s disclosure a few days back too. But look at the fall in the stock price; it was Rs 1,450 in January and today it’s Rs 600 that’s a 60% fall. This was a USD 12.5 billion marketcap stock and now the marketcap is closer to USD 5 billion.
 
So the fall has been absolutely crunching in Kotak Mahindra. Of course at USD 12.5 billion, a lot of the euphoria was around the brokerage and stock market operations or stock market business of the bank that was valued at a huge kind of valuation given what some of the listed brokerages were trading at. Now all of them, the gas has gone out of all of that.
 
A little bit of a puncturing can be understood. But for somebody who wanted to buy Kotak Mahindra on the strength of its management and business, thought USD 12 billion plus was an outlandish valuation and could not bring himself to buy it at that valuation.

I think the point is arriving at USD 5 billion marketcap where you could start looking at it. It’s difficult to time these things - if the bad news is really going to come, who is to say that Kotak cannot go back to Rs 500-400, entirely possible. But at short point we are arriving at that zone where a good stock because of some news flow or expected news flow might actually be on its way to being available at fairly decent valuations.
 
So maybe that’s the way after a 60% fall to approach something like that.