Kotak Mahindra Bank Share Price Target Cut To Rs 1,950 By Emkay - Here’s Why

Kotak Mahindra Bank (KMB) has come under scrutiny after Emkay Global Financial Services reiterated its 'Reduce' rating on the lender and revised its target price to Rs 1,950, compared to the current market price of Rs 2,107. The brokerage cited a mix of strategic hesitation, lower return ratios, and rich valuations relative to peers as key concerns.

Growth Outlook Hinges on 2HFY26 and FY27
In its latest report, Emkay said, “We met Kotak Mahindra Bank (KMB)’s management, to understand the impact of the recent monetary policy and the company’s long-term growth plan.” The bank believes systemic credit growth could accelerate starting in the second half of FY26, with meaningful improvement likely in FY27, assuming demand conditions improve.

Despite this optimism, Emkay flagged that KMB’s credit growth slowed to 13.5% YoY and 3% QoQ, down from 17.6% in FY24, pointing to the bank’s “traditional conservative growth approach”. The bank maintains its credit growth guidance at 1.5-2x of nominal GDP growth, but Emkay feels KMB must evolve beyond its “stutter-step growth pattern” if it aims to become India’s third-largest private bank by consolidated RoE.

Margin Management Under Pressure
KMB has been focused on limiting margin contraction, especially as sharp interest rate cuts loom. The bank is mostly done with savings account rate reductions and may implement sharper term deposit rate cuts to reduce the cost of funds. However, with 60% of its loan book linked to the repo rate, KMB remains vulnerable to margin pressures in the first half of FY26. Relief could emerge in the second half as CRR cuts and deposit rate normalisation kick in, Emkay noted.

Strategic Shifts and Challenges
KMB has undergone a complete leadership overhaul over the past 18 months and is actively buying small retail asset portfolios. However, Emkay stressed that to achieve its strategic goals, the bank must refine its growth approach without compromising on asset quality, especially given its ultra-high capital base.

The bank recently launched the ‘Solitaire Credit Card’, aimed at reviving its cards portfolio. But Emkay believes it will take time for KMB to “get its mojo back” and recapture lost market share. Moreover, the bank is expected to remain cautious on microfinance institution (MFI) lending, due to ongoing stress, and will instead focus on secured segments, which could further weigh on margins.

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Asset Quality: Mixed Signals
KMB has indicated that stress in unsecured loans like cards and personal loans has largely eased, and that it has shored up its specific PCR to 78%. However, challenges remain in its vehicle finance (VF) portfolio, especially in commercial vehicles (CVs), where subsidiary Kotak Prime saw rising NPAs in Q4. Emkay also noted that KMB lacks a contingent provision buffer, which most of its peers currently carry.

Valuation and Outlook
Emkay values the standalone bank at 1.9x FY27E adjusted book value (ABV), with subsidiaries valued at ₹625 per share. It argues that sub-optimal RoEs—13% for FY25 (excluding KGI divestment)—lag behind large private peers clocking 15% or more, making the current valuation appear stretched.

In conclusion, while Kotak Mahindra Bank’s long-term prospects remain intact, Emkay believes it must urgently reset its growth stance to deliver on its ambitions, especially as margin compression and competitive pressure mount.

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