Reviews

In this edition, we have reviewed Kotak Mahindra Bank and Bata India. We suggest our reader-investors to HOLD in Kotak Mahindra Bank and Bata India.

We had previously recommended Kotak Mahindra Bank in Volume 35, Issue No. 02, dated December 23, 2019 – January 5, 2020. The stock was recommended as part of the cover story.

It was then trading at Rs 1,713.05 and was recommended based on the bank’s focus on CASA and retail deposits, and its increasing market share. Kotak Mahindra Bank Limited is a full-service commercial bank, offering a wide range of products and services including personal, commercial and corporate banking services, including deposit accounts, loans and investments. Currently, the bank has 1,539 full-fledged branches and 2,447 ATMs.

On a consolidated quarterly front, its total income increased by 1.6 per cent YoY to Rs 12,323.15 crore in Q1FY21. In Q1FY21, the bank’s NPA to loans (advances) ratio stood at 0.89 per cent from 0.73 per cent in the same quarter for the previous fiscal year. Consolidated net profit of Rs 1,852.59 crore was reported in Q1FY21, declining by 4.12 per cent from Rs 1,932.21 crore in the corresponding quarter for the previous fiscal year.

Looking at the annual trends, the total income was reported at Rs 50,299.69 crore in FY20, up by 9.58 per cent from Rs 45,903.36 crore in FY19. In FY20, the bank’s NPA to loans (advances) ratio stood at 0.71 per cent, improving from 0.75 per cent in FY19. The bank reported a consolidated net profit of Rs 8,593 crore in FY20, up by 19.28 per cent from Rs 7,204 crore in the previous fiscal year. 

The management strength and sustainability, strong deposit franchise, robust NIM and comfortable asset quality are positives for the bank which should help it cushion the negative effects of the pandemic. Owing to these factors we recommend investors to HOLD the scrip.

We had previously recommended Bata India in Volume 35, Issue No. 03, dated January 6 – 19, 2020, under the ‘Choice Scrip’ segment. The stock was then trading at Rs 1,822.35 and was recommended based on the company’s strong financial performance and good growth prospects. Bata India manufactures a wide range of leather, rubber and plastic footwear products.

On a consolidated quarterly front, net sales declined by 84.72 per cent in Q1FY21 to Rs 135.08 crore from Rs 882.75 crore in Q1FY20. The company reported an operating loss of Rs 33.82 crore in Q1FY21 as against an operating profit of Rs 260.17 crore in Q1FY20. The company reported a net loss of Rs 100.89 crore in Q1FY21 as against a net profit of Rs 100.97 crore in Q1FY20.

Looking at the annual trends, the company reported net sales of Rs 3,056.11 crore in FY20, up by 4.26 per cent from Rs 2,931.10 crore in FY19. Operating profit increased substantially by 65.19 per cent to Rs 900.77 crore in FY20 from Rs 545.28 crore in FY19. On account of substantial increases in depreciation and interest cost, net profit reported in FY20 came in at Rs 328.95, decreasing marginally from Rs 328.99 crore in FY19.

Given that there is no significant surge in the pandemic, demand is likely to see a quick revival on account of the festival season. The company’s continuous focus on cost control measures and cash-rich balance-sheet will help it to tide over the pandemic. Despite the near term challenges, Bata India is well-laced in the long-term perspective. Our recommendation is to HOLD the scrip. 
(Closing price as of September 08, 2020)