REFILE-India's Kotak Mahindra plunges about 10% after ban on adding new clients digitally - Hindustan Times
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REFILE-India's Kotak Mahindra plunges about 10% after ban on adding new clients digitally

Reuters |
Apr 25, 2024 10:52 AM IST

KOTAK MAHINDRA BANK-CENBANK/STOCKS (CORRECTED, PIX):REFILE-India's Kotak Mahindra plunges about 10% after ban on adding new clients digitally

BENGALURU, - Kotak Mahindra Bank's shares tumbled nearly 10% on Thursday after India's central bank banned the private lender from taking on new clients digitally, which raised concerns about the potential impact on growth.

REFILE-India's Kotak Mahindra plunges about 10% after ban on adding new clients digitally
REFILE-India's Kotak Mahindra plunges about 10% after ban on adding new clients digitally

The company's shares dropped 9.7% to 1,665 rupees in pre-open trade, their lowest since March 2023, while the Nifty bank index was down 0.86%.

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The Reserve Bank of India on Wednesday ordered Kotak to stop taking on new customers via its online and mobile banking channels, and from issuing new credit cards, due to information technology-related deficiencies.

That was a "negative surprise," said Macquarie Capital analyst Suresh Ganapathy.

He said the ban is bound to affect Kotak's growth over the medium term as the lender had a very heavy digital model.

Kotak said it has taken measures to adopt new technology to strengthen its IT systems and that it believes the ban will not materially impact its overall business.

However, at least three brokerages cut their price targets on the stock, including Jefferies.

The brokerage also trimmed its earnings expectations for Kotak by 1%-2% for the current fiscal year to factor in the potential risks and lower valuations.

Kotak's stock trades at about 20 times its expected earnings over the next 12 months, a PE ratio that makes it the second-most valuable stock on the 12-member bank index, per LSEG data.

The slide in Kotak's shares on the day, took their losses for the year to 12.7%, much steeper than the 1.1% dip in the bank index.

This article was generated from an automated news agency feed without modifications to text.

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