DCF Studio

    KOTAKBANK.NS · NSI · Financial Services

    Kotak Mahindra Bank Limited

    Also onConsensus Drift

    Implied value per share

    INR 362.53

    Market price

    INR 412.50

    Implied upside

    -12.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedCapital expenditure runs at 1.6% of revenue against depreciation of 1.2%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 362.53-12.1%
    Exit multiple
    INR 623.78+51.2%
    Market price
    INR 412.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn162bn323bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 860.1bnINR 976.0bnINR 1107.6bnINR 1257.0bnINR 1426.5bn+13.5%
    EBITINR 310.9bnINR 352.8bnINR 400.4bnINR 454.4bnINR 515.6bn+13.5%
    NOPATINR 234.0bnINR 265.6bnINR 301.4bnINR 342.0bnINR 388.2bn+13.5%
    Add depreciation & amortisationINR 10.5bnINR 11.9bnINR 13.5bnINR 15.4bnINR 17.4bn+13.5%
    Less capital expenditureINR -14.0bnINR -15.9bnINR -18.0bnINR -20.5bnINR -23.2bn+13.5%
    Less increase in working capitalINR -35.6bnINR -40.4bnINR -45.8bnINR -52.0bnINR -59.0bn+13.5%
    Free cashflow to firmINR 195.0bnINR 221.2bnINR 251.1bnINR 284.9bnINR 323.3bn+13.5%
    Discount factor0.95280.86500.78530.71300.6473-
    Present valueINR 185.8bnINR 191.4bnINR 197.2bnINR 203.1bnINR 209.3bn+3.0%
    Present Value Of The ForecastINR 986.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.521Reported 0.285, pulled toward 1.0 (Blume)
    Cost of equity10.97%Risk-free + beta x equity risk premium
    Cost of debt8.80%Implied cost of debt of 32.5% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationINR 4103.4bn81.1% of capital
    Total debtINR 953.9bn18.9% of capital, book value as a proxy
    Tax rate24.7%Effective, capped at statutory
    WACC10.15%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 362.53

    72% of EV

    Forecast FCFF, final year
    INR 323.3bn
    Capex at depreciation, working capital in reinvestment
    INR 388.2bn
    Less reinvestment at g/ROIC (24.6% of NOPAT)
    INR -95.6bn
    Capitalised
    INR 292.5bn
    ROIC (WACC floor)
    10.1%
    Terminal value, undiscounted
    INR 3920.5bn
    Terminal value, discounted
    INR 2537.7bn
    Enterprise value
    INR 3524.5bn
    Less net debt
    INR -80.9bn
    Equity value
    INR 3605.4bn

    Exit at 14.9x EBITDA

    Value per shareINR 623.78

    84% of EV

    Terminal value, undiscounted
    INR 7934.4bn
    Terminal value, discounted
    INR 5135.8bn
    Enterprise value
    INR 6122.6bn
    Less net debt
    INR -80.9bn
    Equity value
    INR 6203.5bn

    Spread between methods: 53%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.15%460.00464.42469.34474.93481.38
    9.15%401.75403.19404.63406.07407.51
    10.15%360.04361.28362.53363.77365.02
    11.15%325.94327.03328.12329.21330.30
    12.15%297.58298.54299.50300.46301.42

    Outlined: this model. Green text: above today's price of 412.50. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year13.5%17.2%+3.7pp
    EBIT margin36.1%41.0%+4.8pp
    Discount rate10.1%9.0%-1.2pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.