Kotak’s reported standalone PAT of Rs 570 crore was in line with our  expectations, but adjusted for a one-off fee reversal of Rs 60 crore, lending  business PAT was higher. The 2QFY16 results indicate that most of the P&L  drags from the ING integration are behind us, with sequential growth picking  up, margins stabilising and opex normalising lower and even the elevated  credit costs for the ING book coming within management guidance. In all, we  factor in Rs 10-11 billion of ING-related integration costs in FY16F, after which we  think profitability will mean-revert, leading to a sector-best earnings CAGR of  24-25% over FY15-18F. We therefore maintain our ‘buy’ rating but with the  stock’s 15% run-up over the past two months (vs Nifty +7%), upside could be  somewhat limited.

Our target price is Rs 750/share implies upside potential of ~10%.

Our calculations imply  just 6% y/y opex growth for Kotak after the normalization of employee  expenses (1QFY16 had an additional INR 3.4bn charge towards pensions).  Given the almost 2x jump in network that ING provided, branch expansion  has come off (9 branches added in 1QFY16), leading to lower opex growth.

Reported fees of Rs 610 crore were affected by Rs 60 crore of income reversals, which are not likely to recur. Even on an  adjusted basis, fee growth was flat y/y due to one-off fees in earlier qtrs.  On a transactions basis, Kotak is seeing ~20% core fee growth.

Quantum Advisors on Friday announced that it has reached an agreement with HWIC Asia Fund, an affiliate of Fairfax Financial Holdings, under which HWIC will acquire 49.2% stake in it for an undisclosed amount.

Quantum Advisors advises and manages India allocations for foreign portfolio investors, while its wholly owned subsidiary Quantum Asset Management Company (QAMC) is the investment manager of Quantum Mutual Funds.

Under the terms of the agreement and subject to customary closing conditions, HWIC will acquire shares from an existing financial shareholder and subscribe to new shares issued by Quantum Advisors. Ajit Dayal and IV Subramaniam will not be selling any of their shareholdings in Quantum.

Jimmy Patel, CEO of Quantum Asset Management, said: “The investment by the Fairfax group also allows Quantum Asset Management to ensure that we have the minimum net worth of R50 crore as stipulated by Sebi in May, 2014.

We were given three years to reach that minimum net worth and we will be ahead of the May 2017 deadline. With the minimum net worth issue behind us, we expect a significant acceleration in the growth of the number of investors in the Quantum Mutual Funds.”

Quantum Asset Management started its mutual fund operations in 2006 and has average assets under management of over R612 crore for July-September quarter.

Motherson Sumi registered 174 per cent year-on-year rise in its consolidated net profit figures at Rs 286.89 crore for the second quarter ended September 30, 2015. The company earned Rs 104.44 crore in the corresponding quarter a year ago. (Reuters image for representation only)

Motherson Sumi shares jumped over 3 per cent on Friday after the company registered 174 per cent year-on-year rise in its consolidated net profit figures at Rs 286.89 crore for the second quarter ended September 30, 2015. The company earned Rs 104.44 crore in the corresponding quarter a year ago.

At 12.58 pm, shares of Motherson was trading 2.43 per cent up at Rs 248.40. The scrip opened at Rs 243.90 and had touched a high and low of Rs 252.80 and Rs 241.25, respectively, in trade so far. Sensex was down 2.55 points at 26301.65.

In a release the company said, “The growth was fueled by healthy second quarter sales across the geographies and business segments. In fact in Euro terms, SMR and SMP grew by 14 per cent and 31 per cent, respectively.”

Consolidated net total income from operations of the company jumped to Rs 9197.57 crore for the quarter ended September 30, 2015. The figures were at Rs 8016.66 crore in the same quarter last year.

Vivek Chaand Sehgal, MSSL’s Chairman in a release said, “These second quarter results are among our best ever. Our revenues grew by 14 per cent. These results confirm that we are firmly on track to achieving our ambitious 2020 targets.”

At 11.06 am, REC and PFC shares were trading 8.51 per cent and 7.06 per cent down at Rs 243.50 and 234.20. Sensex was up 8.13 points at 26,312. (Photo: Reuters)

Shares of power sector lender Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) plunged as much as 12.83 per cent and 11.05 per cent on Friday after the government approved a turnaround plan for state electricity boards that is likely to impact the lenders’ margins.

According to traders, the package is a long term positive but would compress lenders’ margins significantly in short term. The compression in margins can affect profits by 10 per cent in the medium term.

At 11.06 am, REC and PFC shares were trading 8.51 per cent and 7.06 per cent down at Rs 243.50 and 234.20. Sensex was up 8.13 points at 26,312.

As per the plan cleared by the Cabinet on Thursday, states will have to take over 75 per cent of the SEBs’ loans as of September 30, 2015, by FY17-end, and 50 per cent by the end of March 2016 itself. The states will have the facility of a concessional interest rate of about 9 per cent in servicing the loans, compared with the present 13-14 per cent interest rate on SEBs’ outstanding debt. The states will issue bonds at 0.5 per cent above the G-Secs.

Nomura in a research note said, “As of March 2015, the power distribution companies accumulated losses of Rs 3.8 trillion (2.8 per cent of GDP) with their outstanding debt nearly doubling over the last three years to Rs 4.3 trillion. The plan unveiled by the government is expected to wipe out Discom losses by March 2019.”

“These measures clearly point to medium-term health of state electricity boards (SEB)…However, we are disappointed that incremental losses will become a part of fiscal targets materially only from FY20. This leaves scope for back-ending of reforms by States,” said Jefferies.
(With inputs from Reuters)

IDFC Bank CEO and MD Rajiv Lall.

IDFC Bank shares that demerged from IDFC got listed on the bourses on Friday at an opening share price of Rs 70.50 on both BSE and NSE.

IDFC Bank has been carved out as the country’s newest bank after it demerged from infrastructure financing firm IDFC Ltd. Rajiv Lall is the MD and CEO of IDFC Bank.

Promoters hold 53 per cent stake in IDFC Bank, whereas institutional investors have 43.80 per cent and others hold 13.20 per cent stake as of Oct 27, 2015.

In a BSE filing on October 29, IDFC said, “IDFC Bank is starting its journey with a balance sheet of Rs 73,447 crore and a networth of Rs 13,322 crore. The book value of IDFC Bank share is Rs 39.11.”

IDFC Bank comprises three distinct business i.e. commercial and wholesale bank, rural bank and personal and business bank. The bank’s strategy and effort is to create a universal bank in 5-7 years with three business well established,

IDFC Bank has launched with 23 branches. Of these, 15 are rural branches in Hoshangabad, Khandwa and Harda districts of Madhya Pradesh, the rest being spread across urban locations.

At NSE,the share price was trading Rs 70.50 at 10.11 am.