Succession overhang on Kotak Bank stock may continue for now
MUMBAI : Kotak Bank’s underperformance over the last three years on the stock exchanges could continue with Uday Kotak stepping down as MD & CEO four months ahead of schedule. Market analysts believe that the overhang of Kotak’s successor could rule on the stock performance until the Reserve Bank of India (RBI) approves the prospective candidate, who could be an insider.
While interim CEO Dipak Gupta is due to retire by the year-end, Kotak Bank veterans K.V.S. Manian and Shanti Ekambaram, said to be favourites to succeed Uday, are close to superannuation, which is 60 years as per Kotak policy, but can be given extensions.
The bank’s stock performance has been the second-worst among 15 private bank scrips over the past one year through 1 September 2023, with a 6.9% negative return compared to that of ICICI Bank (10.8%), HDFC Bank (7%) and Axis Bank (33.19%), Capitaline Databases shows. The three-year share perf-ormance similarly has also been relatively poor,with the bank being ranked 13th by returns among its 15 peers .
It generated a 23.8% return against ICICI Bank stock’s 148% return, Axis Bank’s (104%) and HDFC Bank (40%). “Since 2020, there has been an overhang (on the stock) of a court row with RBI over reduction of promoter stake to below 20% and the succession issue, with the central bank fixing the promoter-led MD & CEO’s tenure at 12-15 years," said Ambareesh Baliga, market analyst.
“This overhang on the stock could continue until RBI approves a candidate to succeed Kotak." Kotak has submitted succession applications for the MD and CEO and chairman positions to the RBI. Another market veteran, requesting anonymity, said the fate of the stock could also be driven by the prospective candidate being an outsider.
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