Kotak bank has delivered disappointing returns to investors over the past five years, with the stock gaining less than 9% compared to the Nifty 50's 86% return and Nifty Next 50's 110% gain since December 2020. This translates to an annual return of under 2% for the bank's shareholders, while the stock has remained range-bound as peers and broader markets moved to higher levels. However, with advances growing at nearly 16% year-on-year and the bank's digital strategy gaining scale, market focus has renewed on whether the stock may finally break out of its long consolidation phase.

Strong Balance Sheet and Risk Management

Kotak Mahindra Bank has maintained a conservative approach to credit risk across multiple cycles, keeping asset quality stable while other lenders faced repeated stress from bad loans. The bank's risk metrics demonstrate this disciplined approach effectively.

This clean balance sheet allows profits to support growth rather than cover past losses. The bank's capital adequacy ratio provides substantial protection against economic stress and capacity to expand the loan book or pursue acquisitions without raising fresh equity.

Deposit Strategy and Funding Optimization

Kotak has strategically shifted its deposit mix towards a more stable retail base, reducing dependence on higher-cost deposits. The bank's CASA ratio stands at 42.3%, representing current account and savings account deposits as a share of total deposits. Chief Financial Officer Devang Gheewalla noted the bank is seeing higher average balances from retail customers.

The bank has reduced reliance on high-cost, floating-rate savings accounts while increasing fixed-rate deposits that offer stability and predictable costs. This shift supports margins when competition for deposits intensifies, positioning the bank favorably for future profitability improvements.

Digital Platform Success and Technology Leadership

Kotak's 811 digital platform has emerged as a significant competitive advantage, ranking among the most downloaded banking apps in India and placing third globally. The platform targets customers seeking digital-first loans, credit cards, and investment products, substantially reducing acquisition costs compared with traditional branch-led models.

The digital platform improves operational efficiency and scalability, allowing the bank to offer additional products such as insurance and home loans within the same ecosystem.

Margin Outlook and Recovery Timeline

Net interest margin has eased to 4.54%, with management attributing the decline to lower interest rates. However, the bank has begun repricing deposits, and as most term deposits mature within nine to 12 months, lower funding costs are expected to reflect in earnings by late 2025 or early 2026. During this transition, higher-cost deposits are being replaced with lower-cost funding, which could support profitability once the cycle completes.

Diversified Revenue Streams

Kotak's non-bank businesses contribute significantly to earnings diversity. Kotak Mutual Fund reported 31% year-on-year profit growth, while Kotak Institutional Equities has ranked first in the domestic market for three consecutive years. The alternative assets arm, KAAML, manages approximately $11 billion in investments, providing substantial income diversification alongside core banking operations.

Valuation and Market Positioning

After five years of limited share price movement, the bank's valuation metrics suggest potential undervaluation. Book value per share stands at ₹844, representing 14% year-on-year growth. The stock trades at a trailing price-to-book multiple of 2.6 times, significantly below its 10-year average of 4.1 times.

Analysts tracking the bank expect adjusted earnings per share to grow approximately 14% annually over the next three years, with consensus estimates suggesting the stock trades at an 11% discount as of December 2025.

Kotak Mahindra Bank has sent official communication to shareholders holding physical shares, notifying them about the mandatory conversion to dematerialized form before the January 14, 2026 record date for its upcoming 1:5 stock split. The bank has informed physical shareholders that the new sub-divided shares will be issued exclusively in demat form as per regulatory requirements.

Stock Split Details and Record Date

The bank has officially fixed Wednesday, January 14, 2026, as the record date for its forthcoming stock split. Shareholders who hold the bank's shares in their demat accounts as of the close of trading on January 13, 2026 will be eligible for the corporate action.

Physical Shareholders Notification

In its latest regulatory filing, the bank has communicated with physical shareholders through email and ordinary post, explaining the mandatory demat conversion requirement. According to Regulation 39(2A) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the bank will issue, credit and maintain the sub-divided equity shares exclusively in dematerialized form.

For shareholders who do not convert to demat form before the record date, the bank will maintain the sub-divided shares in a separate Demat Suspense Escrow Pool Account in compliance with prevailing regulations. These shareholders will need to claim their equity shares from the bank or its Registrar and Transfer Agent, KFin Technologies Limited, by submitting requisite documents.

Historical Corporate Actions

This upcoming split marks a significant corporate action for Kotak Mahindra Bank, which last undertook a share split more than 15 years ago. The bank has a track record of implementing shareholder-friendly corporate actions:

Regulatory Compliance and KYC Requirements

The bank has also highlighted SEBI Circular SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/91, which mandates physical shareholders to update their PAN, contact details, bank account details and specimen signature for their respective folios. The requisite KYC forms can be downloaded from KFin Technologies Limited's website or obtained by contacting their office in Hyderabad.

For any queries or assistance regarding the demat conversion process, shareholders can contact KFin Technologies Limited at their Selenium Tower office in Gachibowli, Hyderabad, or reach out via email at einward.ris@kfintech.com .