As the country remains under lockdown due to the outbreak of coronavirus, billionaire banker Uday Kotak has put an analogy for the nationwide lockdown and said that it is similar to Abhimanyu's Chakravyuh.
As the country remains under lockdown due to the outbreak of coronavirus, billionaire banker Uday Kotak has put an analogy for the nationwide lockdown and said that it is similar to Abhimanyu’s Chakravyuh. “It is easy to get into the lockdown, but getting out (of the lockdown) is a more complicated process,” Uday Kotak said after Kotak Mahindra Bank announced the March quarter results. Abhimanyu’s Chakravyuh is an episode from an Indian epic Mahabharata in which the warrior prince Abhimanyu is said to have trained in warfare and breaking into an immensely difficult warring strategy formed of concentric circles but not having any clue about getting out. While economies look to get out of the lockdown, risks also loom large about the second phase of coronavirus outbreak.
India had imposed a nationwide lockdown on 24 March to keep the coronavirus outbreak in check but with the country shut down for over a month now, the economic cost of shutting down businesses is mounting, Uday Kotak said. Meanwhile, Kotak Mahindra Bank’s March quarter results saw a nearly 10% decline in profits on-year in the March quarter as provisions increased to Rs 1,047 crore, a jump of 511%. This resonated with the cautious tone in which Uday Kotak was talking in his post-earnings conference call. The lender saw 16.4% growth in deposits on-year to Rs 2.62 lakh crore.
As risk aversion among lenders grows on the expected fallout of the nearly two months-and-counting lockdown, Uday Kotak said that his bank will be very cautious while lending and will carefully analyse every account and request to avoid stepping into any bad loan puddle. Advances for Kotak Mahindra Bank grew by 6.8% in the march quarter to Rs 2.19 lakh crore. Between December 2018 and December 2019 the growth rate for advances was recorded at above 10%. Lending henceforth will be dependent on sector, individual companies as the bank remains cautious towards companies with higher fixed cost and higher leverage.
Uday Kotak was optimistic about India’s future with expectations of a 6% real GDP growth after the initial 12-24 months, with nominal growth pegged at 10-12%. The bank has the ability to grow at 1.5-2x of nominal GDP growth rate, Kotak said. Currently, 26% of the loan book of the bank has opted for the moratorium. Kotak Bank’s gross non-performing assets stood at 2.25% against 2.46% at the end of December last year. Kotak Mahindra Bank share price was trading flat on Thursday at Rs 1,190 per share. The stock is down 29% since the beginning of this year.