Tech Mahindra, Kotak Mahindra Bank, RBL Bank, IndiaMart, Mastek Q2 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Kotak Mahindra Bank - Soft quarter; embargo impact becoming evident

Kotak Mahindra Bank Ltd.’s earnings were below our estimates, largely due to higher-than-expected credit costs (65 basis points) and lower other income. While the loan growth moderated to ~15% YoY, the deposit traction remained steady. Net interest margins continued to remain under pressure (-11 bps QoQ) due to reducing share of unsecured retail and rising cost of funds (+5 bps QoQ) and are likely to moderate further during FY25.

The management remains upbeat about the corrective measures taken post the regulatory embargo, with key investments across tech functions, and expects the overall impact in line with the initial assessment.

With the ambitious vision of becoming the third-largest private bank in the medium term, we expect investments to remain elevated in the near term to augment the balance sheet growth.

We reduce our FY25/FY26E estimates by ~3% largely due to lower NIMs and elevated credit cost and maintain Buy with a revised SOTP-based target price of Rs 2,030 (standalone at 2.2x Sep-26 adjusted book value per share).

Tech Mahindra - Valuation amply prices in direction and pace

Tech Mahindra Ltd.’s growth and margin trajectory improved yet remain a work in progress. Q2 growth and margin print were slightly ahead of estimates, supported by strong growth in 75% of the portfolio (ex-Manufacturing/Healthcare).

The recovery gradient is on the expected lines, yet the ask remains steep. The margin improvement was led by strong IT segmental margin improvement, offsetting the drop in BPO margin (BPO ~16% of revenue and ~12% of operating profit), a drop in other expenses and flat sub-con expenses.

Maintain Reduce on Tech Mahindra with a target price of Rs 1,480, based on 18 times Dec-26E earnings per share.

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