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					““Kotak Mahindra Bank Q1 FY11 Earnings Conference
                      Call”

                      July 21, 2010




MODERATORS   MR. UDAY KOTAK - EXECUTIVE VICE CHAIRMAN AND
             MANAGING DIRECTOR, KOTAK MAHINDRA BANK.
             MR. JAYARAM – EXECUTIVE DIRECTOR, KOTAK
             MAHINDRA BANK
             MR. DIPAK GUPTA – EXECUTIVE DIRECTOR, KOTAK
             MAHINDRA BANK
             MR. JAIMIN BHATT – GROUP CHIEF FINANCIAL OFFICER,
             KOTAK MAHINDRA BANK
             MR. GAURANG SHAH – GROUP HEAD – SUPPORT ASSET
             MANAGEMENT AND LIFE BUSINESS
             MR. NARAYAN – GROUP HEAD – RETAIL ASSETS KOTAK
             MAHINDRA BANK




                       Page 1 of 22
                                                                                   Kotak Mahindra Bank
                                                                                          July 21, 2010


Moderator    Ladies and gentlemen good afternoon and welcome to the Kotak Mahindra Bank Q1 FY11
             Earnings conference call. As a reminder for the duration of this conference all participant lines
             will be in the listen-only mode. There will be an opportunity for you to ask questions at the end
             of today’s presentation. Should you need assistance during the conference call, please signal an
             operator by pressing * and 0 on your touch-tone phone. Please note that this conference is being
             recorded. At this time I would like to hand the conference over to Mr. Uday Kotak from Kotak
             Mahindra Bank, thank you and over to you sir.


Uday Kotak   Good afternoon ladies and gentlemen for our FY 11 first quarter analyst call and I have got my
             team here with me, which is our two whole time directors Mr. Jayaram and Mr. Dipak Gupta.
             Our group CFO Jaimin Bhatt, Gaurang Shah who is now responsible for our asset management
             and life insurance SBUs and Mr. Narayan who is now in the bank and he has also oversees as a
             director for Kotak Securities.


             I will just start with some initial comments on the bank and the financial sector and then hand it
             over to my colleague Jaimin Bhatt. The bank continues to grow well. We have seen on a
             consolidated basis for the quarter and year-on-year growth in advances of about 42%. Our
             estimate for full year advances growth would now be in the range of about 30% to 35% against
             the earlier view which was more like 25% to 30%. Net interest margins for the first quarter on a
             consolidated basis are 5.7% and our current view is that for the year we see it in the range of 5%
             to 5.5% before adjusting some new capital which we are proposing to raise from Sumitomo
             Mitsui Banking Corporation. The new capital from Sumitomo Mitsui Banking Corporation adds
             about Rs.27 per share to the book value of the company.. Talking of the Indian financial services
             industry, we are seeing it becoming more and more a bank lead model. Kotak Mahindra Prime
             which is within the NBFC space has done well with passenger car financing growth of 55% year-
             on-year. However, in general, the NBFC model is from time to time going through pressure on
             liquidity and interest rates and some of it we have seen witnessing right now for the sector as a
             whole. KMP of course is well capitalized and in a reasonable position, but this is a challenge
             which the NBFC model will continue to face.


             Brokerage industry continues in its path of fragmentation and margins pressure. We see in the
             future potential consolidation but still early days of this fragmentation and margin pressure.
             Investment banking, we have seen a pick up in the business which we believe will reflect
             positively through the year.


             Some of the two areas where we have seen significant regulatory changes are asset management
             and life insurance. On the asset management side on the domestic side, while equity funds have
             seen negligible flows, the fixed income mutual funds in India are this point of time facing
             pressure because of drop in corpus and margins arising out of changes in regulation including the
             new rule which comes into effect from August 1st for mark to market.




                                  Page 2 of 22
                                                                                       Kotak Mahindra Bank
                                                                                              July 21, 2010

               We are seeing positive signs in the offshore asset management including new money into equity
               funds. In the insurance industry again there has been big changing regulation ., We have seen
               new rules coming from IRDA which are to be effective September 1 and that would put severe
               pressure on high cost and high capital intensive insurance models. We believe that we are
               relatively better placed because we have managed both costs and capital on a conservative basis
               over the last few years. With that I will now handover to my colleague Jaimin Bhatt, who will
               take us through the detail presentation for the quarter, over to you Jaimin.


Jaimin Bhatt   Thanks and good afternoon. For this quarter which is April-June, we have just announced our
               results earlier today. At the consolidated level, we have a profit after tax for the group at Rs.3.27
               billion which is as against Rs. 2.57 billion the same period last year. As Uday mentioned
               advances have grown 42% year-on-year and we have the period end advance of Rs.330 billion.
               NIM is at 5.7% from 6.1% last year and capital adequacy continues to be strong despite the
               advances growth. We have a capital adequacy consolidated at 16.9% which includes a tier one of
               15% and this is without considering the current quarter profits. And with SMBC money coming
               in the 16.9% capital adequacy will actually be close to 20%. Assets managed by the group, we
               are at Rs. 480 billion.. On the non-performing assets side, we have seen a sharp drop compared
               to year-on-year. Last June our gross NPA without the stress assets were at 3.2% with the net
               being at 2.07% these numbers are now down to 2.0% and 0.95% respectively. The
               bankstandalone profits have seen a 100% jump Rs. 0.903 billion last year to Rs.1.8 billion this
               quarter. CASA during the one year period has seen a 38% jump and we closed the period with
               Rs.66 billion of CASA. CASA ratio at 28% which is about the same number as last year.


               Overall income we are at about Rs.22 billion for the quarter which is compared to Rs.19 billion
               for the same period last year with most of the segments showing upward swings. At end of the
               period we have a net worth of Rs.82 billion with a book value per share of Rs.237.


               The cut of the advances – overall Rs.329 billion of advances, a 42% jump from Rs.232 billion
               from June 09 whereas at the end of March we were like Rs.297 billion. Corporate advances
               which has seen the highest growth are at Rs.92 billion up from Rs. 53 billion last year and we
               have seen growth in most of the other segments notably mortgages which have grown from
               Rs.32 billion last year to Rs.53 billion this period. Commercial vehicles have grown from Rs. 32
               billion to Rs. 40 billion as well as the auto loans from about Rs.49 billion to Rs.70 billion. Agri
               has been the other growth engine which has been growing very consistently and steadily.
               Deposits again have grown from Rs. 156 billion to Rs. 222 billion for this period. Now for the
               subsidiariesKotak Mahindra Prime has continued to show a good growth and hence the quarter
               had a profit of Rs.760million as compared to Rs.189 million the same period last year and the
               immediately proceeding quarter at Rs. 586 million. Kotak Securities has shown a slight dip on a
               quarter on quarter basis this quarter ends with a profit of Rs. 474 million as against Rs.508
               million in the immediately proceeding quarter. Kotak Life typically first quarter being a slow
               quarter and has ended with a negative Rs.69 million for this quarter.




                                     Page 3 of 22
                                                                      Kotak Mahindra Bank
                                                                             July 21, 2010

The international subsidiaries continue at a steady phase Rs.157 million profits for the period and
the other asset management companies which is the domestic mutual fund and Kotak Investment
Advisors remaining steady at their numbers. Overall for the quarter we end with Rs.3.27 billion
as against Rs. 2.57 billion for the same period last year. At the standalone level if I take you
through the segmental profit before tax, the treasury segment had a profit of Rs.859 million
which is compared to Rs.885 million; corporate bank which has grown very steadily at Rs.
1,049 million as against Rs. 570 million in the same period last year, but the immediately
proceeding quarter segmental profit at Rs. 1,575 million, was boosted by revenues from
acquired stressed assets in that period. On the retail front, the Retail lending business has shown
a very sharp growth in segmental profits from Rs. 467 million last year to Rs. 1.4 billion this
year, branch banking negative of Rs. 576 million for this period, whereas credit cards is a
negative of Rs. 197 million for this period.


The bank standalone advances has shown a 35% growth year-on-year at Rs.231 billion for this
period as against Rs.172 million a year ago. If one looks at the segmental table in terms of how
the RBI wants the classification of retail and corporate where effectively really means anything
which is over 5 crores goes in to corporate, corporate would constitute Rs. 95 billion out of Rs.
231 billion of the advances group based at the bank level. Overall deposits at the bank have
grown to Rs. 240 billion compared to Rs. 174 billion a year ago and that has been a steady
growth during the period here. At the bank standalone we currently have 262 branches and in
this quarter we added 13 branches and continue to be on track for getting the 320 branches
number at the end of this financial year. The net interest income at the bank is Rs.5.08 billion
which is 24% higher than this period last year, with deposits growing and CASA is growing,
capital adequacy at the banks standalone with tier one that is 14% and the total capital adequacy
at 16.8%. In respect of the provision coverage ratio, the RBI requirement being with 70% by
September 10, we are currently at 65%, whereas at March we were at 58% and certainly we
would be hitting the 70% at the end of the current quarter. The gap to reach the level of 70% is
currently at Rs.45 crore. We also to have standard provisioning is in excess of what is required,
the excess amount being Rs.470 million.


Kotak Prime is showing growth both on the income and the profits, income going two close to
Rs.3 billion for this quarter the profits before tax at Rs. 1.1 billionand profit after tax at Rs.760
million. Advances if you look at the number at Kotak Prime have grown 56% year-on-year and
the car NPAs are pretty much in the control, being at 0.3% of the car loans. Securities business
as we said under some pressure with income at Rs.1.7 billion as compared to the previous quarter
of Rs.1.8 billion and post tax profit for this quarter at Rs.474 million. During this period the
market share was at 3.7% while the PMS asset under management is at Rs.23 billion which is
about the same number as it was there in March.


In terms of expansion Securities Company has now got about 1200 offices across the country
covering 400 plus cities. Kotak Mahindra Investment which includes the capital market related
lending is on a steady path, with income at Rs. 244 million and post tax for the quarter at Rs.76
million. KMCC the investment bank recorded a profit after tax of Rs.69 million for this quarter.



                      Page 4 of 22
                                                                                          Kotak Mahindra Bank
                                                                                                 July 21, 2010

                     The entity was engaged in several issues during this period notably the Standard Chartered-IDR
                     which was the first IDR issue in the country, the IPO of JP Infratech, the QIPs of Godrej
                     consumer products, IPO of Nitesh Estates, and the recent IPO of Hindustan Media Ventures.
                     Investment bank also acted as exclusive advisor for Monnet Power for the private placement and
                     picked up for the fifth time in the year in succession the Best Equity House Award by
                     FinanceAsia and the third year in a row as the Best Domestic Equity House by Asiamoney.


                     The international subsidiaries clocking of Rs.157 million of after tax profit for the quarter up
                     from Rs. 139 million in the immediate proceeding quarter. Kotak Investment Advisors which is
                     into alternate assets - private equity and real estate fund management recorded a profit after tax
                     of Rs.108 million for the quarter. The insurance entity showed a first year premium at Rs.1.9
                     billion up from Rs.1.3 billion same period last year. The renewal premium was at rs. 3.3 billion
                     upn from Rs. 2.9 billion and the overall gross premium at Rs. 5.5 billion against Rs. 4.3 billion.
                     As I mentioned before we ended with a negative Rs.69 million for the quarter in this entity. The
                     solvency ratio in the insurance entity remains pretty strong at 2.7 at this period. The asset
                     management company ended with a post-tax profit for the AMC at Rs. 74 million and for the
                     trustee at Rs. 23 million, which is a slight dip over the period last year and the average assets
                     under management at the AMC has been Rs. 285 billion with Rs. 45 billion comprising the
                     equity assets under management. We are open for questions and we are happy to take that.


Moderator            Thank you. Ladies and gentlemen we will now begin with a question and answer session. The
                     first question is from the line of Dipankar Choudhury from Deutsche Bank, please go ahead.


Dipankar Choudhury   Hi, Jaimin if you could clarify the margin in FY10 because in your fourth quarter release it was
                     printed as 6.3% and now it is I think printed at 6.1%, which is the correct number?


Jaimin Bhatt         Dipankar 6.1 is the annual number for the year.


Dipankar Choudhury   Okay, no the reason I am asking this question is that then in that case what is the sequential
                     decline?


Jaimin Bhatt         Okay I will tell you what the other reason why we have adjusted the numbers of the previous
                     periods is because of this change of accounting for repos and reverse repos, thanks to the circular
                     from RBI. Basically what was happening is till the previous period, which is till March the repo
                     numbers and the reverse repo numbers were adjusted out of investments. Now the same is
                     treated as borrowing / lending. Hence till March 10 it typically reduced the denominator. So, if
                     you look at the sequential on a comparative basis 6.1% to 5.7% is the current comparison.


Dipankar Choudhury   It is roughly about 40 basis point decline?


Jaimin Bhatt         That is right.




                                          Page 5 of 22
                                                                                            Kotak Mahindra Bank
                                                                                                   July 21, 2010

Dipankar Choudhury   So, I mean just an additional question on this issue that this could be largely attributed to savings
                     bank, CRR and the capital unwinding is there anything else?


Jaimin Bhatt         There could be a mix of two or three things, one is the fact that we are using additional capital as
                     you have seen the growth in advances during the quarter itself at 11% which is reasonably high
                     that is used up additional capital. Second the mix in favor of corporate and even among the retail
                     you have got mortgages, which has grown the highest at the expense of the high yielding
                     personal loans and the third one is what you mentioned in terms of the CRR change..


Dipankar Choudhury   Right okay and one last question is, what exactly explains the return to loss in insurance?


Gaurang Shah         The main reason is cost increase and some impact of the cap on charges, which was effective
                     from 1st January 2010. So I think on the point of sale you earn much lesser sales allowance than
                     what you use to earlier. These are the two main things.


Dipankar Choudhury   Okay. Right thanks. That is it from my side.


Moderator            Thank you. The next question is from the line of Amit Premchandani from UTI Mutual Fund.
                     Please go ahead.


Amit Premchandani    Just wanted to know on an incremental basis the borrowings were around Rs. 5,300 crores and
                     lending was Rs. 3,200 crores quarter on quarter, what is the sustainable level of this incremental
                     ratio as we have seen that margins have also declined significantly, so where do you see the
                     lending rate, the lending growth, the borrowing and the deposit growth.


Uday Kotak           Well, I think if you recollect right in the beginning I mentioned, we think without considering the
                     new capital which we are proposing to raise from SMBC. We see for the full year our NIM in
                     the range of 5% to 5.5% and that is the combination of factors.            Keep in mind that the
                     borrowings are also not only from the point of view for the advances but it also is for our
                     government securities book.Now as Jaimin mentioned repo has taken as a borrowing, earlier it
                     was considered to be in the category of investments.


Amit Premchandani    Right, I will take your point but incrementally also if you see the changes in deposits and
                     changes in advances, deposits have incrementally concluded only 15% of the funding. So, on an
                     incremental basis where do you see this trend moving?


Uday Kotak           If you look at incremental advances it is 11%.


Jaimin Bhatt         Yes also you are comparing March to June, typically March deposits are always at peak and they
                     are not really steady so if you look at on a year-on-year that is the right comparison.


Amit Premchandani    Okay, so don’t you see any risk on the deposit growth lagging significantly behind the credit
                     growth for the system as well as Kotak?




                                           Page 6 of 22
                                                                                          Kotak Mahindra Bank
                                                                                                 July 21, 2010

Uday Kotak          I think if you ask me again go back to the fundamentals, I believe of course deposit growth
                    compared to the advances is an overall issue for the system but we think it is going to be an even
                    bigger challenge for financing non bank finance companies through the year. Relative basis,
                    banks will have much wider access to liability base and we are actually beginning to see it and
                    including in the first few weeks of July where significant amount of money has moved away
                    from fixed income mutual funds actually into bank deposits.


Jaimin Bhatt        Just to add to that, if you look at the standalone bank you have seen year-on-year basis the
                    advances have grown by about 35% whereas deposits are by about 38%. Yes so it is basically the
                    quarter is not the right indicator because you are comparing March which is a spike in deposits.


Uday Kotak          And in March what happens is a lot of money on 31st of March, corporates and others move out
                    of other investments and park it with banks.


Amit Premchandani   Okay thanks.


Moderator           Thank you. The next question is from the line of Ashish Sharma from Enam Asset Management,
                    please go ahead.


Ashish Sharma       This first point sequential growth in your corporate deposits have been quite strong. Is this
                    because of telecom exposure I mean has increase in telecom exposure or in telecom lending that
                    has resulted into that?


Uday Kotak          You mean corporate loans?


Ashish Sharma       Yes sir.


Uday Kotak          Let me say that we have some telecom lending but it is not excessive and again it is like few
                    hundred crores. So we are not having a disproportionate exposure to the telecom lending and we
                    would be very choosy about where in telecom we are financing


Ashish Sharma       Any ballpark number sir?


Jaimin Bhatt        Yes out of the Rs. 2,200 crores increase you see telecom would be about Rs. 400 odd crores.


Ashish Sharma       And would majority of it would be long term or short term?


Jaimin Bhatt        It would be a mix of both, about 50-50.


Ashish Sharma       Okay. Second question would be on the adjustment in the profit. Consolidated profits from the
                    affiliates and minority interest it is a 26 crores figure, I mean any one off in that because overall
                    if you compare it with other periods.




                                          Page 7 of 22
                                                                                      Kotak Mahindra Bank
                                                                                             July 21, 2010

Jaimin Bhatt    Okay let me take the first question first and then I will come to this one. In terms of the corporate
                growth, you are talking about March being at Rs. 64 billion which is grown to Rs. 83 billion in
                this period, but March was a dip from Rs. 84 billion in December. If you take December ’09 the
                corporate book was at Rs. 84 billion and today we are at Rs. 92 billion, a steady growth.


Jaimin Bhatt    Now to take your second question, what you are seeing at the minority interest adjustment is
                effectively some dividend which has been paid out by the subsidiary to the parent. And
                effectively it is our way of kind of moving some capital from the subsidiary to the parent, yes
                basically somewhat subsidiaries have excess equity and there is more and more equity required
                in the bank and basically the bank had proposed a dividend and just got approved this morning to
                the extent of what the bank is going to pay dividend we pull up that much dividend from the
                subsidiary so there is no distribution tax on that.


Ashish Sharma   Fine sir. Yes and another question would be on this transaction which the equity infusion will see
                when we will get approval, now just wanted to get a sense, I mean we have been asking this, I
                mean we are going at 35% growth in advances organically. Is an inorganic option in mind
                valuating opportunities on the banking front if in case you want to strengthen up the banking
                franchise sir ?


Uday Kotak      No, something which we are certainly evaluating and if there is something appropriate we will
                look at it because with this additional capital infusion we again go back to 20% plus capital
                adequacy and if you take current year’s profit we even go up further, therefore in addition to the
                30%-35% advances growth which we are seeing, we are certainly opento acquisitions but
                obviously it is appropriate for me to say that at this point of time there is nothing which we need
                to say which has reached a cook stage.


Ashish Sharma   Okay so organically sir 30% to 35% is the best case scenario in growth terms we are looking at
                for 2011 sir?


Uday Kotak      Well that is the current indication, we will see how the year goes and what we want to make sure
                is that we build this engine in a coordinated fashion. There is absolutely no point getting a
                disproportionate asset growth and then scrambling for liabilities where we are not able to get
                fine pricing and raise the level of our overall cost of liability in terms of long term implications
                for our cost of fund. Therefore we have to balance both sides of the figures in a calibrated
                manner to have a sustainability to grow and fund it.


Ashish Sharma   Fine sir, just one question Kotak Mahindra Prime, the Rs. 76 crore figure is higher than the run
                rate we were seeing last year, I mean in the four quarters, it is highest in the last 5-6 quarters,
                partly driven by lower provisioning expenses. I mean what sort of a run rate do you see, I mean
                would it be at a same pace going forward, the traction in the business remaining the same sir?


Speaker         Let me put this way, the car finance business is in good shape, the various business lines of
                Kotak Mahindra Prime include are primarily car finance and then there are some levels of




                                      Page 8 of 22
                                                                                      Kotak Mahindra Bank
                                                                                             July 21, 2010

                financing of other assets including commercial real estate and debt capital markets. There is no
                income which we would call as one time and overall we believe that Kotak Mahindra prime is in
                a very good shape and we are reasonably hopeful that we will have a decent year compared to
                last year in Kotak Mahindra Prime as it looks today.


Ashish Sharma   Fine sir. And just last question on life insurance thing. Now, with a new regulatory regime I
                mean is it imperative now that we are looking at the margins, I mean you have not reported NBP
                margins, will there be very significant impact on the NBAP margins, which you should generate
                from those policies, what is outlook on that sir.


Gaurang Shah    See the NBAP margin, if you look at the present value of future, which perhaps what people
                declare, I do not think there is going to be significant change in terms of the yield margin for
                future. Now, if you take on a point of sale that is where the real impact is going to be and if you
                look at it, the sales overrun, which is running today at the rate of almost 15% to 20% of first year
                premium for the industry if you knock that off then perhaps that is where the real challenge is
                and the rest where the cost cutting will take place largely. I think our challenges would be
                somewhere around 15% to 20% cut in terms of our sales cost or a distribution cost which we are
                incurring.


Ashish Sharma   I mean, yes I am just going to that number only Rs. 735 crore was for 2010 sir, commission
                expenses plus operating expenses, as a percentage of your gross premium it was closer to 26%, I
                mean which has declined from 36% from ’09, if it has marked improvement over ’09, how much
                more room do we have in this, I mean to sustain the margins we would be having in 2010 sir?


Gaurang Shah    Yes, let us put it this way, you must keep out the commission, the basic cost was in the range of
                around Rs. 532 crores. Now, if you look at it this Rs. 532 crores, if you want to maintain where
                we are actually, that way we must cut by at least 25% to 30%.


Gaurang Shah    Something will go from the cost, something will be by improvement in productivity, the
                combination of this perhaps will probably help you sustain it, it is too early days actually, we
                have to do all our numbers and perhaps these are back of the envelop calculations, because we
                are all still hoping that this guideline gets delayed by a month or two, but it is not going to come,
                so I think 1st September everyone has to implement and now I think it is the real thing in other
                words the clock starts ticking now.


Ashish Sharma   Yes fine. Just last question on any product mix changes required in Kotak Life Insurance or on
                that front we are perfectly fine?


Gaurang Shah    No, I think product mix, I think first people if you want to sustain some of the cost, you have to
                go to selling more traditional plans. If you have already done like in this quarter, I think we are
                now reaching around 10% and post September, I think we would like to increase it to around
                30%, the balance will stay ULIP and that is where perhaps the readjustment on the cost will be
                required by your commission as well as cost which we incur to get that premium.




                                      Page 9 of 22
                                                                                         Kotak Mahindra Bank
                                                                                                July 21, 2010

Ashish Sharma    Yes fine sir thanks a lot and all the best for the next quarter, thank you.


Moderator        Thank you. The next question is from the line of Mudit Painuly from Macquarie, please go
                 ahead.


Suresh Ganpati   Hi this is Suresh Ganpati here. Just two quick questions, one thing is on the strategy of moving
                 more towards the corporate loan profile, clearly that entails the part of lower level of margins
                 which yourself have guided about 5% to 5.5% but obviously you also get benefits in the form of
                 lower provisions, so you actually ended up 2010 with about 2% of average loans as your credit
                 cost, where do you see this going down to in the sense that now your NPLs are also stabilizing
                 and your mix is moving more towards corporate so what is the realistic figure of this
                 provisioning charge or the credit charges and second one on a securities market share, I mean in
                 March 2006 you had a market share of closer to 9% and you have lost 540 basis points over the
                 course of past five years coming down all the way to 3.6% or 3.7% what possibly explains such a
                 sharp fall in market share, I mean sure it is not a function of purely trends in the volume mix,
                 whether it is cash or F&O in the market, perhaps it could be competition or is there any structural
                 issue that you are facing?


Uday Kotak       Okay on the first one, on provisioning the best way for me to answer that question is you actually
                 look at the numbers. For the last full year our total provisioning was Rs. 485 crores, for the first
                 quarter last year it was Rs. 157 crores and for this year’s first quarter it is Rs. 56 crores. So that
                 gives you a trend about how we are seeing a very significant improvement and we will keep in
                 mind this Rs. 56 crores has also improved our provision coverage by 7% from 58% to 65%..
                 And therefore some of this provisioning we would have been doing, within the Rs. 56 crores
                 some of the provisioning for improving our coverage ratio, which we do not think ultimately that
                 will be a cost, right and which was not there in last year’s first quarter. Rs. 157 crores is down to
                 Rs. 56 crores where also some provisioning in the current quarter is done to do the catch up on
                 the coverage, so you can see the levels to which improvement in our credit profile is and you
                 keep in mind that if you look at our mix of assets between last year, this year, last year we have
                 taken a hell a lot of pain on unsecured personal loans and credit cards in terms of credit cost and
                 that book is now significantly smaller in our total mix than what was therefore against, some
                 sacrifice in NIM means not only because of wholesale but also because of retail lending which
                 has got more secured at lower spreads we have got significant savings in credit cost, so that gives
                 you a sense on the numbers. And on brokerage market share position which you told over five
                 years, I will have my colleague Narayan to answer that question.


Mr. Narayan      See since you raised this five-year issue, let us run through what has changed in the market. See
                 if you look at that point of time the major component of the market was of cash and future’s
                 percentage was lower. Over a period of time, (a) the future percentage in the overall market is
                 substantially gone up, (b) to cut the future further, you will see the option share in that is
                 substantially gone up compared to future’s. And again in the future, there is a Nifty future which
                 is more than stock futures In each of the         market, s the margins in each one of these are




                                      Page 10 of 22
                                                                                        Kotak Mahindra Bank
                                                                                               July 21, 2010

                 different, the lowest being in the options, next the Nifty futures, next is stock futures, and
                 afterwards the cash.


                 Yeah, and within cash again delivery. Now further if you look at the Prop side of the percentage
                 which is being disclosed, the percentage of Prop in the overall market has gone up for a period of
                 time and to the best of my knowledge, if it was about 30% about five years back, it is about 45%
                 now, I don’t have right numbers with me. That is the Prop disclosed, in my view that is not the
                 only Prop, Prop further is more than that because lots of brokers do it in investment company’s
                 name which gets disclosed as clients, but actually Prop, because it is done by the same broker by
                 same investment company. So if you look at the overall market, the cash component of the
                 market has come down. Further if you look at the institutional play, while the large institutional
                 players are distributing their F&O business over various brokers, now they have started directing
                 it substantially to their own brokerage, own branded broking firm which means the foreign
                 institutional players will give to their own broking firms. That further makes it to what is
                 available to the non or the Indian broking firms lesser in FII space especially on the future’s
                 side. So we put all this together, and of course we can't deny that the competition has become
                 larger, more capitalized players in the market and hence that has also led to splitting of the
                 market share between various players. All put together has definitely brought down the market
                 share. We as a firm believe that it is better on the retail side at least to focus more on the cash
                 side and we continue to do that, not that we don’t we don’t do futures. But on the cash side,
                 again if you look at to start analyzing the overall market, the delivery market in the cash segment
                 has substantially come down over a period of time on the retail side. This is reflective of the
                 lower participation of the general retail customer in the market, hopefully things will change and
                 we are geared to capture the market shares as soon as it comes.


Uday Kotak       And I think from a more system point of view, the more fundamental question we need to ask is,
                 the direction in which equity markets are going in terms of participation and our view is that a
                 very significant part of the equity market participation has become momentum and less from the
                 point of view cash delivery and investors in terms of their participation and this is a very
                 important structural change which has happened and which is impacting the entire brokerage
                 industry as well.


Suresh Ganpati   So just to carry on from that, Uday, so your function, is your focus on the banking business,
                 more a function of realization that you really can't make, tons of money in the securities business
                 any longer what you used to do five year before and therefore les us start concentrating on the
                 banking business, because you are not longer going to get scale in the securities business, is that
                 a main reason or is it really a conscious focus that now I no longer want to focus on this business
                 mainly and it's banking and insurance that is the going to be key driver?


Uday Kotak       I think on the first point you are absolutely right, we are very focussed on making tons of money,
                 so on that I think we are both in agreement. The situation in my view is that different segments
                 of financial services are in different industry structure situations and business structure situations
                 today and this is inevitable. You see a high growth segment which is also very high profitable in



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                  stage one. Newcompetition comes in, where no barriers to entry and exit are much more relaxed,
                  so a lot of competition and lot of new players come in. The industry structure changes, investors,
                  again we are also affected by the fact that the investors moved away and the trader has become a
                  much bigger part of the market with futures. And even so called investors are becoming more
                  and more futures traders. Sometimes I wonder whether they fully recognize the risks of what
                  they are doing because they are buying underlying significantly higher leverage. Therefore that is
                  an industry structure analysis and I would like to say that we are very, very committed to
                  building our capital markets franchise and we are patient in long term therefore we are not going
                  to be swayed by the fact that the bank seems to be at this stage, the one which is firing more and
                  brokerage is firing less. We see this as any integrated financial services business and we would
                  commit resources to the capital market side at this point of time including investing more if that
                  is appropriate because we see the space over time moving to first stage of industry which is an
                  industry structure. And therefore there is no question about moving away and I mean all of us
                  have lived through the times when three years ago, the capital market side was kicking in far
                  more than the banking side. So in a way we think our model is more balanced between what I
                  call as a stable borrower model and the issuer investor model and we want to play both ends of
                  the financial services segment and that is where I think actually, we feel the integrated model
                  works much better, because we are less susceptible to sways of any standalone model. There was
                  a time when the banking model was under pressure and the capital market model was roaring
                  away and there was a time when as of now the capital market’s revenue model has some pressure
                  and banking model is growing away. But we would like to play both the parts, stable borrower as
                  well as issuer investor.


Suresh Ganpati    Okay. Thanks so much.


Moderator         Thank you. The next question is from the line of Ajinkya Dhavale from Bajaj Allianz. Please go
                  ahead


Ajinkya Dhavale   Couple of questions on the banking side, one thing, can you just give me what is the status on
                  this acquired NPAsnow, what is the book standing like? I observed last year you booked a good
                  gain there, could you share some outlook on monetization of that piece in the current and next
                  one year?


Jaimin Bhatt      Including the security receipts, we would be at about Rs. 250 crores in terms of what we hold in
                  our books today. But this is after substantial provisioning which has gone in.


Ajinkya Dhavale   Yeah and gross of provisioning that number would be?


Jaimin Bhatt      This would be again like others, as the average provisioning on this is almost the same as what
                  they have done for others, yeah so about 60% provisioning is what this pocket has suffered as
                  such.


Ajinkya Dhavale   But Jaimin, all of this is now classified as NPAs and everything has moved to…?




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Jaimin Bhatt      Most of it, most of the advances under acquired stress assets would be as NPAs.


Uday Kotak        If we bought NPA and within one year, it became NPA again and we are living with that which
                  obviously has a implication on our ratios if you look at it on a combined basis, but we are ready
                  to live with it, because we believe we understand the underlying risk. And our view is that first
                  of all, we believe there is significant embedded value in the portfolio. And our approach to that is
                  not to be pressured by quarters, to be determined by where we think we get the best value for
                  getting resolution and that’s the focus we keep. And you saw a big spike on that in March
                  quarter but that’s because we saw value in some of those resolutions. A driving force will be
                  continuing value and we do believe that at this stage, there is a significant multiplier of the book
                  value which we are currently carrying our books in terms of what we can recover out of this
                  over time.


Ajinkya Dhavale   Okay. And second on the fee income in the bank, the growth seems to be tapering off and then
                  there is hardly any growth on the year on year basis. Could you just throw some light? Actually
                  last year, the fee income had got a good momentum for the full year. Why is it so volatile of
                  around, what is the outlook there?


Uday Kotak        Okay fee income, again I will ask Jaimin take through more specifics. But on a big picture basis,
                  the pure traditional banking fee income which is transaction banking, DD charges, other charges
                  that is in good shape. Incomes on account of mutual fund and distribution or insurance continue
                  to languish.


Jaimin Bhatt      Ajinkya, if you would take my earnings update, what you will traditionally classify as fee
                  income for this quarter is at about Rs.63 crores, was about Rs. 57 crores in the same period last
                  year. The spike you are seeing in what you have seen in other income, other income is where
                  your ARD realization sits and the spike would be primarily where the ARD realizations that
                  spiked out in the last quarter of last year.


Ajinkya Dhavale   Right, Jaimin on a YOY basis, the 10% fee income growth is pretty low and if I consider FY10,
                  your fee income had grown by 36%, am I right? For the full year I am saying not for the fourth
                  quarter.


Jaimin Bhatt      Fee income would also comprise your mutual funds and basically lot of the debt capital market
                  activity which is being softer.


Ajinkya Dhavale   Right, but is it fair to assume that your fees will grow faster than assets or slower than assets?


Jaimin Bhatt      I would think it should be at the same pace or maybe slightly faster than the assets, especially
                  now that you are doing more corporate banking related stuff.




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Ajinkya Dhavale   Okay. And last question on the asset management, in the initial remarks you said that the
                  offshore funds are seeing good traction but that doesn’t seem to be as per your disclosure, I mean
                  is it after June that things are happening? It has remained at $1.6 billion for three quarters now.


Jayaram           Yeah in terms of the close. W are seeing it's varying in the last month or so that we are actually
                  starting to see some pretty active growth and we are hopeful that this quarter will be a much
                  better quarter for the offshore asset management businesses.


Ajinkya Dhavale   Okay. And why is the sequential decline in the mutual fund profitability, while the revenues are
                  more or less stable?


Uday Kotak        I think I had mentioned to you that the fixed income mutual fund has seen pretty sharp drop
                  particularly in the month of June and that it has some impact on these profitability for the mutual
                  funds in this quarter.


Ajinkya Dhavale   No, I was surprised, because the top line has remained flattish, I mean there is hardly any decline
                  but the bottom line, that means the costs have gone up. There is no great change in the top line
                  despite a AUM fall. So maybe put it other way or what sir, is it fair to assume for the full year
                  our profitability will be lower than last year assuming current conditions?


Uday Kotak        No, I wish I could have that long term vision of what's going to happen to profitability in the
                  asset management business with regulatory changes and changes in the interest rates for the fixed
                  income mutual fund side.


Gaurang           Things don’t look that great as it was last year and that’s what one can say.


Ajinkya Dhavale   On the fixed income side?


Gaurang           Yes on the fixed income side. And equity side you all know that with the entry load regulations
                  last year, the equity has been hardly growing, so there is a pressure on it in domestic mutual
                  fund


Ajinkya Dhavale   Okay. Thank you.


Moderator         Thank you. The next question is from the line of Neha Agarwal from Goldman Sachs. Please go
                  ahead.


Neha Agarwal      Hi sir just a quick clarification on your earlier question, you spoke about fee income growth
                  being in line of asset growth now the number Rs. 63 crores, how much of that was roughly the
                  retail and corporate as it stands today?


Jaimin Bhatt      We don’t have the numbers off hand but I can give it you now.


Neha Agarwal      Okay. The other question is CASA, what is the target growth that you have in mind there?



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Uday Kotak     See, I mean first on, CASA I just wanted to highlight another point which is a reality in our case,
               we actively promote what is known as sweep deposits, which is a client can operate on its t like
               a savings or current account and get interest for that period and where our effective cost is
               similar to the savings cost Our sweep deposit is now about 9% of total deposits, which is not
               reflected in CASA. And our view is that this is a product, which we are continuing to promote.
               Probably we are amongst the few banckactively promoting the sweep deposit. Since as a
               product, it offers flexibility to the customer and from a cost of fund point of view gives us a cost
               positioning similar to savings account, but does not get reflected in CASA. And at 9% of the
               deposit base, it's now getting to be a pretty significant number. Keeping that aside and our
               medium term view is to get CASA closer to 40%.


Neha Agarwal   And medium term is next couple of years?


Uday Kotak     I would like to believe that in the next three to five years, we should get that. I am talking about
               average, I am not talking about end of the period.


Neha Agarwal   Sure. We discussed a decline in market share of the securities business at length, just one
               question, I understand your structural strategy in terms of being more focused in the profitable
               cash segment, so is it fair to assume that in the interim, we would continue to hold back and see
               pain reflecting through lower market share?


Uday Kotak     I think we will be focused on value and margins and if along while we achieve that objective, if
               they can keep market share we would up to do both, but we would not like to sacrifice first for
               the second.


Jaimin Bhatt   Neha, we will just fill you in, your first question in terms of the breakup of fees between
               wholesale and retail it is almost 45-55 between wholesale and retail.


Neha Agarwal   45 being wholesale?


Uday Kotak     That’s right.


Neha Agarwal   Okay. Thanks.


Moderator      Thank you. The next question is from the line of Vikram Kotak from Birla Sun Life Insurance.
               Please go ahead.


Vikram Kotak   Yeah hi, I have a question that when I see a quarter one 2010 number last year April to June and
               when I see this year numbers, the lending profit has moved from 55% last year to 80% almost
               and non-lending profit moved from 45-20. So actually there is a big fall in the non-lending profit,
               we all know the regulatory headwinds, we know the competition, but also a very short period to
               compare, but what's going to be the trend going forward, is this trend going to be persistent or
               are we looking to device some strategy around?




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Uday Kotak     I think Vikram you asked the question which is at the heart of Indian financial services sector
               right now and in fact in my original comments I said that fortunately or unfortunately, depending
               on which side of the coin you are more or less, the financial services industry in India is getting
               to be more and more bank led. Even within the financing profit which you talked about, NBFC
               models will report great profits at present, but will find a pressure of liquidity as well coming to
               them, so that’s something also which you need to keep in mind within the overall financing
               numbers. Now my belief is that this is what I call as second stage of industry consolidation in
               some segments of financial services, particularly securities and brokerage. This second stage
               consolidation is in full swing. Industry structure is where we are in full swing, where we will see
               significant fragmentation and margin pressure. And like you see, industry structures in terms of
               the theoretical and academic model which you look at, finally it moves to Stage-III of the
               industry structure, when you see consolidation and when the survivors really get the benefit out
               of that. So we are still not there in the brokerage industry, we are in the middle of Phase-II as I
               see it. Our commitment to this business is long term and therefore we would like to believe that
               when we go to Stage-III and industry structure gets more consolidated in whatever shape,
               consolidation can happen through inorganic means all through mortality but within that third
               part of this cycle, we would like to be one of the survivals and we see that as a long term goal for
               our securities business.


Vikram Kotak   But at least in a time which we can forecast, I think this trend…


Uday Kotak     My view is that this should happen in the next 18 months or so plus or minus 6 months that’s
               my view for the industry on the brokerage side. On asset management, I think a lot of it is
               particularly on equity asset management is driven by regulatory changes. Now with the kind of
               changes which have come to insurance industry, the question in my mind is number one, I think
               the fact of the matter, unfortunately as you have seen this brokerage industry, a lot of the
               traditional passive investor has either gone away or has become a momentum trader, because
               brokers have converted him from him being a good fellow buying shares and holding for a while
               to using that same money as margin and getting in to be a derivatives trader.


Vikram Kotak   At no cost?


Uday Kotak     Yeah, so some of that I think has changed and a lot of investors post the shock of 2008-09 have
               not come back as investors, so we have seen a structural change in the brokerage industry of that
               investor. Now is that investor passively coming and participating certainly at this stage not
               through mutual funds, because you are not seeing net increase in corpus, is he coming through
               like insurance, maybe because of the growth we saw in the premiums over last one year, life
               insurance industry would have seen some of that passive investor come through ULIP products
               and all. But with the new structure and significant reduction on sales cost and therefore ability
               for distribution of distributors to push a product and insurance is a push product as we know,
               how will this play out and in totality what is the amount of money which will come to equity
               markets and I am talking from the retail and the Indian investor as distinct from the offshore
               investor, is it going to come through the broker route, is it going to come through the mutual



                                    Page 16 of 22
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               fund route, is it going to come through the insurance route, are we going to see net increase or
               are we not going to see net increase. I think these are very fundamental questions on industry
               which we are seeing and at this stage, as we all know there are no clear answers, but we do
               believe that long term equities as an asset class has the ability to produce better returns in a
               growth economy like India and if that is the premise, water will find its way from one of the
               three outlets. And if it does that, we are in all the three outlets and hopefully if we execute well
               and obviously we are going to constantly focus on that, we will the get the water.


Vikram Kotak   Okay. But in a near future, possibly the ratio may remain more tilted towards the lending side,
               clearly?


Uday Kotak     At this stage, yes, I mean if you look at our last year lending ratio which was 56% of financing
               profits out of the total profits then you are absolutely right, this first quarter, financing has
               become such a large part, but that’s what I consider as at some level this kind of a model that
               tomorrow if the wind moves in the other direction or if wind moves reparably in both the
               directions then we can capture both.


Vikram Kotak   Sure. Thanks very much sir. Actually I missed your starting comments.


Moderator      Thank you. The next question is from the line of Hiren Dasani from Goldman Sachs Asset
               Management. Please go ahead.


Hiren Dasani   Thank you. Just on the fee income side again on the banking, if Rs.63 crores is the fee income
               then what's the remaining portion of Rs.70-80 crores of 137 crores total?


Jaimin Bhatt   Hiren, that will also include the dividend which we talked about earlier which came from the
               subsidiary. It will also in addition include ARD income .


Hiren Dasani   What is ARD income?


Jaimin Bhatt   Stressed asset income, the realization what happens is going part of the other income. A bulk of
               the other adjustments would comprise of the dividend, which you picked up from the subsidiary
               which we talked in one of the earlier questions.


Hiren Dasani   Okay. But there is no trading profit in this…


Jaimin Bhatt   I mean nothing which is substantial there at all.


Hiren Dasani   And even ARD also looks like marginal compared to Q4 because Q4 you had a big…..


Jaimin Bhatt   Yes certainly, compared to Q4 certainly.




                                    Page 17 of 22
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Hiren Dasani   Okay. So essentially what you are saying is that 250 crores net NPAs on the stressed assets
               roughly 600 odd crores gross value, which you would have acquired assuming close to 60%
               coverage ratio?


Jaimin Bhatt   Yeah your right.


Hiren Dasani   And this 600 crores would be roughly 15%-17% of the original NPA value.


Jaimin Bhatt   Yeah that calculation is correct.


Hiren Dasani   Okay. So roughly 4000 crores worth of stressed asset you would have acquired over a period of
               time, okay. And the other thing is on the Kotak Prime, as you are saying the wholesale funded
               entity will see some pressure so how do you look at the growth, will it get shifted to the bank or I
               mean what's the outlook there?


Uday Kotak     I think at this stage, we are going to continue to keep the car finance business out of the NBFC
               subsidiary. We always have the ability if there are issues of funding to be able to move some
               pieces into the bank.


Hiren Dasani   And aside from historical reasons of the tie ups with Primus and all, do we still have any
               compelling reason to keep this business out of the bank as of now?


Uday Kotak     No I don’t think anything significant except that you know we got a very well-oiled machine and
               a team there with great commitment to the concept of KMP and it's worked well. And there is a
               value to that focus and controls which is what we have kept and it's worked for us and it's an
               option which we always keep and we keep on evaluating I can assure you every six months to a
               year what to do.


Hiren Dasani   I mean NBFC does so as a useful vehicle for other lendings which maybe difficult to do in the
               parent bank which still I am not sure whether the car finance…..


Uday Kotak     Yeah but also keep in mind a more general point in the bank, larger the advances, larger is the
               commitment for priority sector.


Hiren Dasani   Got your point, thank you.


Moderator      Thank you. The next question is from the line of Vishal Goyal from UBS Securities. Please go
               ahead.


Vishal Goyal   Thank you. Sir my question is actually on regulatory changes given the regulator activism
               especially in financial services On RBI side also we have couple of consultation papers lying
               especially on the asset management part of the business. What would be your view, I mean what
               kind of shape it actually might have because in the present form it would mean on private pools
               of capital so AMC business will have to be carved out kind of from the banking piece.



                                       Page 18 of 22
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Uday Kotak      I think it is still a draft paper at RBI, and I would say at this stage based on our interaction with
                RBI, we don’t see any significant reason to worry on that point at this stage.


Vishal Goyal    And do you expect RBI do anything on the banking holding company or financial holding
                company structure in any time?


Uday Kotak      As you probably would have seen in the media there is a committee which RBI has formed and I
                happen to be a member of that committee so deliberations are going on right now on that.


Vishal Goyal    And last thing again on regulatory, what kind of regulatory changes generally would anticipate in
                the times to come, I think maybe in the next 12-18 months just, so I know one increasing capital
                requirement is just one of them which might happen anytime.


Gaurang Shah    Well it could only get better. So far as asset management and insurance is concerned, I think we
                have played the goal to other pendulum is swung to other extent , now only it can improve from
                here, okay.


Uday Kotak      And the banking side, I think India has actually been far more conservative on capital norm,
                before some of the international norm, actually India is ahead of the curve including standard
                provisioning, including higher risk weight for certain categories of assets And which is why
                Indian banks are actually very comfortable on the capital adequacy side. In our case of course, I
                think our capital is quite significant for us therefore to be able to withstand any of that. But this
                whole direction seems to be to link the financial sector growth particularly from a banking point
                of view to capital.


Vishal Goyal    Okay. Thanks.


Moderator       Thank you. The next question is from the line of Alpesh Mehta from Motilal Oswal Securities
                Limited. Please go ahead.


Alpesh Mehta    In the securities business, in the last year a good amount of the profitability came from the Prop
                trading and the mark-to-market reversals, what's your outlook on the profitability for this year
                and last two quarters what we have seen that your private margins are at around 26%-27%, so
                shall we assume that kind of a profit margin that your targeting this year as well? Last year in
                FY10, good amount of the profitability came from the proprietary trading and the mark-to-
                market reversal if I am not wrong in securities business.


Narayan 1.4.4   No you right in last year we had a prop desk it was not that very significantly overall.


Alpesh Mehta    Because we are looking at your annual report disclosures…


Narayan         Let me complete, this year the overall while Prop continues to be positive, maybe the numbers
                were not as great as it was last year, but I think Prop has its ups and downs so you will find
                maybe things changing in next nine months.



                                      Page 19 of 22
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Alpesh Mehta   Okay and in last two quarters, what we have seen your profit margins in the securities business is
               at around 26%-27%, shall we assume that kind of a profit margin that you are targeting and
               moving your cost structure accordingly?


Uday Kotak     I think to a certain extent, the answer to that profit margin in the brokerage business depends on
               what our competitor brokerage firms also do, isn’t it?


Alpesh Mehta   Yes.


Uday Kotak     If you can give an answer on what competing brokerage firms are doing


Alpesh Mehta   Okay. And in terms of your margins you mentioned that you are targeting around 5%-5.5% of
               net interest margin, so now from year on, will that be a gradual decline or you still expect some
               sudden decline in the margins?


Uday Kotak     We are at 5.7% in quarter one.


Alpesh Mehta   Yeah.


Uday Kotak     Keep in mind this indication which we are giving is keeping in mind the fact that there is a pretty
               significant chunk of capitals coming and that always helps so that's the other interplay which
               we got to keep in mind. Otherwise I think it really depends on the mix and how the mix plays out
               through the year, also cost of fund, I mean this sharp point in cost of fund that changes mix
               pretty dramatically.


Alpesh Mehta   Yes. And can I have the breakup of the provisions on the consolidated basis which you have
               reported in the quarter.


Jaimin Bhatt   If you look at my consolidated provision is Rs. 55 crores, my standalone provision is 56 crores,
               actually very little in subs.


Alpesh Mehta   So this is mostly towards the standard asset provisioning or is there any mark-to-market reversal?


Jaimin Bhatt   There is no standard asset provisioning, in fact we are carrying excess standard Provisioning.


Alpesh Mehta   Yes, so just to provide more for the NPAs basically.


Jaimin Bhatt   That’s right.


Alpesh Mehta   Okay. And there is no mark-to-market reversal in this?


Jaimin Bhatt   That’s correct.


Alpesh Mehta   Okay. Thanks a lot Jaimin thanks.



                                      Page 20 of 22
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Moderator        Thank you. The next question is from the line of PS Subramaniam from Sundaram BNP Paribas.
                 Please go ahead.


PS Subramaniam   Could you give us some sense on what's the outlook on the personal loan side, I think there has
                 been a fair bit of degrowth on this side, so with the improving macros, do you think you would
                 be improving focus there and looking at higher growth there in the rest of the year?


Dipak Gupta      Just now if you look at our unsecured retail segment, for the last 24 odd months we have been
                 just cutting our exposures on a continuous basis. And up until may be about a quarter or so the
                 recovery was not necessarily looking great, but if you look at last three-four months, the
                 recovery position seems to be improving significantly. The book size is much smaller now and
                 there are pockets of opportunity available in this segment and some of these are what we are
                 looking at. It really won't be the same level of volume which we really saw maybe in 2007 at that
                 point of time, I think we will step all the gaps slowly and cautiously.


PS Subramaniam   Okay thats fine sir. Sir in terms of corporates again you know we have seen a very sharp
                 increase and so what would be the kind of ideal mix of credit that you would target by the year
                 end?


Uday Kotak       A broad mix is 60% retail and commercial and 40% corporate.


PS Subramaniam   Okay thanks. Sir on the automotive side, particularly on the commercial vehicle side what is the
                 sense that we are getting in terms of the cycle and what kind of growth you think we would see
                 on this front, if you could just throw some color on that?


Dipak Gupta      It is looking pretty good on the commercial vehicle side but remember, most manufacturers have
                 been increasing prices month-on-month actually, every month there is a 2%-3% price hike most
                 manufacturers are putting in place. And the growth really just now is coming essentially because
                 transporters have actually stayed away from buying new vehicles in the last 2-3 years. So it's all
                 about catch up demand at this point of time. I think may be 3-6 months down the line you will
                 have some level of balancing where we will see that the price increase is unjustifiable or not
                 economic enough really and you will see some amount of slowing of demand there. But at this
                 point of time it looks very good.


PS Subramaniam   Okay. Thank you very much sir for the insights, thank you.


Moderator        Thank you. The next question is from the line of Vikas Garg from Fidelity. Please go ahead.


Vikas Garg       Hello sir, my question is on Kotak Mahindra Prime Ltd. given the fact that the capital adequacy
                 of the NBFC was around 13% as in March end and all the NBFCs need to maintain 15%
                 adequacy by March in the next year. And also given the fact that the company is expected to
                 grow its loan book, so what kind of additional capital would be provided by the bank to support
                 the growth for the NBFCs?




                                      Page 21 of 22
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Uday Kotak   Just for our information Kotak Mahindra Prime shareholding in the bank owns 51% and Kotak
             Securities owns 49%. Therefore if there is a capital need, it comes in that ratio. As you know in
             addition to the bank being surplus capital, Kotak Securities is hugely surplus capital and
             therefore at net equity levels of close to zero. Therefore any use of capital which provides decent
             ROE is good use of capital certainly from KS point of view and vis-à-vis the bank. The calls
             which we have to take is how much do we want to grow the balance sheet and where is this more
             appropriately done,.


Vikas Garg   Okay. But any sense on the broad range of the number, the capital which could be provided
             either by KSL or the bank itself?


Uday Kotak   Right now I think both have very significant ability to put capital. It also depends on our
             evaluation by end of the year at 15% capital adequacy what's the most appropriate platform for
             which business or which incremental business, keep in mind the bank capital adequacy is 10%.


Vikas Garg   So any additional capital would be coming only at the later part of the year and not maybe
             quarter …..


Uday Kotak   Yeah nothing significant maybe the marginal here or there during the year, but the call for the
             15% will be looked at closer to the end of the year depending on the circumstances, depending
             on how the regulator is thinking about it, depending on our thoughts on the structure of
             incremental asset, so it's a whole host of issues for which we don’t want to take decisions too
             early.


Vikas Garg   Okay. And how seriously are you looking at the option of securitizing the loan book back to the
             bank?


Uday Kotak   We will look at it in the last quarter and that’s an option always available.


Vikas Garg   Okay. Thanks very much.


Moderator    Ladies and gentlemen that was the last question. I would now like to hand the floor back to the
             management for closing comments. Please go ahead.


Uday Kotak   I just wanted to say thank you all for this call, and look forward to talking to you in the near
             future. Thank you and bye.


Moderator    Thank you gentlemen of the management. Ladies and gentlemen on behalf of Kotak Mahindra
             Bank that concludes this conference call. Thank you for joining us and you may now disconnect
             your lines.




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