Kotak Mahindra had a lumpy 4.05% lopped off its valuation to Rs 147 early today, as the company turned out disappointing results after market hours Monday.

For Q4 ended 31 March 2003, the bank registered a 48% fall in net profit to Rs 10.06 crore (Rs 19.30 crore) on a 53.3% increase in total income to Rs 80.65 crore (Rs 52.62 crore).

For FY 2002-03, the company posted a 17.5% drop in net profit to Rs 44.96 crore (Rs 54.52 crore) on a 36% rise in total income to Rs 254.67 crore (Rs 187.23 crore). On a consolidated basis, the group posted a net profit of Rs 73.31 crore (Rs 84.09 crore) on a total income of Rs 714.84 crore (Rs 606 crore). The company has also recommended a dividend of 21%.

Net profit, apparently, has been lowered due to expenses incurred over the setting up of the bank. During the year, the company spent Rs 20.85 crore on converting itself into a bank from a financial institution. Money was spent on infrastructure, restructuring, technology and people. The bank also provided Rs 11.56 crore towards diminution in value of its investment in Fascel Ltd., a cellular service provider in Gujarat. This was sold in April 2003. A subsidiary of the bank has also sold its investment in Fascel Ltd. The impact on consolidated accounts on account of this sale is a net profit of Rs. 2.05 crore.

Owing to bank-related expenses, KMB reported a 6.7% decrease in PBT and a 17.5% decline in profit. Customers assets during the year grew by 23.6% to Rs 1,240.57 crore, mainly driven by commercial vehicle finance and retail finance.

The company's net non-performing assets rose by Rs 1.31 crore (Rs 0.005 crore), while the capital adequacy ratio was at 25.97% (30.47%) from the stipulated 9% by the Reserve Bank of India.

Players said the fall in the stock is on disappointment over results, which have not been up to market expectations. The low dividend has also prompted disdain.

In February 2003, KMB obtained a licence from the Reserve Bank of India to set up a bank. In January 2003, in fact, the shareholders had already approved the proposal to change the name of the company to Kotak Mahindra Bank. A proposal to change the authorised capital of the company to Rs 100 crore divided into 10 crore shares of Rs 10 each was also approved by shareholders at the extraordinary general meeting held on 30 December 2002.

The bank commenced operations with an asset base of Rs 1,500 crore and a net worth of over Rs 500 crore, which included paid-up equity capital of Rs 59 crore. Kotak Mahindra Bank is headed by KMFL's vice-chairman and managing director Uday Kotak, who is likely to take charge as the chief executive officer (CEO) of the bank.

KMFL was originally promoted in 1985 by Uday Kotak and Sidney Pinto along with Kotak & Company under the name Kotak Capital Management Finance. The promoters were joined by Harish Mahindra and Anand Mahindra in 1986 and the company was renamed Kotak Mahindra Finance.

The company has established itself as one of India's leading financial institutions. Its activities include corporate finance, capital market financing, asset reconstruction, commercial vehicle finance, consumer finance, technology finance, car finance, investment banking, mutual fund and life insurance.

It also has international partnerships with Goldman Sachs (one of the world's largest investment banks and brokerage firms), Ford Credit one of the world's largest dedicated automobile financiers) and Old Mutual (a large insurance, banking and asset management conglomerate) through joint ventures and subsidiary companies.

As on 31 March 2003, promoters held 62.97%, while the public and institutions held 21.20% and 2.38% respectively.