ANNUAL REPORT 2011-12
The face of stability
02
04
The bottomline is stability
What's Inside
Message from Uday Kotak
08
41,079 FY12
33,664 FY11
26,003 FY10
21,664 FY08
9,781 FY09
Consistent value-creation, despite market vagaries
12
Chasing value with an eagle eye
20
value smart
14
Bharat, a treasure trove of opportunities
16
Strengthening liability side acumen
18
21
Awards and accolades
22
Financial inclusion
25
Bank reports & statements
88
Paradox? Possible. Preserving value through future readiness
Financial Highlights
26
Consolidated Standalone
26 27
consolidated financial statements
28
Consolidation at a Glance Auditors’ Report Financial Statements Basel II (Pillar 3) Disclosures
28 29 30 73
Directors’ Report Management Discussion & Analysis Sustainability Report Report on Corporate Governance Auditors’ Report Financial Statements
88 96 108 110 125 126
Registered Office
Company Secretary
Auditors
Registrar and Transfer Agent
Kotak Mahindra Bank Limited 36-38A, Nariman Bhavan 227, Nariman Point, Mumbai 400 021. Tel.: +91 22 6658 1100 Fax.: +91 22 2285 5577 Website: www.kotak.com
Bina Chandarana, Company Secretary and Executive Vice President
Messrs. S.B. Billimoria & Co., Chartered Accountants, 12, Dr. Annie Besant Road, Opp. Shiv Sagar Estate, Worli, Mumbai 400 018.
Karvy Computershare Private Limited Plot No. 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500 081. 7, Andheri Industrial Estate, Off Veera Desai Road, Andheri West, Mumbai 400 058.
Making a stronger case for stability, amid economic volatility; Transforming possibilities into vibrant realities across rural, sub-urban and urban India; Strengthening financial competitiveness for decades on end; Looking closely at people capabilities to create a new performance paradigm; Inspired by a belief that value creation is a journey that never stops and criss-crosses people across the social pyramid.
That’s Kotak Mahindra Bank in a nutshell for you. Diverse stakeholder aspirations. One robust commitment for value. Not intermittently, but consistently. Call it a seasoned art or sensible science, our objective is cut out for us: deliver on stakeholder expectations with passion and set the bar a little higher each time.
The bottomline is stability (contd.)
Chart busters of fy2011-12
Advances (` CR)
39,079 33.2% Savings Account (` CR)
5,050 51.6% PAT (` CR)
1,085 32.6% Bank standalone figures
6
Kotak Mahindra Bank Limited
Operational highlights FY2011-12 Bank • Offered Salary2Wealth Account to the Indian Army, Indian Railways, Indian Posts, private sector players and PSU companies, including some of the Navratna companies • Scaled up the financial inclusion programme • Launched Silk, a savings programme for women • Introduced Probationary Officer’s Course, providing young Indian graduates a career opportunity in the lucrative banking sector • Kotak Wealth with Crisil published the first-of-its-kind India-specific report ‘Top of the Pyramid’ on Ultra HNIs Other businesses • Kotak’s International Business raised close to US$457 million through debt funds including an infra debt fund of about US$ 223 million • Kotak Mahindra Old Mutual Life Insurance’s Group Insurance business has migrated to the Group Asia system, which will help it seamlessly process huge volumes of data through the year, significantly improving the company’s ability to serve over 3 million members of its Group clients • Kotak Investment Banking successfully closed several deals during the year including the first-ever Institutional Placement Programme (IPP) in the Indian Capital Markets
VALUE CREATION WITH STABILITY
CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
BANK REPORTS & STATEMENTS
THE BOTTOMLINE IS STABILITY
top scores of fy2011-12
11,754 10,526
FY08
term deposits (` CR)
FY09
16,423
FY10
20,470
FY11
26,135
FY12
4,670 5,118
FY08
CASA (` CR)
FY09
7,463
FY10
8,791
FY11 FY12
12,402
FY08
5,301
KOTAK SECURITIES FY09 AVERAGE FY10 DAILY VOLUME FY11
(` CR)
insurance premium
(` CR) individual group renewal
3,293 3,925 4,648 4,034
FY12 FY08 FY09 FY10 FY11 FY12
Presence
across indian cities and towns
525+
975 1,195 1,113 965 810
group customer accounts
132 148 221 288 354
584 1,000 1,534 1,722 1,773
17.5%
29.0%
28.5%
Capital Adequacy Ratio
5-year CAGR of Advances
5-year CAGR of Deposits
10mn
Figures for term deposit, CASA, capital adequacy ratio, 5-year CAGR of advances and 5-year CAGR of deposits are bank standalone Annual Report 2011-12
7
Bharat, a treasure trove of opportunities At Kotak Mahindra, our business model is more attuned to borrowing from urban India and lending it to Bharat. We have simultaneously met our targets on advances to the agricultural sector and also maintained a financially viable portfolio of agricultural loans with lowest delinquency across banks. Thanks to our collateralised lending approach and deep engagement across the entire value spectrum. 16
Kotak Mahindra Bank Limited
VALUE CREATION WITH STABILITY
FINANCIAL HIGHLIGHTS
CONSOLIDATED FINANCIAL STATEMENTS
BANK REPORTS & STATEMENTS
Bharat, a treasure trove of opportunities
We finance the entire value chain across industries. For example, in the cotton industry we finance farmers, ginners, aratiyas, traders, exporters, spinners and even mill owners. The benefits are two-fold: • Market intelligence through a detailed understanding of a particular business, commodity price movements, crop seasonality, nature of funding facilities and cross references of large players across geographies for a given output • Our customers further refer Kotak Mahindra Bank to their suppliers/clients to gain a benefit of at par and same-day credits
Giving wings to aspirations
“The Bank funded my first truck and since then I have successfully managed and scaled up my transportation business. I thank God and the bank that has given me the opportunity to successfully look after my family and uplift our social status.” Hardeep Singh
“To us, one of the trusted faces of modernity is Kotak Mahindra. They have started mobile banking services in our Gram Panchayat, enabling villagers to access their savings account from the village itself. The service has benefited us significantly.”
Hansaben B Hajipura, Sarpanch
We are also marking a significant presence in the tractor and vehicle financing, without risking profitability. Our latest technology-based solutions has widened our network of financial inclusion, deepening the emotional connect with the community.
Making considerable inroads into tractor financing 1 lakh+
103,794 No frill accounts
316 Number of villages penetrated
72,768 Biometric smart cards issued
30+ locations Agri-business team presence (other than metros and state capitals)
Customer base
230 districts Geographically covering 70% of the industry 11.5%
Market share in states where we are present
Annual Report 2011-12
17
Preserving value through future readiness At Kotak Mahindra, we are future-ready. We are driving our ambitious growth plans through investments in processes and technologies. We undertook a project to replace our Core Banking System (CBS) with Finacle 10 – a functionally rich (yet scalable) technology backbone, without any business disruptions. This improved organisational flexibility and ensured that the new solution integrates seamlessly with other systems in the bank. Our enhanced delivery offerings through a centralised platform resulted in a significant improvement in services and customer experience.
Automation of manual processes leading to improved turnaround time Enhanced internet banking experience for customers Multi-tiered sweep facility, multi-currency and multicountry operations
20
Kotak Mahindra Bank Limited
360 degree view of customer through CBS for a faster and efficient service
“Technology is playing an important role in building tomorrow’s banks and we are excited to collaborate with progressive banks like Kotak Mahindra Bank, to set new benchmarks for excellence in the banking industry. We are happy that Kotak Mahindra Bank has been able to derive significant benefits in terms of both growth and operational efficiencies.” Haragopal Mangipudi, Global Head - Finacle™, Infosys
Value smart People are at the forefront of our value creation enterprise.
Recognitions • Ranked 10th in APAC (Asia Pacific) Top Companies for Leaders (2011) (study was conducted by Aon Hewitt in partnership with Fortune and RBL Group)
They work closely at each level of the relationship edifice and help create an ecosystem of cooperation and trust. Our senior management have stayed on with us and is delivering outstanding performance year after year. We have managed to emerge as a people-focused organisation, willing to learn and grow with evolving times.
• Continued to be ranked amongst the Top 25 Best Employers in India since 2007 (study conducted every 18-24 months by Aon Hewitt)
We have also laid an equal emphasis on levels of employee engagement with a consistent focus on building stability and scalability across all levels of the organisation through talent management. Besides, we developed leadership platforms like KLT (Kotak Leadership Team), KIT (Kotak Initiatives Team) and Regional Forums (RF) to promote cross-functional reach of leadership across the organisation.
total number of people across the group
• Recognised amongst the Top 25 Best Companies to Work For (study conducted by Great Places to Work Institute, India, in partnership with The Economic Times)
1%
< 6%
Annual attrition rate of senior management
Annual attrition rate of middle management
22,092 Annual Report 2011-12
21
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