Goldman Sachs has a buy rating on Kotak Mahindra Bank with a target price of Rs 1,561 after the bank announced a board meeting on April 22 to consider equity capital raising.

The stock ended down 4 per cent at Rs 1,130.45 on Tuesday while the BSE Sensex closed 1011.29 points down (-3.20 per cent) at 30,636.71. Kotak Mahindra Bank Ltd., incorporated in 1985, has a market cap of Rs 216259.42 crore.

Investment RationaleThe rationale for the potential capital raise may not necessarily be for shoring up provisions or potential asset quality concerns given the strong balance sheet and healthy NPL coverage, said Goldman Sachs.

A potential capital raise could increase the possibility of the bank engaging in M-A given Kotak’s past comments on exploring M-A possibilities if valuations are reasonable, said Goldman Sachs.

FinancialsKotak Mahindra Bank's key products/revenue segments include Interest - Discount on Advances - Bills which contributed Rs 14727.95 crore to sales value (74.57 per cent of total sales); Income From Investment which contributed Rs 3933.00 crore to sales value (19.91 per cent of total sales); Interest On Balances with RBI and Other Inter-Bank Funds which contributed Rs 755.29 crore to sales value (3.82 per cent of total sales) and Interest which contributed Rs 332.25 crore to sales value (1.68 per cent of total sales)for the year ending March 31, 2018.

The Bank has reported a Gross Non Performing Assets (Gross NPAs) of Rs 5914.92 croreand Net Non Performing Assets (Net NPAs) of Rs 2174.73 crore. Promoter/FII HoldingsPromoters held 29.96 per cent stake in the company as of third quarter (December 31, 2019), while FIIs held 39.75 per cent, DIIs 12.13 per cent and retail investors 17.92 per cent.