Mumbai, Mar 5: Kotak Mahindra Bank is set to create a separate vertical for mid-market companies having turnover between Rs 500-1,500 crore to up its focus on the segment.
The private sector lender is also keen to increase its focus on high-margin structured finance, a top official has said.
At present the mid-market segment is part of the large corporate team, which covers companies between Rs 500-6,000 crore. From April 1 onwards, the new vertical will be created while the large corporate team will serve clients having revenues between Rs 1,500-6,000 crore.
“Our large corporate growth is relatively benign compared to SME (under Rs 500 crore revenue companies) growth, and that is one of the reasons for this change. Mid-Market opportunity is large and we believe we are under penetrated in this segment,” Paritosh Kashyap, president and head of wholesale banking, told PTI.
Kashyap said the bank used to have a mid-market team about four years ago, and added that the latest reorganisation is driven by the need to get more focus on the segment and grow it faster than what it would have grown under the older way of organising the business.
The private sector lender will serve the mid-market opportunity from about 15 dedicated locations, Kashyap said, adding that the small and medium enterprises (SME) segment is served from 50 locations and the number is much smaller for large corporates.
It is putting together a team largely drawn from internal employees already catering to this business and transferring them into the newly created mid-market vertical, Kashyap said, adding that some talent will also be hired from outside.
The bank is also upping its focus on the structured finance offerings, whose contribution in the overall wholesale book is in low single-digits at present and growing the same, Kashyap said.
“Typically these are non standard financing requirements with relatively better collaterals and higher margins. As of now our exposure is in the low single-digit. We want to grow this book,” he said.
It is also serving the credit needs of startups and new-age companies, who generally come to banks for their short-term borrowing needs, Kashyap said, adding that these loans are made the basis of their business models and capital structures.
The wholesale book does not have any pockets of stress at present, and the corporate deleveraging over the past two years has also been of help, Kashyap said.
“We have had a benign credit environment in the last 7-10 years. As of now we are seeing good growth in all segments with no concern on credit quality. However the concern is, it has been too good for too long,” he said.
Kotak Mahindra Bank is not staying off from any sector, Kashyap said, adding that the problem segments of the past like non-bank lenders, infrastructure companies and real estate players are in better shape now.
Given the recent developments, the share of the non-interest or non-risk income in the overall revenue mix has gone higher than the usual 40 per cent now.
The bank has also launched a product keeping in mind the transaction banking opportunity called “Fyn”, Kashyap said.
Large-scale project loan demand is yet to come, Kashyap said, adding that the term-loan opportunities are more brownfield in nature at present like upping capacity at the same unit or putting up a new capacity next to existing units.
The wholesale banking growth in the December quarter was higher from the sequential perspective because of the decline in the book during the September quarter.
Kashyap is confident of higher credit growth in FY24 on an array of factors, and pointed out that the government’s Rs 10 lakh crore capital expenditure commitment will also help the credit growth.
“Overall credit demand in the wholesale market is good, but a large part of it is driven out of refinancing including maturity of offshore borrowings. Offshore borrowings by corporates have come down in this financial year compared to earlier years,” he said.
At present 30 per cent of the bank’s wholesale book is linked to external benchmarks, Kashyap said, adding that competition in the large ticket loan segment is a reality which influences pricing as well. (PTI)
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