Leading brokerage firm Emkay Global has flagged concerns regarding the management efficiencies going inside the bank. In this article, we will discuss more about this in detail.
With a market capitalisation of Rs 7,414 crores, the shares of Karnataka Bank Ltd are currently trading at Rs 196 per share, down by 20 percent from its 52-week high of Rs 245 per share. Over the past five years, the stock has delivered a return of 366 percent.
Brokerage firm Emkay Global has downgraded Karnataka Bank’s rating from ‘Buy’ to ‘Add’ and has also slashed its target price by 15 percent to Rs 220. This adjustment suggests a potential upside of only 12.24 percent from where the stock currently stands. The downgrade is largely driven by rising concerns over internal management issues at the bank.
On June 29, Karnataka Bank’s Board of Directors accepted the resignations of its Managing Director and CEO, Mr. Srikrishnan Hari Hara Sarma, along with Executive Director, Mr. Sekhar Rao, both citing personal reasons for their departures.
However, reports indicate that these resignations followed closely after the bank’s auditors flagged some concerning expenses. It was revealed that approximately Rs 1.53 crore was spent on hiring a consultant and other activities without the necessary board approval, which exceeded the management’s authorised spending limits.
Emkay has cautioned that if these governance-related issues persist, they could cause bigger trouble for the private sector bank down the line.
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Financial Highlights
The company reported a revenue of Rs 9,014 crores in FY25, up by 8.61 percent from its FY24 revenue of Rs 8,299 crores. However, the company reported a net profit decline of 2.60 percent to Rs 1,273 crore in FY25 from Rs 1,307 crores in FY24.
The stock delivered an ROE and ROCE of 11.10 percent and 6.33 percent, respectively, and is currently trading at a P/E of 5.87x as compared to its industry average of 13.56x.
Karnataka Bank Limited is a private sector bank tailored to different financial needs, including corporate banking, retail banking, transactions in treasury operations, and more.
The bank supports customers in borrowing, offering loans to individuals, Medium and Small enterprises (MSMEs), and agriculture, with products like KBL Micro Mitra and KBL Mahila Udyog.
The treasuring section of Karnataka Bank is responsible for investments and processes foreign exchange (post transaction) and statutory reserves. The bank also offers supporting financial services such as online trading, on-deposit, locker allotments, and bill payments. Customers can access these and other services in physical branches or digitally.
Written by Satyajeet Mukherjee
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