Why Kotak Neo Recommends Buy on ICICI Bank and Add on Nykaa

Kotak Neo Sees Different Growth Paths at ICICI Bank and Nykaa

The brokerage’s calls rest on bank execution and asset quality at ICICI, and sustained consumer growth with improving profitability at Nykaa.

ICICI’s growth is broad, while risk indicators remain contained

Kotak Neo’s Buy case centres on the bank’s ability to grow lending across business banking, corporate, retail and rural segments without, in the brokerage’s view, weakening underwriting discipline. Advances reached ₹18.3 lakh crore in Q2FY27, up 30% year on year. Excluding loans against FCNR(B) deposits, growth was about 24%. The domestic book expanded 23%, with business banking up 34%, corporate loans 31%, and retail and rural loans 15%.

The quarter’s earnings indicators also support the recommendation. Net profit rose 20% year on year, while net interest income increased 18% and fee income grew 20%. Operating expenses rose 8%, and provisions declined 7%, pointing to operating leverage and cost discipline. Gross and net non-performing asset ratios stood at 1.2% and 0.3%, respectively; credit costs were 0.2% of advances. These figures matter because fast loan growth creates value for shareholders only if credit quality holds up.

Kotak Neo cites a provision buffer of ₹238 billion and values the bank at around 2.5 times book value, with subsidiaries adding to its assessment. The Buy rating therefore depends not just on loan expansion, but on continued profitability and disciplined risk management. The brokerage also points to potential margin recovery, though the supplied note does not quantify its expected scale.

Nykaa’s case combines category growth with a profitability test

For Nykaa, the Add rating reflects the brokerage’s view that its beauty and personal care business can continue to grow while fashion expands from a smaller base. Kotak Neo highlights the company’s omnichannel presence, owned brands and customer engagement, alongside demand drivers such as premiumisation and greater online penetration. Its Q2FY27 business update showed growth across both Beauty & Personal Care and Fashion, according to the note.

Kotak Neo estimates revenue compound annual growth of about 27% over FY26-29, including a similar growth rate for the core beauty and personal care segment. It expects profit after tax to grow at around 90% over the same period, faster than revenue, as operating leverage, fulfilment efficiencies, moderation in customer acquisition costs and a higher owned-brand contribution improve margins. These are brokerage forecasts, not reported outcomes: the earnings case requires both continued sales growth and the expected conversion of that growth into profit.

Two ratings, with different assumptions behind them

The recommendations are not directly comparable: ICICI Bank’s thesis is anchored in lending, earnings and asset quality, while Nykaa’s relies more heavily on consumer demand, category expansion and future margin improvement. Kotak Neo assigns ICICI a fair value of ₹1,800 against a stated CMP of ₹1,403, and Nykaa a fair value of ₹370 against ₹330. Those figures are the brokerage’s valuation assessments, not guaranteed trading outcomes. Investors should weigh the assumptions behind each estimate, particularly the bank’s credit performance and Nykaa’s ability to deliver projected growth and profitability.

Key Highlights

• ICICI Bank: Kotak Neo rating Buy; fair value ₹1,800; stated CMP ₹1,403.
• ICICI advances reached ₹18.3 lakh crore in Q2FY27, growing 30% year on year, or about 24% excluding FCNR(B)-linked loans.
• The bank reported 20% net profit growth, with gross and net NPA ratios of 1.2% and 0.3%.
• Nykaa: Kotak Neo rating Add; fair value ₹370; stated CMP ₹330.
• The brokerage estimates roughly 27% revenue CAGR and 90% PAT CAGR for Nykaa over FY26-29E.

Investor Note: These are brokerage views, and the projections depend on business and financial outcomes that may differ from estimates. Investors should assess valuation, execution and risk tolerance independently rather than treating fair values or ratings as assured returns.