Kotak Mahindra Bank (KMB) is well-positioned to grow at a healthy rate as credit demand picks up and as it has a clean balance sheet (capital adequacy of 24.7%; Tier I capital at 22.8%), strong liability franchise (industry leading CASA at 60.2%) and improving trend on asset quality side. In Q1, slippages were elevated amid wave-2 of COVID-19. However, KMB's COVID-related provisions (0.6% of loans) and restructuring was low at 0.25% during the quarter. In Q2, we expect slippages to decline as collection efficiency improves. Consequently, GNPA ratio is expected to be at ~3.3% in Q2, down from 3.56% in Q1. NII is also likely to grow by ~15% with better recoveries and an increase in credit growth during the quarter. We expect the bank's subsidiaries such as Kotak Securities and Kotak Asset Management to perform well amid a buoyant equity market. Valuations are attractive after adjusting for subsidiary valuations of Rs. 571/share.