* Q4 net profit rises better-than-expected 40 pct
* CEO sees bad loans, provisioning costs falling
* Says looking at acquisition-led growth opportunities (Recasts with outlook)
By Devidutta Tripathy
MUMBAI, April 27 (Reuters) - India's Kotak Mahindra Bank Ltd forecast a decline in bad loans and provisioning costs and a pick up in credit growth this financial year after reporting a better-than-expected 40 percent rise in fourth-quarter profit on Thursday.
Kotak Mahindra -- the fourth-biggest private sector lender in the country by assets but the third most-valuable with a market capitalisation of more than $25 billion -- posted net profit of 9.76 billion rupees ($152 million) for the three months to March 31, ahead of analysts' estimates of 9.38 billion rupees.
Its bad loans, however, ticked up to represent 2.59 percent of total loans as of the end of March from 2.42 percent three months ago.
Billionaire Uday Kotak, the biggest shareholder and the chief executive of the bank, predicted better days ahead for the lender which has seen its bad loans rising since its $2.4 billion acquisition of smaller rival ING Vysya in 2015 in India's biggest banking sector takeover.
He said the impact of the deal had been almost fully absorbed by this point.
"We have come virtually to the end of recognition of that stress as of March 31, 2017," Kotak told a news conference.
Kotak said he expected a declining trend in provisioning costs, or credit costs, to continue, without giving a specific guidance. For the year to March, the bank's credit cost fell to 61 basis points from 82 basis points in the previous year.
The bank's loans grew at about 20 percent in the March quarter, at a faster pace than 15 percent for the full financial year. Kotak said he expected loan growth in the current financial year to be broadly in line with the pace last quarter.
The bank's board last month approved a major fund-raising plan to pay for potential acquisitions among other things amid speculation that the lender is eyeing to take over larger rival Axis Bank.
Kotak, who has previously neither confirmed nor denied Axis talks, said on Thursday that they were looking at "a lot of inorganic opportunities".
Axis has dismissed takeover speculation.
An Indian government agency and state-owned insurance companies that together own about 30 percent of Axis hold the key for any bid to succeed. ($1 = 64.0950 Indian rupees) (Reporting by Devidutta Tripathy; Additional reporting by Tanvi Mehta in Bengaluru; Editing by Keith Weir)