India: Uday hands over the Kotak Mahindra baton
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India: Uday hands over the Kotak Mahindra baton

A handwritten note brings down the curtain on a 38-year journey for bank founder.

Photo: Reuters

The big moment came in a rather charming handwritten letter to the board dated September 1, 2023, a curly flourish in the twos. “Dear Sir,” began Uday Kotak. “It has been 38 long years since this institution was created, with three employees in Fort, Mumbai.” And so began the formal process of Uday’s departure from the financial institution that bears his name, Kotak Mahindra. The letter marked his formal resignation as managing director and chief executive.

It has been quite a journey from those early days as a leasing and broking business with a single product – bill discounting – in 1985. Kotak Mahindra today has more than 100,000 employees across five countries, though it will always be the domestic story that matters most. Kotak Mahindra redefined what a smart and nimble Indian bank could do and be, and in doing so pre-empted some of the same possibilities for India itself.

Today, Kotak in some ways resembles the bank that was once its joint-venture partner, Goldman Sachs, which co-founded Kotak Mahindra Capital in 1995 before being bought out by the Indian partner in March 2006 for $70 million. Kotak has, for example, a special-situations group helmed by Srini Sriniwasan, who worked on the JV, and which has a lot in common with the Goldman Sachs Special Situations Group.

It would be a huge surprise if the bank went external for the top job, given the bench strength

It also resembles Australia’s Macquarie in its ability to spot niches – in real estate, infrastructure, private equity, credit – and exploit them with brain power over heft. It opened a distressed domestic assets investment business with the Abu Dhabi Investment Authority in February 2019, a classic opportunistic move.

“We saw a very significant opportunity as India’s economy evolved over the last 30 years,” Uday told us in 2019. “There was a deep belief that the financial sector in India would go through its own evolution and that there was space for private-sector financial intermediation.”

He was right about that. Growth in India hovered between 3% and 4% annually in 1985; it grew 7.2% in the 2022-23 fiscal year at a time when most of the world is fearing recession. Kotak Mahindra’s full-year results recorded profit after tax of Rs149.25 billion crore ($1.8 billion) for 2022-23, up 19% year-on-year, with ROE at 14.36% and net non-performing assets of just 0.37%.

This ability to spot intriguing new trends while maintaining impeccable risk-management discipline has been a hallmark of Kotak Mahindra since its formation.

It is quite a moment ahead, as it is not just Uday’s term that expires at the end of 2023. So, too, do those of chairman Prakash Apte and joint managing director Dipak Gupta, although both can be renewed. “The bank has taken necessary steps on succession, and we await the RBI’s [Reserve Bank of India] decision,” the letter notes. “The bank’s senior management team with years of experience is well placed to carry on this legacy.”

In the mix

In the short-term, Gupta will step up as interim MD and chief executive, and he will be in the mix to succeed Kotak on a permanent basis from January. Indeed, he will surely be the favourite, having been joint managing director since January 2012. Also in contention will be KVS Manianinterviewed by Euromoney last year – and Shanti Ekambaram, who goes by the odd title “whole-time director”. India’s Business Today says Egon Zehnder has been appointed to help with succession, but it would be a huge surprise if the bank went external for the top job, given the bench strength.

Uday turned a touch emotional in his letter. “I stand in a lonely place of being a founder, promoter and significant shareholder of this great institution,” he said. “It also bears our family name and carries that as its brand. The institution that we have together built stands for purpose, trust and integrity. I am committed as a stakeholder to see this institution sustain and grow.” One would think so: he holds almost 26% of the stock.

He also looked forward to a bright national future. “In these changing times, I envision an India leading the world in the years ahead,” he wrote. “I am confident that this majority Indian-owned institution will play an important role in India’s destiny.”

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