Uday Kotak's storied legacy: How he leaves behind an organisation that will stand the test of time
When Henry Ford made cheap, reliable cars, people said, ‘Nah, what’s wrong with a horse?’ That was a huge bet he made, and it worked,” Elon Musk, the owner of Tesla, SpaceX, and X, recently said. Ford took a significant risk at the start of the 20th century, and it paid off. Uday Kotak (pictured), who coincidentally had a car financing joint venture with the US carmaker’s financial arm in his initial years, too took risks and successfully challenged established industry leaders to achieve significant success.
In its nearly four-decade journey, the Kotak Group has amassed total assets of Rs 6.2 lakh crore, market capitalisation of over `3.5 lakh crore and employee strength of nearly 100,000. Kotak’s family was into cotton trading, but he started his journey with a bill-discounting business. Step by step, he built a financial powerhouse with a presence in banking, mutual funds, insurance, stock broking, car finance, investment banking, private equity, and alternative assets. (See box The Institution Builder)
Whether it’s his knack for being in the right place at the right time after liberalisation or exceptional entrepreneurial drive, under his leadership the group has generated immense value for stakeholders. If an investor had placed `10,000 in the company in 1985 the investment would have skyrocketed to `300 crore today. “We have the concept of the ‘professional entrepreneur’. The freedom we experience in building new businesses, coupled with the immense ownership we assume, is unparalleled,” says K.V.S. Manian, Whole-time Director at the bank. Manian has played a pivotal role in the group’s journey from an NBFC to a bank. “Many leaders have built businesses from the ground up, and there’s an absence of fear regarding failure. We foster an environment that promotes experimentation and learning, recognising that failures are an integral part of the journey,” he adds. That’s the culture and legacy Kotak, whose family holds a 26 per cent stake in the bank, has built in the group to continuously challenge the status quo and take risks.
Unfortunately, the RBI’s rules on ownership and tenure limits for the post of MD & CEO at private banks impacted Kotak’s ambition to hold a larger stake and extend his leadership tenure. Moving ahead, Kotak envisions his role as a non-executive board member, serving as a strategic shareholder with a long-term vision of cultivating a world-class institution. “It’s rare in today’s global banking landscape to find an individual holding a 26 per cent stake, especially when such a significant portion of family assets is concentrated in a single stock,” he wrote in the annual report for FY23.
But Uday Kotak’s profile is beyond the Kotak Group. Five years ago, the government reached out to him to steer the failed infrastructure lender IL&FS out of asset-liability mismatches. In a four-year period, Kotak, who served as Non-executive Chairman of the IL&FS board, helped the NBFC recover a major part of the loans.
Kotak recently said that an institution has to outlive individuals, including those who founded it. “But like the water in an ocean, each contributory stream collectively makes up the institution,” he said in an address to shareholders this year. And there are global institutions that Kotak wants his group to emulate in the future. For instance, JP Morgan, the world’s largest bank by market capitalisation. It was started by John Morgan; after he passed away in 1913, his son, J.P. Morgan Jr. stepped into his shoes. The son then led the bank through tough times like World War I and the Great Depression. Later, professional leaders took over from the Morgan family to run the bank. And the global bank has only thrived.
Uday Kotak also appears to have built an institution that will stand the test of time, much like JP Morgan.
@anandadhikari
