Uday Kotak: From Humble Beginnings To Banking Tycoon

Billionaire banker Uday Kotak, founder of Kotak Mahindra Bank – India’s fourth-largest bank by market capitalisation – is now working towards further building India’s financial sector.

By Nichola Marie

Cricket’s loss was finance’s gain? Possibly, as, in his college days, young Uday Kotak was a talented cricketer. A right-hand batsman and a left-hand spinner, he was captain of his school (Hindi Vidya Bhavan) and college (Sydenham College of Commerce and Economics) cricket teams and also played in the Kanga League in Bombay (Mumbai). Then things changed in September 1979, when, during a Kanga League match at Azad Maidan, he was hit on the head by the ball while running between the wickets. He collapsed. An immediate operation stopped the brain hemorrhage. It saved his life but rendered him bedridden for months. Missing a year of studies at the Jamnalal Bajaj Institute of Management, it was during this time that he started visiting the office of his joint family’s cotton export business at Navsari Building, Fort.

Uday Kotak

Striking Out

On completing his MBA, young Kotak was already sure he didn’t want to join the family business which would have meant dealing with more than a dozen family members. The Kotaks were into trading cotton and other agricultural commodities and had offices in Shanghai, erstwhile Bombay and Karachi. Post Partition, his father had returned to India from Karachi and no less than 60 family members lived together on a floor of a large house in Babulnath, sharing a single kitchen. In Kotak’s own words, it was a family that “believed in capitalism at work and socialism at home.”

Convinced by his father not to join Hindustan Lever as was his original plan, but to set up his own business, he accepted his father’s offer of a 300 sq ft office space at the Navsari Building premises. It was here that, aged 23, he started his financial consultancy. It was only expected given that he had always been a maths wiz with the ability to see the larger picture beyond the numbers; he had also topped his university in BCom.

Now, his sharp eye for opportunity drew him towards discounting bills of large corporates. In a scenario where banks offered low interest to savers and extracted high rates from borrowers, he entered as an intermediary, offering money at low rates to companies discounting their bills. It was to prove a winning formula. 

Uday Kotak

Through a friend working at Nelco, he learnt that the Tata firm borrowed funds for 90 days at 17%. However, when it came to returns on fixed deposits, banks offered just 6%. In his own words, “I told my family friends that instead of a 6% return, I would give them a 12% return.” Sourcing funds at 12%, he would lend onward to well-known companies at 16%, making a 4% spread. With the growth of his bill discounting business, he formed Kotak Capital Management Finance, which later became Kotak Mahindra Finance Ltd (KMFL).

Success Story

As the NBFC expanded, individuals who played a key role in its growth in the early days included Shanti Ekambaram (now whole-time director and deputy MD from March 1, 2024), KVS Manian (now whole-time director and joint MD from March 1, 2024), Jaimin Bhatt (group chief financial officer), as well as C Jayaram (former joint MD and now non-executive director), and Dipak Gupta (former joint MD). 

Uday Kotak

In 1995, Kotak struck its first overseas tie-up – a joint venture (JV) with Goldman Sachs for an investment banking firm Kotak Mahindra Capital. Kotak Securities was also created via a similar venture between the two parties. The following year, two JVs for car finance were created with Ford Credit International; this grew alongside the company’s investment banking and stock broking. During the 1997-98 Asian financial crisis, when thousands of NFBCs crashed, KMFL was amongst the minuscule 0.5% that survived by halving the size of its balance sheet.

Making History 

Uday Kotak
The Co-Chairs of the India UK Financial Partnership (IUKFP), Mr. Uday Kotak and Sir Gerry Grimstone call on the Union Minister for Finance and Corporate Affairs, Shri Arun Jaitley, in New Delhi on November 07, 2016.

Armed with the belief that “ultimately one needs to own the customer,” Kotak pushed KMFL to convert into a bank. Acquiring a banking license from the Reserve Bank of India in 2003, KMFL made history by becoming the first NBFC to convert into a commercial bank. And it has sustained. Presently, unlike India’s top four private sector banks, the profits from the subsidiaries of the Kotak Mahindra Bank group (as a percentage of the consolidated profit) are the highest, while they are lower than 10% for the other banks. Besides being in this unique position, Kotak Mahindra Bank (KMB)’s appropriate risk evaluation and conservative approach have helped achieve success in an environment beset by challenges. 

KMB is today the only Indian private sector lender that retains the family names of its promoters. Operating across the spectrum of financial services, including the investment bank, asset management, life and general insurance, alternate assets, vehicle financing, brokerage and research, the consolidated profit as of December 31, 2023 for the group stood at Rs 4,265 crore.

Larger Mission

Uday Kotak

Kotak and the promoter group combined own a 25.93% stake in the bank. According to Forbes, he is now India’s 12th richest Indian with a net worth of $13.2 billion. Stepping down as the bank’s MD and CEO on September 1, 2023 — though he remains on its board as a director — Kotak is now looking forward to enhancing India’s financial sector through policy, and promoting talent and opportunities. 

Kotak’s leadership became widely acknowledged after he was enlisted by the Government to help clean up the books of the debt-ridden IL&FS in 2018. As of last year, 61% of IL&FS group’s outstanding debt had been resolved. 

As part of the B20 (the official G20 dialogue forum with the global business community), he is helping create a financial framework to help sustainability and lessen the existential risks to planet Earth. He terms this risk “much higher than the capability of the business models prevalent on Earth to save it.”

Future-Ready 

Simultaneously, he has ensured that KMB is future-ready as it embraces the ‘digical’ (digital first supported by physical) world. With the onboarding of key heads, the focus is on driving potentially transformative changes, along with growing internal talent. Confident that the “institution will move forward,” under the new MD and CEO Ashok Vaswani, Kotak believes the focus must be on areas of customer, products, risk, and technology. 

Last year, Kotak’s son, Jay Kotak, alongside being the co-head of Kotak Mahindra Bank’s mobile banking app, Kotak 811, assumed additional charge as senior vice-president – conglomerate relationships. Speaking on the sensitive issue of family members working to make a mark professionally in an institution founded by the family, Kotak senior had said, “If the family member is interested in making a career, if they get it on merit to build the career, and it is not imposed from the top [that is fine].” 

Kotak’s astute leadership, which built Kotak Mahindra Bank into a one-stop financial shop, will doubtless ensure a smooth future. 

Awards & Memberships 

Kotak has been the recipient of various high-ranking awards over the years. These include Ernst & Young World Entrepreneur of the Year (2014) among several others… 

Kotak is a member of the Government of India’s High-Level Committee on Financing Infrastructure, the Primary Market Advisory Committee of the Securities & Exchange Board of India, Member of the Board of Governors of the National Institute of Securities Markets and ICRIER. He is also Governing Member of the Mahindra United World College of India, and a Member of the National Council of CII. He is also a member of the strategic board which advises the national law firm, Cyril Amarchand Mangaldas.

It’s Personal

Uday Kotak

Kotak is married to Pallavi; they decided to wed just two months after meeting at a party in 1985. The couple has two children – Jay Kotak and Dhawal Kotak. Jay Kotak (born 1989), earned his bachelor’s degree in history and economics from Columbia University, followed by an MBA from Harvard Business School. In November 2023, he married Miss India and actress Aditi Arya in a destination wedding at Udaipur. 

Dhawal Kotak completed his bachelor’s degree in psychology from Yale University followed by his MBA from Columbia Business School. He works as a senior program manager at Amazon.

When not working, Kotak senior, who has a fondness for cricket and the sitar, prioritises spending time with his family and pets. His favourite holiday destinations are Japan in the cherry blossom season (April), Spain and Brazil. His regret? That he doesn’t get time for any physical exercise! However, given the fact that his wife is a marathon runner and a trekking fiend, he quips that between them, they lead a healthy life. 

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