[ad_1]
Uday box
Photographer: Simon Dawson / Bloomberg
Photographer: Simon Dawson / Bloomberg
If it weren’t for a cricket accident that nearly killed him, Uday Kotak probably wouldn’t be the richest banker in the world.
A ball that hit him in the head and led to emergency surgery pushed Kotak, 20, to abandon his dream of becoming a professional player. After a brief stint in the family’s cotton trading business, he continued his MBA from the prestigious Jamnalal Bajaj Institute for Management Studies in Mumbai before starting finance in 1985 at the age of 26.
Kotak, now 61, has an estimated fortune of around $ 16 billion, according to the Bloomberg Billionaires Index.
While India has been grappling with a shadow lending crisis, its Kotak Mahindra Bank Ltd. has been able to rise through the crowd, earning investor trust by starting to slow lending to riskier sectors more than two years ago and maintaining good corporate governance. When the coronavirus pandemic added to the industry’s woes by eroding borrowers’ ability to pay, the company was one of the first to raise capital to strengthen its balance sheet, helping boost investor confidence that it will be among the biggest winners as the nation emerges from the Covid-induced recession.
The strategy paid off: As lenders plummeted globally, Kotak Mahindra Bank shares rose 17% this year, the most among its Indian peers, and Kotak just got an extension of his tenure as a director. executive for another three years. A representative for the firm did not respond to requests for comment.
“As far as I’m concerned, becoming the richest banker in the world is just a representation that Uday is one of the smartest bankers in the world,” said Anand Mahindra, president of Mahindra Group in Mumbai, whose link to Kotak in 1986 led to the name of the company. “More importantly, he has understood that what makes a bank sustainable and long-lasting is not just smart strategies, but impregnable governance.”
Kotak’s company stands out in a country where lenders have some of the worst bad loan rates in the world. Problems for companies It began to take shape in 2015, when India’s regulator launched a massive audit that uncovered hidden sour loans. That led to a shadow banking crisis that limited the overall economy and further affected asset quality scores and earnings.
Outside of a Kotak Mahindra Bank Ltd. branch in Mumbai in April.
Photographer: Dhiraj Singh / Bloomberg
However, Kotak Mahindra Bank was able to adapt. It reduced loans to small and medium-sized businesses and the unsecured. Its shares have risen more than 24% in each of the last three years.
While its bad loan ratio has risen in 2020, it ranked second-lowest among its peers, with its capital adequacy score being the highest. The nation’s second-largest lender by market value reported an unexpected profit increase of 27% in the quarter ending September 30.
Capital boost
Kotak Mahindra Bank was one of the first to raise funds when the virus broke out
Source: company files
The firm received another boost last month, when the central bank proposed to increase the ownership limit for the founders, effectively reducing the risk that Kotak will be forced to dilute his 26% stake in the lender as previously required by the Reserve Bank of India.
Read also: Box Increased Earnings Helps Lender Become India’s # 2 By Value
Kotak, originally from the western state of Gujarat, established an investment company in 1985 with a 3 million rupee ($ 41,000) loan from family and friends and partnered with Mahindra the following year. The firm, which started discounting bills, then expanded its loan portfolio, ventured into stock brokerage, investment banking, insurance and mutual funds. He became a lender in 2003 after getting the go-ahead from the RBI.
The financier has been the CEO of Kotak Mahindra Bank since its inception and gained more control in 2006 by ending a more than a decade-long association with Goldman Sachs Group Inc. He rose through the ranks by maintaining strong underwriting practices and avoiding sector loans. more risky. Instead, focusing instead on expanding collateral-backed loans for farm equipment, mortgages and vehicles, according to Deepak Jasani, head of retail research at HDFC Securities Ltd.
While the RBI just approved the Kotak’s CEO term extension, despite the previous proposal to put a cap on the tenure of top executives in private banks, investors are beginning to wonder what will happen after he hands over the reins.
Unlike many family businesses in India, Kotak has avoided enrolling family members on the lender’s board or in senior executive positions. That helped maintain the confidence of investors and depositors in a country where a lack of corporate governance and transparency has already brought down three banks and driven two shadow lenders out of business in less than two years.
Also Read: Why India’s Financial Firms Keep Exploding
“It’s been all Uday,” said Ananth Narayan, a former banker and now an associate professor of finance at the SP Jain Institute of Management and Research in Mumbai. “There are a lot of good people under him, but frankly they are all overshadowed by Uday. Anyone who has to put themselves in Uday’s shoes has a tough job because he is an institution unto himself.
For now, Kotak is still very much in command. The firm is exploring a acquisition of smaller rival IndusInd Bank Ltd., people familiar with the matter said in October, a move that would consolidate Kotak Mahindra Bank’s position as one of India’s top private lenders and increase its assets by more than 80%.
Photographer: Simon Dawson / Bloomberg
Looking back, Mahindra says its decision in the 1980s to bet on Kotak has been a gratifying one.
“I vividly remember both my father and uncle asking me at the time why I had so much faith in this young man just out of business school,” he said. “I told them that I had a feeling that one day we would be very happy to have our name associated with theirs. I just had a strong feeling about her potential. “
– With the assistance of PR Sanjai
