The Capital Market King- Uday Kotak

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Uday Kotak is the MD and CEO of Kotak Mahindra Bank one of the prominent Indian private sector bank and he is India's fifth richest person according to Forbes India Rich List.

Why in Focus today?

According to RBI, no individual can hold the position of MD or CEO in any bank whether it is a Public sector or Private sector Bank for more than 15 years. So Uday Kotak has completed his fifteen years tenure as MD and CEO of Kotak Mahindra Bank and it would be now interesting to know that who will take his position.

Initial Journey: He was born in a middle class Gujarati Family and after completing his Masters in Business Administration(MBA) he was offered a job in Multinational Giant Hindustan Uniliver but he did not do the job there and instead started working in his family business. Then he started his own business of bill discounting which he later expanded to investment, car loan, personal loan, corporate loan and insurance sector.

The Big Entry: In the mid of 1980s, banks used to borrow money at  6% and lend at 17%. Nelco, a Tata company used to borrow money for 90 days at 17% through bill discounting. Uday Kotak convinced his friends and family to lend him money at 12% which was in turn lent out to Nelco at 16% and that is how the bill discounting business started. It was a win-win for everyone – the depositors earned 12% on Tata risk vs. the 6% they earned on deposits and Nelco could borrow at 16% i.e. at 100 bps lower.

The Rivalry with the International Giant: In 1989, CITI Bank was the only bank which provided car's loan in India but it was at a very high interest rate of 27-28%. But CITI Bank could provide car loan only when cars were available but at that time there was a short supply of cars in India. So cars would be available after 6-8 months of order placement. Kotak saw a opportunity here, his company started buying and booking cars in advance as it would take a long time for the cars to be delivered. So whenever anyone wanted to buy a car they would approach him as he took no premium from the customer on car delivery but instead they had to take loan from his NBFC. This way he slayed the International Giant in their own business in a very short period of time and now he has the ability to buy the CITI Bank India business.

The art of finding the best partners: Uday Kotak had mastered in finding the best Joint Venture Partners by merging with the global leaders like Goldman Sachs, Ford and Old Mutual. He then knew the best practices of investment banking, mutual funds and automobile lending. Apart from this he was able to exit the JV's easily having a win-win situation for all the partners to continue the existence of his business.

Truly he is the gem of Indian Capital Market and the wealthiest self made banker.

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