In his first-ever interaction with the media, Shivanand Mankekar, the 70-year-old reclusive ex-professor of Jamnalal Bajaj Institute of Management Studies (JBIMS), says his former student, Uday Kotak, the founder-CEO of the country’s fourth largest bank by market cap, has created an institution par excellence.
The 64-year-old, Asia’s richest banker, is “Financier of the Year” as per the jury of Fortune India-Grant Thornton Bharat study of India’s Best Financiers. The six-member jury comprised Mr Cyril Shroff (Managing Partner, Cyril Amarchand Mangaldas), Mr Ravindra Dhloakia (RBI board of director & former professor of IIM-A), Mr Anand Sinha (Former RBI deputy governor), Mr Subhash Garg (Former Revenue Secretary of India), Ms Gayathri Parthasarathy (Global Financial Services Leader - PwC) and Mr Anil Khandelwal (Former MD of Bank of Baroda).
Mankekar, who taught finance to Kotak when he was pursuing his MBA from JBIMS, tells Fortune India, “Uday Kotak is among those handful of people in finance for whom I have the highest regard. Though we do not meet very often, he keeps reminding me how my lessons have stayed on with him.” Uday Kotak completed his Bachelor’s degree in Commerce from Sydenham College, Mumbai, and went on to pursue Masters in Management Studies from JBIMS.
The two individuals whom Kotak holds in high regard have been his former partner Sidney Pinto, who helped him set up the NBFC, the former avatar of the present bank, and Prof Mankekar. In an interview in 2010, Kotak cited a lasting impression made by the professor. “I remember the first lecture of Prof Mankekar.
He asked, “How do you value a company?” Someone said by net profit, and somebody else said by assets. He said, “All wrong. You value a company on its cash flow.” He would explain how growth happens and how companies grow.” Incidentally, Kotak’s first brush with the stock market was when he accompanied the professor to the office of a broker at the Bombay Stock Exchange. “That is where the idea of financial consultancy started germinating in my mind along with reading a few books,” Kotak said in the interview.
But Mankekar believes Kotak is cut from a different cloth. “The knowledge which a teacher imparts to his students is akin to planting a seedling, and it’s up to the student to nurture it into a robust tree, something which Uday has done par excellence,” says the professor, a prolific investor himself who shot to fame with his investment in Pantaloons in 2002.
For the second year running, Kotak Mahindra Bank (KMB), with a ₹4.90 lakh crore standalone balance sheet, has retained its numero uno position as the top mid-sized bank. Known for his conservatism, Kotak tells Fortune India that he is not averse to growth but is cautious of growth at any cost. “It’s not about conservatism, but more about a very deep entrepreneurial view of risk and return. If I take so much risk, I must make a commensurate return. This is true globally — banks horribly misprice risk and return,” says Kotak, who had tweeted about the perils of chasing size when Credit Suisse went under.
Incidentally, amid the bad loan crisis at ICICI Bank in 2017, Kotak Mahindra Bank’s (KMB) market cap had eclipsed that of ICICI. But since then, ICICI’s market cap has bounced back to ₹6.47 lakh crore against KMB’s ₹3.65 lakh crore. But Kotak is unperturbed about the changing market stakes — forever willing to sacrifice growth at the altar of profit.
While ICICI Bank’s advances now stand at ₹10.19 lakh crore, more than 3x that of Kotak Mahindra Bank’s (KMB) ₹3.25 lakh crore book, Kotak believes size should be an outcome of chasing the right opportunities and pricing credit right. “The ultimate objective of sustainable growth is the creation of value. For value, you need relevance [in size]. But you should not obsess over size for size’s sake. Being the largest does not necessarily mean the best,” says Kotak.
Mankekar, however, believes people mistake Kotak’s “risk-understanding” as “risk-aversion”. “He is a visionary who knows how to measure and price risk. Combined with tremendous patience and the maturity of waiting for the right balls to play his shots, has helped Uday make a mark of his own,” says the professor.
With a capital adequacy ratio of 21.80% and a gross NPA ratio falling to 1.78% from 2.34% in FY22, Kotak is rearing to go. “The demand is reasonable, GDP growth is strong, inflation is under reasonable control, interest rates have plateaued, fiscal deficit is in check, and we have political stability. What more can you ask for?” says Kotak.
Though his peers have grown in size, Kotak Mahindra Bank has proved to be a wealth creator with the stock compounding return at 30% since 2003 against 15% for the Sensex. It continues to be the most expensive banking franchise at 4.5x estimated P/B, significantly higher than HDFC Bank (3.7x) and ICICI Bank (3.3x).
Though Kotak had to cut short his cricketing career post an injury, Mankekar believes his protégé hasn’t lost his sense of timing. “Uday is the ‘The Wall’ of Indian banking, who can always be depended upon to make the most prudent decisions without any pressures of growth/size, and this has led to him steadfastly navigating the bank through the cycles.”
Interestingly, Rahul Dravid, the renowned cricketer who retired at the age of 39, earned the esteemed sobriquet "The Wall" for his exceptional prowess to excel in any playing conditions. His remarkable achievement of scoring 270 runs against Pakistan in 2004 during a gruelling 12-hour-long test innings solidified his reputation. Just as Dravid's resilience and unwavering determination captivated the world of cricket, so, too, has Kotak demonstrated an unwavering resolve in weathering the numerous crises that have plagued the banking sector over the past two decades. With his impending departure by the end of this year, it is only fitting that Prof Mankekar bestows upon Kotak the title of "The Wall of Indian Banking."