Twenty five years is a defining age. It is the crossroads where youth
and aspiration meet insight and maturity We, at Kotak, are at this
point of reckoning
The world around us has changed at startling speed: 25 years ago,
Indian television was in its infancy, mobile phones were unheard of,
and emai did not exist. One of our recent TV ads captured this thought
- When was 25, conversations happened face-to-face, not on Facebook.
The true challenge is to ensure we stay relevant to our customers
through a deep understanding of their constantly evolving mindsets.
I look back to when it all started for perspective. Way back in 1985,
your bank (of course, it was not a bank then) was born out of an
opportunity in the spreads business - bills discounting. Soon, it
grew deeper and wider into leasing and car fnance - also spreads
businesses (essentially those that intermediated between savers and
borrowers). Investors as a breed were scant.
Come the early 90s, the stage was set for a slew of reforms in the
capital markets. The abolition of the Controller of Capital Issues
(CCI), the setting up of the regulator Securities & Exchanges Board of
India (SEBI), the launch of the National Stock Exchange (NSE) and the
creation of Indias frst Depository, NSDL. Your company saw opportunity
in this reform-fuelled environment and built its capital markets
business in an emerging world of investors and issuers. Our
takeover of FICOM gave us a distribution advantage, so our reach could
exceed our 6 year old grasp.
Throughout the 90s, as your company approached teenage, it straddled
both the spreads and the markets businesses. Meanwhile, we forged
associations with Goldman Sachs and Ford Credit, in 1995 and 1996
respectively. The frst energized our foray into investment banking and
securities, and the second helped us consolidate our strengths in auto
Then the environment around us suddenly changed with the onset of the
Asian contagion in the late 90s. Non Performing Loans (NPLs) destroyed
the spreads industry, and practically 90% of the NBFCs died. Even large
government sponsored fnancial institutions needed restructuring to
endure. At Kotak, we hunkered down, pruned exposures, survived and grew
stronger. Like the boy who stayed home to avoid catching the bug from
the other kids in the playground.
Then came our age of adolescence. Thats when we started building
things, in what Id call our "fnancial manufacturing" businesses. We
launched our Asset Management offering at age 13 and then Life
Insurance in partnership with South Africas Old Mutual at 16.
At 18, like all young adults, we got our license to drive. We became
Indias frst and so far only NBFC to turn into a bank. This was also
the period when the capital markets really took off. So while we were
setting up the Bank, we saw exponential growth in the securities and
investment banking businesses.
India seemed set to convert into a country of investors, from one of
just savers. We used this time to build out the banks network of
ATMs, as also its suite of world class offerings.
We also responded to the call of the markets by adding other markets-
related offerings such as our private equity business, our realty fund
and the ability to retail pension funds.
However, post 2008, in the wake of the American upheaval, the tables
turned for fnancial services worldwide. The investor, particularly in
equities, was wounded and withdrew to the cocoon of savings. It seemed
like we had come full circle, with the return of the saver!
You may recall, I frst referred to a unique merit of our business model
on these pages way back in 2003, with the epithet 6=1. At that time, we
had begun to taste the benefts of group synergy, and customers had
begun experiencing a seamless brand and service experience. Even as the
American fu was spreading in 2008, I wrote here of how I believed that
our integrated one frm approach was the most appropriate model for the
Indian fnancial sector. Just last year, I reiterated my belief that
while the capital markets businesses are cyclical in nature, the
fnancing and asset management offerings would provide a steady stream
of growing annuity.
Your banks fnancial results for 2010-11 only serve to reinforce my
faith in this model. This year, 75% of our earnings came from the
fnancing business. The capital markets business contributed 15% (down
from 55% in 2008) and the manufacturing business, i.e. Asset Management
and Life Insurance 10%. Regulatory developments, environmental events
and customer mindsets can all serve to shift value from one side of the
platform to another, hence it is critical to be present across the
spectrum of the fnancial ecosystem.
As you can see, while the environment has proven dynamic we have grown
our profts steadily on a consolidated basis. The business model is
complete, and our position vindicated. We are attaining stability and
maturity; we are coming of age. We are, after all, 25!
As we head into the second major phase of our life cycle as a frm, we
want to follow 2 mantras:
Excellence for Relevance
Depth in addition to width At Kotak, we have long defned our position
as concentrated India, diversifed fnancial services. This approach
has served us well so far, given Indias stage of evolution. But going
forward, we will have to make choices, and turning up at every
happening party may not be the right strategy. In preparation for that
time, we must now fgure out how we do better, what we do.
Until now, an important aspect of Kotaks DNA was width - wherever we
spotted relevant, lucrative, unexploited opportunities, we moved ahead
with speed and broke new ground. Now we will complement that with a
surgical focus on depth and excellence. For example, customer
experience is always about delighting each customer, and not about the
And as I wrote in 2007, quality of service is directly linked to the
quality of people. When we crossed the 10,000 mark, we won a mention in
Hewitts list of Indias best employers. Today, at over double that
number, we have again been counted among Indias best employers, and
continue to be Indias number one BFSI employer. I salute my colleagues
and thank them for their contributions. I also thank their families for
their unstinting support.
Finally, I thank our Board of Directors for their support and exemplary
guidance. also take this opportunity to express my gratitude to all
our stakeholders who continue to repose faith and trust in us over the
In conclusion, on a personal note, I did celebrate my own 52nd birthday
just weeks before the end of this fscal
But along with your company, I too feel so full of energy, enthusiasm
and passion as I look forward, that I can say with conviction that it
truly is.grt 2b 25!