Here are excerpts from a free-wheeling interview with Kotak:
On entering his 25th year in business.
It’s difficult to plan precisely where you want to go. But you always have a big desire of where and how you want to go. In 1985, we were operating from an 300 sq. feet office in Flora Fountain and it used to be great fun at that time as the core of our business was spreads (with bill discounting). We started with Rs 30 lakh and every year would earn Rs 20-30 lakh.
It was a great return on equity... Then came Ford Credit, a joint venture for car finance, in 1996. Then we were part of the first JV Goldman Sachs did anywhere in the world. Both these JVs gave us tremendous insights into how business was done the world over. It was a great learning and got us tremendous intangible value.
It was like: “I am moving out of my little pond to know how the ocean works.” Then we started building businesses like mutual funds (1998), insurance (2001) and then we converted into a bank. It’s been six years as a bank. It’s amazing to look at this company, that in 1985 we started with Rs 30 lakh capital and three people, grow into a firm with 18,000-odd employees.
Your growth mirrors that of the Indian financial sector…
You will see a significant pattern. We have also lived through challenging times, a period in which there were so many scams. I call them agniparikshas (tests by fire) internally. We saw a lot of casualties in the process. You then begin to understand the nuances of the sector far more deeply.
What has it taken to survive and thrive during this period?
Our firm’s belief has always been that if something is too good to be true then don’t do it. It’s strange, but you have seen people slip up on simple home truths. Secondly, we face reality as a firm, and to that extent we tend to be conservative. It’s about a business of trust and continuity.
I like to say: “If what you create doesn’t outlive you, then you have failed.” So if you are dealing with an intangible thing like trust you need to be real. I am a firm believer that we don’t have to be nuclear scientists for this business, which is just pure common sense. It’s got complicated by people wanting to grow and do things too fast.
Do you aspire to be a leader in each of your businesses?
People have spent disproportionate money for rankings, without necessarily deriving value. We respect size, it does matter, but we don’t want to buy size alone without value. Being in the top three in the business is not my priority. It’s not like if we’re in the top three, only then we’ll have value thereafter.
It’s a dangerous game to play. We’ve seen lots of examples of those who chased numbers and destroyed value. I am a believer in return on equity over time. Market cap is a consequence; If you chase money, you don’t get it. If you chase a dream, money will come.