The Uday Kotak Playbook: A peek into the veteran banker's management style

2) Raise professionals to quasi-promoters: Uday Kotak never believed in hiring chacha and bhateejas. Initial lieutenants were mostly his clients, for example, Shivaji Dam and KVS Manian were in Tata’s Nelco, C Jayaram was with Sanmar heading the finance division, and Shanti Ekambaram was working with a foreign bank when Kotak recruited them. He believed in hiring professionals, who work to serve their own interests first, but engaging with them in a manner that made them quasi-promoters, who work to serve the company’s interest above their own. Shivaji Dam bought his first lot of shares of the company, in a private issue, with Rs 5,000 generously handed over by Uday Kotak. There were two bundles of Rs 5,000 each offered to him, but Dam took just one. Had he taken both, he would have been twice as rich.

3) Equally close or equally distant: Deep personal connections with work colleagues. He made his lieutenants feel like no secret came between them. He promptly replied to every greeting and wish and remembered personal details of ex-colleagues even after years. Yet, he maintained a clear distinction between work relationships, and best buddies. He made expectations from each clear, therefore no cliques were created and zero power play.

4) Promote insiders, then get experts from outside to accelerate insider-leader’s learning: To head new business verticals, he always chose insiders first and hired experts to work under him/her. With the group growing into newer segments, it was hard to find an insider that fit the leader profile but that didn’t stop Kotak from placing the insider on top and then bringing an expert in, as a subordinate, to become the insider-leader up to speed.

5) Build an informal network: He would talk to every person across various levels and soak up information. When visiting top-level management, would make time to chat with the attendants and other ancillary staff to gauge market sentiment and business opportunities. He would always be on time for meetings but would always stretch its closing, using extra time to talk to juniors to glean something more than what was the meeting’s initial purpose.

Also Read: Kotak Bank minus Uday Kotak: Can the bank continue its winning streak?

ON THE BUSINESS OF BANKING

1) Every penny counts: Every credit is important. Till some years ago, all loans above Rs 2 crore passed through him. But he would never ask questions if the team rejected a credit application referred by him. Senior executives recalled rejecting loans of clients personally introduced by Uday Kotak and being allowed to stand by it, however hard Kotak may have argued in favour of the client.

2) Only the paranoid survive: When NBFCs crumbled in the nineties, after CRB Capital Markets’ debacle, Kotak was quick to respond. He realised P&L (profit and loss) risk could be managed but not a bad balance sheet. He wound up his book and was among the 1 percent to survive.

3) If something’s too good to be true, avoid it: The banker steadfastly avoided all fancy deals and financial fads and always advocated erring on the side of caution. Be it the unbridled growth in infrastructure between 2003 and 2008, unsecured corporate credit, lending to real estate, or anything that offered unrealistic yields or unrestrained growth, Kotak steered clear.

4) A good manager is a good risk manager: He had the ability to anticipate risks. Seeing the financial collapse unfolding over a weekend in September 2008, his team brainstormed, and sat through a Friday night till 4 am the next morning to transfer all credit from Wachovia Bank to JP Morgan. With the risk managed, the team earned their weekend rest while peers reacted to the crisis with panic.

5) Bad news first: Good news could wait. Bad news couldn’t because it needed immediate action. Standard instruction to all execs: Convey bad news first.

Also read: Uday Kotak’s success as a banker has overshadowed his entrepreneurial achievements

6) Know the spice levels: An investment banker offers what investors want; a lender decides what is right for it. Offering equities is letting customers choose the level of spice in their food, lending is deciding how much spice you can take. In 2007-08, there was exuberance, Kotak brought some of those companies to market, but they did not lend; the opportunities were “too spicy” for their taste.

7) Leverage isn’t your money: When a bank with Rs 10 as capital and a borrowed Rs 100 loses Rs 5, it has lost 50 percent of its money. If it has lost Rs 10, it’s time to pack up. Bankers don’t have control and ownership; it’s other people’s money. Arrogance stems from believing that they own all the leverage.

8) It’s not about winning or losing: It’s about living with the consequences, like when a lion chases a deer, where winning isn’t the goal but living or going hungry is the outcome to be contended with. Sensitised senior execs to approach with the outcome-mindset and not with an intent to get to the finish line first.

9) Anticipate change, embrace change: In 1890, New Yorkers and town-planners worried about horse manure. An analyst foresaw horse manure, by 1930, piling up to the third floor of buildings. But change happened - in 1910, the automobile came into being, and was welcomed as an anti-pollution device! Anticipate change.