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Read the full text of Uday Kotak's message to shareholders of Kotak Mahindra Bank

"While India was amongst the hardest hit, the silver lining is that we have a tremendous opportunity before us to turn adversity into success for our people," Uday Kotak said.

July 30, 2021 / 08:21 AM IST
File image of Uday Kotak

File image of Uday Kotak

In an era marked by the COVID-19 crisis, the Kotak Mahindra Bank will not shy away from taking "bolder bets", the bank's Managing Director and CEO Uday Kotak said in his message to the shareholders on July 29. The statement comes three days after the private sector lender posted a 32 percent year-on-year (YoY) jump in standalone Q1FY22 net profit at Rs 1,641.92 crore against Rs 1,244.45 crore in Q1FY21.

Here is the full text of Uday Kotak's message to the shareholders:

The Never Normal World

We have leapfrogged five years in the span of a year.

The dictionary defines normal as usual, regular, conforming to a type, standard or pattern. Humankind is hard-coded to seek the assurance and security such patterns promise, even a new normal, if you will, to which we can adapt and grow accustomed to. But a never normal world, one that is unpredictable and does not fit patterns, is a new planet of challenges and opportunities.


2020 was a year unlike any that we have seen. And while 2021 brings with it a fair degree of hope and optimism, I believe that we must embrace living in a world where the new normal and never normal coexist.

Look around us. And what is clear is that the pandemic has resulted in some everlasting changes in the way consumers and businesses will function. There are some significant structural changes that are taking place, in the way we live and work, the way we bank, shop and interact with others. When it comes to digital and technology, we have leapfrogged five years in the span of a year, and while there will be some rebalancing when we revert to more in-person interactions, there is no going back completely, with digital extending to almost all aspects of our lives.

The other consequence of the pandemic is the risk of increasing imbalance between the rich and the poor – both when it comes to people and nations.

This poses some important questions. Will the post-COVID world see greater collaboration between nations or will each country retreat into a silo? Will it give a boost to globalisation or increase protectionism? How do we ensure equal growth that embraces all? And from India’s perspective, how do we turn this crisis into a significant opportunity for the country and its citizens?

India in the Never Normal

The future belongs to the educated and skilled

The two months of April and May 2021, when COVID 2.0 struck India, served as a reminder of human frailty and vulnerability in a manner that I had never imagined. We must do everything in our power as people and governments to make sure it never recurs.

While India was amongst the hardest hit, the silver lining is that we have a tremendous opportunity before us to turn adversity into success for our people.

Geography is history. We are transitioning to a world where ‘location’ will be increasingly irrelevant. India’s army of talented software engineers, analysts, consultants can provide their services to the world sitting in India. And for a service economy like India’s, this can be a boon. India can be the front office as well as back office of the world.

However, for India to harness this opportunity fully, what is critical is that we redouble our efforts in education. We have to make good the year that so many of our children have lost to the pandemic. More importantly, we have to make structural changes in our educational system to improve the quality of education imparted, invest in teachers and upgrade teaching infrastructure.

The future belongs to the educated and skilled and we owe it to our present and future generations, in particular to those lower down on the socio-economic ladder, to invest in education, aggressively and meaningfully. Education gives us the best chance to bridge the gap and offer a better quality of life to all.

On the same lines, even within the country, I expect COVID-19 will narrow some of the disparities between urban and small town & rural India. With geography no more a significant consideration, people can choose to work from their hometowns and migration to the cities could reduce. This will enable workforce in smaller cities to compete for jobs irrespective of where they are based.

India in 2021 is also where we were in 2003, at the early stages of an investment cycle. The growth driver for India will be infrastructure – both physical and social.  Investments in physical infrastructure, including internet and broadband connectivity, sharp increase in healthcare spending – building and upgrading healthcare facilities, training doctors and nurses, and education are a sine qua non. We have to invest significantly more and move closer to the 3% of GDP mark in healthcare investments over the next 3-5 years.

However, the country cannot lose sight of the importance of sustainability as we pursue our growth priorities. Climate change is a reality and sustainable growth is the future. Profit, people and the planet are closely intertwined such that we cannot focus on one at the expense of the other. We will also see a disproportionate flow of global and domestic capital to companies that adopt and integrate the principles of ESG in their businesses.

Kotak in the Never Normal

From caution to growth conviction

Which brings me to Kotak. As I’ve said before, our ambition is to continue to build on our vision of a world-class financial services institution that delivers long-term sustainable returns for all its stakeholders. With that in mind and against the backdrop of the pandemic, you will see a significant shift in our approach, one of greater aggression, one that is even sharper on execution.

We will not shy away from taking bolder bets. We have a deep conviction in the India growth story and confidence in our risk management capabilities. And we believe the time is right to experiment more, concentrate on segments that we deem offer the best opportunities for returns and, in the process, support the Indian economy by extending credit, while at the same time providing safety to our depositors.

Our template for growth as always will revolve around risk-adjusted returns. We don’t look at either – returns or risk - in isolation. Today we have a much lighter balance sheet and with sufficient capital in our hands, we are ready to grow substantially faster, but on our terms.

The other area that takes precedence for us is higher investments in strengthening our digital and technology platforms and offerings. The future may be uncertain, but we can be confident that it belongs to technology. What was once a support function to business, is now the epicentre around which our businesses will revolve.

Finally, you will see a further shift in our business model towards being even more customer-centric. While customer-first was always the byword that we lived by, the needs of the customer are now even more front and centre. Our model will revolve principally around customers and business decisions will be taken with the customer at the core.

The year gone by


In an extraordinary year, our primary focus was on safety. Safeguarding our employees, customers and partners. Banking is an essential service and we took a number of measures to ensure the seamless delivery of services, while at the same time ensuring a safe workplace environment for all. Our strengths in digital banking allowed customers to bank safely from home.

During the year, we have undertaken a mindset shift to make retail and commercial lending our focus, in addition to the corporate and deposit franchise. For example, we are leveraging our low cost of funds to offer a competitive interest rate on home loans. Home loans give us an opportunity to build a longer-term relationship with customers. And we will get bolder in unsecured retail finance too, for which we’ve kept our powder dry over the last two years.

From a group perspective, we had multiple engines firing. In FY 2020-21, the subsidiaries contributed 30% to the consolidated Profit after Tax. Stock markets posted a smart recovery and then some, and this was reflected in the performance of Kotak Securities and Kotak Mutual Fund.

Kotak Life Insurance put in a strong performance with AUM (Policyholders’) growing 34% YoY. Over `30,000 crore of funds were raised via IPOs in FY 2020-21 and Kotak Investment Banking was the banker to many of the marquee issues. Kotak Special Situations Fund invested in six stressed/special situations opportunities during the year across sectors like real estate, chemicals, technology, cement and pharma.

Looking Ahead and Beyond

Doing good and doing well go hand in hand

At this critical juncture, we have to redefine our priorities. Growth cannot be just for a select few. Inclusion is our responsibility as well as a business imperative. There will be a premium on sustainable growth. Growth that is inclusive and that takes into account the environment, is socially responsible and scores high on governance and ethics. Doing good and doing well go hand in hand.

For the financial sector, the disproportionate importance of risk management has come to the fore. The ability to price risks well and having superior underwriting skills is core to the success of a financial services institution.

The industry also needs to stop postponing the inevitable and kicking the can down the road. Upfront action with an eye on enduring, sustainable growth, not swayed by quarterly, short-term results is a must for the future of a healthy Indian financial sector.

Banks also need to be relevant for the future. The winds of change are blowing and banks need to reinvent themselves. Customer-focus and Digital-first are the keys to survival and growth.

As a financial services institution, I believe that Kotak is well-positioned to take on the future with more than adequate capital in our arsenal, a nimbler balance sheet and a more assertive attitude.

I express my deepest gratitude and appreciation to all the COVID warriors who have delivered exceptional service in such trying circumstances.

This includes members of the Kotak family who have tirelessly put others before self – both on the job and off it.

We are in for exciting times ahead. The old maxim “Change is the only constant” could well have been written for 2021 and beyond.

I wish you peace, prosperity and good health.
Moneycontrol News
first published: Jul 29, 2021 09:44 pm
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