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It is hard to leave a company you helped build, especially when it is flourishing. Regulatory rules meant that Uday Kotak, the founder and promoter of Kotak Mahindra Bank, had to relinquish his executive position at the bank by the end of this year.
Nevertheless, Kotak resigned from his position as managing director (MD) and chief executive officer (CEO) of the bank four months before the end of his term, to facilitate management transition and allocate time to personal priorities.
The resignation marks an end to his two-decade-long innings as MD and CEO at Kotak Bank. The bank bears his imprint of conservatism, it grew steadily under his leadership and was rewarded with premium valuations by investors. Yet, investors are not overly worried about the exit of the founder CEO—the Kotak Mahindra Bank stock was down just 0.6 percent in Monday morning trade.
The regulator’s rules limiting the tenure of a bank CEO means that Kotak’s move was inevitable. Also, Kotak and the promoter group continues to hold about a quarter of the bank (25.9 percent). He has also become a non-executive director of the bank, with a term of five years.
The large financial interest and the board seat can ensure continuity. “Uday Kotak is hanging up his boots only under regulatory compulsions, but the co-founder of Kotak Mahindra Bank will continue to command a say in the running of the lender as a key shareholder in the bank and a prominent voice on the board,” writes Dinesh Unnikrishnan. You can read the full coverage at Moneycontrol here.
Of course, one has to see how the regulator views the latest developments at the bank. Also, a smooth transition to the new leadership is key to long-term returns of the stock. Even so, the continuing presence of the founder promoter at the bank is reassuring for investors.
“There is little doubt that as the principal shareholder, with close to 26 percent stake, Uday Kotak has deep skin in Kotak Bank and he would ensure a rewarding journey for himself and the shareholders,” writes Madhuchanda Dey in this piece. Do Read.
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