World’s Richest Banker Made $16 Billion After a Brush With Death

Photographer: Simon Dawson/Bloomberg

If it weren’t for a cricket accident that almost killed him, Uday Kotak probably wouldn’t be the world’s richest banker.

A ball that hit him in the head and led to an emergency surgery pushed a 20-year-old Kotak to abandon his dream of becoming a professional player. After a brief stint at the family’s cotton-trading business, he went on to pursue his MBA at the prestigious Jamnalal Bajaj Institute of Management Studies in Mumbai before starting out in finance in 1985 at the age of 26.

Kotak, now 61, has a fortune estimated at $16 billion, according to the Bloomberg Billionaires Index.

While India has been grappling with a shadow-lending crisis, his Kotak Mahindra Bank Ltd. has been able to rise through the crowd, gaining investors’ trust by starting to slow lending to riskier sectors more than two years ago and keeping good corporate governance. When the coronavirus pandemic added to the industry’s woes by eroding borrowers’ ability to repay, the firm was one of the first to raise capital to fortify its balance sheet, helping boost investors’ confidence that it will be among the biggest winners as the nation emerges from its Covid-induced recession.

The strategy paid off: As lenders have plunged globally, Kotak Mahindra Bank shares are up 17{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} this year, the most among Indian peers, and Kotak just gained an extension to his chief executive officer term for another three years. A representative at the firm didn’t respond to requests for comment.

“As far as I’m concerned, becoming the world’s richest banker is only a proxy for Uday being one of the world’s smartest bankers,” said Anand Mahindra, the chairman of Mahindra Group in Mumbai, whose tie up with Kotak back in 1986 led to the firm’s name. “More importantly, he’s understood that what makes a bank sustainable and durable is not just smart strategies but unassailable governance.”

Kotak’s company stands out in a country where lenders have some of the worst bad-loan ratios in the world. Trouble for the firms started brewing in 2015, when India’s regulator initiated a massive audit that unearthed hidden souring loans. That led to a shadow-banking crisis that constrained the broader economy and further hurt asset-quality scores and profits.

Kotak Mahindra Bank, though, was able to adapt. It reduced lending to small and medium companies and unsecured individuals. Its shares rallied more than 24{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in each of the past three years.

While its bad-loan ratio has risen in 2020, it ranked as the second lowest among peers, with its capital-adequacy score being the highest. The nation’s second-largest lender by market value reported an unexpected 27{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} profit surge in the quarter ended Sept. 30.

Capital Boost

Kotak Mahindra Bank was one of the first to raise funds as virus broke out

Source: Company filings

The firm got another boost last month, when the central bank proposed increasing the ownership limit for founders, effectively reducing the risk that Kotak will be forced to dilute his 26{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} stake in the lender as previously demanded by the Reserve Bank of India.

Also read: Kotak’s Profit Surge Helps Lender Become India’s No. 2 by Value

Kotak, a native of the western state of Gujarat, set up an investment company in 1985 with a 3 million rupee loan ($41,000) from family and friends and partnered with Mahindra the following year. The firm, which started off discounting bills, later expanded its loan portfolio, got into stock brokering, investment banking, insurance and mutual funds. It converted into a lender in 2003 after getting the RBI’s nod.