"We just sit back and wonder — Yeh kya ho gaya?" (What has happened?) says Uday Kotak.
That is a modest look-back at his business that has come a long way from being a humble auto loan lender to a diversified financial services conglomerate in which the Kotak Mahindra Bank has had a pride of place since 2003.
The bank's share value has multiplied 23 times and its market capitalisation is just shy of Rs28,000 crore.
That's quite some growth since the days when it started out as three people in a 300-square-feet office in 1985. Today it has more than 20,000 employees and Rs10,000 crore in revenue as it completes 25 years. The group plans to double revenues over the next four years, adding 2,500 employees every year.
A management graduate of the Jamnalal Bajaj Institute of Management Studies, vice-chairman Kotak, 51, calls the success "a product of the reform process" that kicked off in 1991, opening up the state-dominated financial industry to private enterprise. An investment banking partnership with Goldman Sachs proved critical in Kotak's heady growth through the 1990s.
"We are fortunate that India's nominal GDP growth is 14% per annum. Our view is that we want to grow 1.5 to 2 times the nominal GDP," Kotak told HT.
For two decades, his entrepreneurial comrades have been C Jayaram and Dipak Gupta , now executive directors at Kotak Mahindra Bank.
What started as a non-banking financial company (NBFC) has been left behind. Along the way the group struck big money in deals like the investment banking deal that brought HongKong's Hutchison group to India's telecom industry. The focus is now on the bank.
"There will be disruptive change. We would have 500 branches by 2012 and the optimum number overall is anywhere between 500 and 1,000 branches. Beyond that it's a very difficult call because of changes that will happen as a result of growing technology," said Kotak.
After all, the bank faces formidable competition from both homegrown entities like ICICI and foreign banks that are set to get more licences.
The group aspires to have 60 to 65% of its revenues from the banking business but aims to maintain the leadership position in all segments such as investment banking, stock broking, investment management, wealth management and insurance.
Given the current state of the financial services industry, Kotak feels that banks need to invest a lot in building culture and get rid of the approach for short-term gains.
"This is creating significant cultural issues which are inconsistent with sustainable trust," he said (See interview).
Kotak said he is worried about the trust erosion in banking after banks turned aggressive sellers of mutual funds and insurance policies, exposing clients to losses. "I want to see how can we change this."
It does not help that the group has seen staff attrition while a war for talent is on.
"As an industry attrition rate is high particularly in the front end (attrition rate is 30%). So it is very difficult to attract and retain talent," said Gupta, who also heads human resources at Kotak Mahindra Bank.
In investment banking, the group has failed to evolve as a global player, but Jayaram says that it has been a conscious choice as the group first wanted to establish itself at home.
"Our real challenge is to now try on our own to cross that rubicon and see that do we have the ability to do an ADR or GDR," said Jayaram. "We have tied up with various companies in different geographies to service M&A activities."
Kotak represents a breed of entrepreneurs more aligned to professionally run companies and does not speak of his two sons following him as inheritors. "He (my son) is not going to sit in my chair. Fortunately, I am not old enough now."
Kotak has faced criticism for his brusque style, but his key aides do not agree. "Uday is not an authoritarian and there is system in which the top 20-30 people can have disagreements with him. He is able to engage in discussions and listen to others views," says Jayaram.