Kotak has always had the courage to break new ground, explore uncharted territories and reinvigorate the industry.
In its quest to reach the goal, it is as important to create new milestones on the way.
With its industry-defining initiatives, Kotak Mahindra Capital Company (KMCC) harnessed its unrivalled product enhancement expertise to take bold and pioneering initiatives in the capital markets at a time when the company was just finding its feet. Along with the stock exchanges, it set a precedent in the book building IPO process, curating an IPO as per international pricing norms of book building.
KMCC’s efforts in price discovery mechanisms, retail participation through the ‘cut off’ concept and addition of the provision of ‘Red Herring Prospectus’ in the Companies Act have contributed significantly in strengthening India’s capital markets. Working closely with the regulator, KMCC also assisted with the T+6 post issue process, revision of the abridged prospectus in IPOs or in the IPO application forms and disclosures, and the framework for anchor investors in public issues, amongst others. In FY 2018-19, KMCC led the largest IPO, largest REIT IPO, largest QIP and largest Block of the year, raising a total of ₹ 32,983 crore across 14 transactions.
First QIP of Compulsorily Convertible Debentures
Led India’s first-ever QIP of NCDs with Warrants as a stapled product
First-ever Bonds listing for a port trust company
First IPO with no identifiable promoter
First-ever French Auction in Asia
First IDR Issue
First IPO with unlimited FII participation
First IPO with a 10% dilution
At a time when the custody market space was dominated by a few large foreign banks, Kotak took the bold decision of breaking through by creating its niche with differentiated offerings. Providing better technology and customised services in addition to the regular advisory on markets and regulations, it captured market share to become one of India’s largest domestic custodians. Its assets under custody reached upwards of USD 30 billion and clientele included marquee investors and foreign portfolio investors.
With its comprehensive portfolio of Custody, Clearing, Fund Accounting and Treasury Solutions – all served by dedicated in-house teams, Kotak continues to spread its wings globally. A strong focus on new initiatives has led to its emergence as the first bank custodian to offer PCM Services on Gift City’s INDIA INX exchange, with an aim to become a one-stop destination for local and overseas investment requirements of fund managers.
Becoming a leader often requires one to take a contrarian approach, moving in a different direction from the rest of the pack. The Bank’s maxim that ‘return of capital’ is more important than ‘return on capital’ has manifested itself many times in its history and one such example is our Commercial Vehicle/Construction Equipment (CV/CE) loan book. When the CV/CE financing business was going very strong, the Bank foresaw the danger of over-heating in the market and that the industry was prone to over capacity. Kotak had its ears to the ground and chose to be contrarian by consciously reducing its exposure to CV/CE financing from December 2012. As a result, Kotak’s CV/CE book came down to ~ ₹ 5,000 crore in December 2014 from its high of ~ ₹ 8,000 crore in September 2012. During that period, the Bank reduced its monthly disbursement by 80% and largely catered to its existing good customers. The CV/ CE book came down but there was no shutting down of branches and Kotak chose to take the operating expenditure pain rather than capital pain – a strategy that proved to be beneficial amid the peaking NPAs and defaults in the industry. By September 2015, however, on regaining comfort in the segment, the Bank again started increasing disbursements, bringing its book back to ~ ₹ 8,000 crore in June 2016.
The mountaineer often needs to change her/his strategy while climbing difficult peaks. Kotak Securities (Ksec) revolutionised the industry in its formative years when the securities business in India operated on the sub-broker business model where the sub-brokers issued contract notes to clients and were also responsible for settlement of payment which was fraught with risk of sub-brokers defaulting to customers. Keeping investor interest and protection in mind, Ksec decided to revamp its strategy. It issued contract notes and made payout of funds to the client directly and the sub-broker’s role was limited to only coordinating with the client for dealing purposes. This approach later became a directive, when SEBI in August 2004 issued a circular introducing a model tripartite agreement whereby the sub-brokers were not allowed to issue contract notes to clients and the brokers had to issue them directly. This was a major step towards investor protection that ensured direct movement of funds and securities between the broker and the investor.
A fall or two does not stop a mountaineer from getting up and starting all over again. That is what Kotak Institutional Equities (KIE) had to do after it ended its JV with Goldman Sachs, leaving it to survive without its global parentage. It first invested in
building its research abilities and then went on to enhance its sales and execution skills by infusing new talent. Providing topnotch
services to clients, it garnered wallet share from FIIs to succeed in the institutional equities business. It also, early on, focussed on servicing domestic institutions as well given its conviction on India’s financial savings potential and Indian asset managers becoming meaningful players in the Indian investment industry.
KIE today is ranked among India's leading domestic brokerage and research houses, winning several prestigious awards.
Kotak Life Insurance (KLI), a fully-owned domestic company, is one of the leading private insurance companies in the country. The company is known for its balanced distribution mix & product mix, superior business quality, compliance and customer-centricity. It acted out its conviction to achieve a balanced portfolio mix by bringing down ULIPs to 25% and it also has one of the highest VNB margins of 36.9% in the industry.
To boost growth, KLI transformed its agency business by revamping agent selection criteria, improving the value proposition for agents, realigning the role of its frontline employees, in addition to superior execution framework and governance mechanisms.