Message from Uday Kotak

When everything can change,

ANYTHING IS POSSIBLEANYTHING IS POSSIBLEANYTHING IS POSSIBLE

The word that has resonated the most with me, especially post-COVID, is humility. Whether it is political leaders, central bankers, business leaders or the householder, change is on us and at us - like we have never seen before, and none of us can pretend we know its contours and how things will play out.

With the COVID era hopefully behind us, the world feels like a different place. Whether it’s war, inflation, supply shortages, deteriorating service standards everywhere or crazy airline travel prices, something seems to have snapped. We are on a road never travelled. The geopolitical order is also at the altar of change. But, I am also convinced that this is where new vistas of opportunity are, as we reshape our planet.

THE GLOBAL MARKETS BECOME THE FIRST INDICATORS OF CHANGE

In the past few years, much private capital, supported by liberal printing of money by central banks, has chased a host of new-age companies, with an intent to create value through access, affordability, efficiency and usually an asset-light model hinged on technology. The valuations have been off the charts, with investors chasing unicorns, gazelles and anything that can resemble a disruptor of traditional business models. Like every rise in history, this one also came to a fall, a meltdown, to be more precise, with trillions of dollars of investor wealth eroding globally at speed. We moved from a world where money had zero price to money does come at a price! From here, where do we go?

THE INDIAN ECONOMY PERFORMED RESILIENTLY AMIDST THE CHAOS

The delta wave enveloped Q1, perhaps also driving an unprecedented scale of vaccination across the nation. By Q2 though, the economy had begun to revive at speed. The scale of festive spending, travel and tourism, job creation and GDP growth touched prepandemic levels signaling the robustness of a large domestic economy, fueled by a captive population riding on deferred spending and aspirations. By Q4, digital payments crossed the USD1 trillion mark, and the stock markets rose to an all-time high, riding on a new breed of part-time retail investors. Real estate, one of the most preferred asset classes for Indians, saw a revival on the back of demand for premium housing and bigger units. Lower interest rates coupled with large unsold inventory were like manna from heaven for homebuyers.

The Government’s pledge to promote ease of business and faster implementation of large projects kept India a decent performer amidst tough global conditions. The efforts made in the past few years started connecting to build an ecosystem led by technology, access and affordability in the rural and urban markets.

Amidst this resurgence, the global economic impact began weighing in, fuel prices boosting inflation and curtailing access to easy money, affecting spending and investments in some segments of corporate India. The ripple effect of lockdowns in China created supply chain challenges, deferred supplies and chip shortages, the full impact of which will take time to register. However, this disruption has indeed brought the need to explore India as a key alternate procurement destination for many sectors worldwide. This opportunity clearly ties in with the ambitious ‘Make in India’ vision of the Hon’ble Prime Minister Shri Narendra Modi.

IT IS TIME TO TAKE WING, BUT WITH PARACHUTES ON

India continues to have a fundamentally sound growth story. The core of any strategy lies in its execution, and while taking an unpaved road, one needs to balance enthusiasm with a sense of alertness. Given the fluidity of the global economy, geopolitical landscape and inflation, the immediate few months ahead may pose multiple challenges.

India will need to balance its aspiration for growth with maintaining macro-economic stability. India cannot choose its neighbourhood, which adds to the challenges at hand. Prudence on the fiscal deficit, current account and monetary policy are key requirements.

“The word that has resonated the most with me, especially post- COVID, is humility. Whether it is political leaders, central bankers, business leaders or the householder, change is on us and at us - like we have never seen before, and none of us can pretend we know its contours and how things will play out.”
AT KOTAK, OUR STRATEGY IS ALIGNED TO THE POSSIBILITIES UNFOLDING

We, at Kotak, envisage the future around excellence, relevance and sustainability.

Excellence is all about delivering cutting edge products and customer experience. Our investments in people and technology have enabled us to accelerate in a dynamic market space.

Relevance is all about creating a significant and meaningful presence in our chosen customer, product and geographical segments. We have continued to foray and scale up our presence in key growth segments.

While many companies have meteoric growth, few sustain in the long run. This brings me to the final pillar, sustainability. It is all about insulating the business as well as creating value, while investing in risk management, processes, and brand and ESG consciousness.

“We, at Kotak, envisage the future around excellence, relevance and sustainability.”
CHANGE IS A CONSTANT, AS WELL AS AN OPPORTUNITY

In the past few years, we have reimagined banking, outlining customised platforms to empowering diverse customer profiles through technology, comprehensive need analysis and on-demand delivery from branches to fingertips. We have built a robust business model eyeing the challenges. Being a conservative institution by nature helped us build moats around credit products, technology reliance and pan-India presence. And we have continued to overhaul them, never taking anything for granted.

Being optimistic through actions helped us set new directions to the Kotak growth story. We try to predict and adapt to change. In FY 2021-22, we rebranded Kotak811 to offer the essentials of banking through a tech-first user experience to millions of Indians. Kotak811 is changing the way India banks every day, offering a gateway to a rich ecosystem of Kotak financial products to aspirants and achievers alike.

As a Group with innovation at its core, we launched our ambitious investment app, Kotak Cherry. It is our endeavour to offer DIY investing across all asset classes and make it accessible to all investor types. The major change at Kotak is the new courage to experiment and learn. We are fervently working on innovative changes across the group, including in securities, asset management and alternate assets.

“In FY 2021-22, we rebranded Kotak811 to offer the essentials of banking through a tech-first user experience to millions of Indians. Kotak811 is changing the way India banks every day, offering a gateway to a rich ecosystem of Kotak financial products to aspirants and achievers alike.”
OUR PERFORMANCE HAS BACKED OUR EFFORTS

In FY 2021-22, our net profit at the consolidated level witnessed a 21% YoY growth to ` 12,089 crore. Our consolidated net interest margin was 4.7% (up 20 bps against FY 2020-21). The Return on Assets (ROA) at the consolidated level was 2.36% for FY 2021-22 (2.16% for FY 2020-21). Our Bank’s Standalone CASA stood at 60.7%, capital adequacy ratio (CAR) at 22.7%, with CET1 at 21.5%.

As of 31st March, 2022, the total assets under management (AuM) for Kotak Group was more than ` 3,82,500 crore. As a responsible, homegrown ecosystem, we cater to the diversified financial needs of our customers in addition to banking and financing, be it mutual funds, insurance (life and general), investment banking, institutional and retail broking services, investment advisory, alternate assets, et al.

WE CONTINUE TO PUSH BOUNDARIES

When it comes to making an impact, actions matter. At Kotak we have ensured that our businesses are compliant and socially responsible. We have built a culture of identifying areas of improvement and are leading the change. During FY 2021-22, we focused on women representation and ESG efforts. During the year, the growth in our group’s workforce improved women’s representation to 28%. We doubled down on our pandemic relief efforts, assisting both employees and communities. We instituted an ESG policy framework, undertook a materiality assessment and initiated a climate risk and opportunity assessment. We have also begun to bring our Indian subsidiaries into the fold of monitoring emissions generated, paving the way for us to streamline our ESG strategy. In this Report, we are addressing the enhanced disclosure requirements regarding ESG parameters through the ‘Business Responsibility and Sustainability Report’. Our efforts shall continue to see more promising results going forward.

“As a responsible, homegrown ecosystem, we cater to the diversified financial needs of our customers in addition to banking and financing”
“In this Report, we are addressing the enhanced disclosure requirements regarding ESG parameters through the ‘Business Responsibility and Sustainability Report’. Our efforts shall continue to see more promising results going forward.”
THE JOURNEY HAS JUST BEGUN

To paraphrase Steve Jobs, the future unfolds every passing moment, and one can only make sense of it in hindsight, meanwhile trusting that the dots will eventually connect. Much like navigating an uncharted terrain – with no precedents or map or guide. That’s where possibilities lie in abundance.

Change is the new comfortable feeling. Let’s make anything possible with humility at the core!

Uday Kotak
July 14, 2022