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FILE PHOTO: Uday Kotak, Managing Director of Kotak Mahindra Bank, poses for a photograph at the company’s corporate office in Mumbai on January 15, 2015. Reuters/Danish Siddiqui/File Photo Acquire licensing rights
Sep 2 (Reuters) – Uday Kotak, the billionaire who founded and leads Kotak Mahindra Bank (KTKM.NS), has resigned as managing director and chief executive four months before his term is due to end, the bank listed on a stock exchange. said in the filing on Saturday.
Kotak’s early exit from the country’s fourth largest bank is due to personal reasons, according to the bank, but analysts say it should allay concerns that Kotak’s presence could threaten his successor.
The bank said that Deepak Gupta, currently joint managing director, will perform the chief executive duties till December 31.
“I have considered this decision for some time and I believe it is the right thing for the institution,” Kotak wrote in a letter sent to India’s exchanges.
Kotak wrote, “I thought it appropriate to hand over the baton and accelerate the change.”
India’s banking regulation limits the tenure of CEOs of lenders to 12 years if they are also major shareholders.
Kotak’s tenure was about to end in December.
The bank in its exchange notification said that the bank has already applied for the new Managing Director in the central bank of India. The top positions of lenders in India are approved by the Reserve Bank of India, which regulates banks.
“If the new chief executive is from outside the bank, the transition will require a lot of cooperation,” said Amit Tandon, chief executive of proxy advisory firm Institutional Investor Advisory Services.
“However, if the bank has chosen an internal candidate, the transition may be easier,” Tandon said.
On social media platform X, formerly known as Twitter, Kotak said, “Founders go, but the organization thrives forever”.
He said that he will remain on the board of the bank as a non-executive director and significant shareholder.
Anand Dama, banking analyst at brokerage firm MK Global Financial Services, said the early departure of the CEO was a surprise, but the application for approval of his replacement showed the bank already had an internal candidate.
risk averse banker
Uday Kotak was granted a banking license in 2003, allowing him to join ICICI Bank, HDFC Bank and others as early private entrants in India’s banking sector, which until 1993 allowed only state-owned banks.
Kotak and his bank earned a reputation for their focus on risk management, which helped the lender avoid the bad loan cycle that has plagued Indian banks since 2013.
Kotak Mahindra Bank’s consistent risk management is behind the bank’s high valuations, said Dhananjay Sinha, head of research at brokerage firm Systematics.
“By creating a space between his exit and the arrival of a new CEO, Kotak is perhaps trying to signal that the transition will be independent,” he added.
As per stock exchange data, the bank has gross bad loans at 1.78% of total assets and the bank trades at a price-to-book ratio of 4.2 times. This compares with India’s largest private lender HDFC Bank’s ratio of 4.2 times and ICICI Bank’s at 3.38 times.
Kotak has also been a supportive banker to the Indian government in times of stress and helped lead the bankruptcy process for Indian infrastructure conglomerate IL&FS in 2019, which brought the country’s credit markets to a standstill.
But he is at loggerheads with the regulator.
In 2018, he made headlines by challenging in court an RBI directive to reduce shareholding in his bank to 26%, giving himself more time to sell stock to outside investors.
Along with the bank, Kotak has also built an $18 billion business in alternative assets and an asset management company.
“I look forward to my new role as non-executive director, a role entrusted to me by the board and the overwhelming majority of the shareholder of the bank,” Kotak wrote in his letter.
Reporting by Jayshree P. Upadhyay; Additional reporting by Chris Thomas; Editing by Miral Fahmi, Tomasz Janowski and Lewis Havens
Our Standards: The Thomson Reuters Trust Principles.
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