From A 200-Sq-Ft Office To India’s Most Profitable Private Bank: How Uday Kotak Built Kotak Mahindra

In an exclusive interview with Republic Media Network Editor-in-Chief Arnab Goswami for the “Legends” series, Uday Kotak opens up about the formative years of Kotak Mahindra and how a simple focus on cash flow, over profits, created one of India’s most trusted financial institutions.

Uday Kotak was a second-year MBA student at Jamnalal Bajaj Institute when most of his peers were dreaming of corporate jobs. Kotak had interned with Hindustan Unilever Limited and was leaning toward a conventional start. But his father nudged him in a different direction.

“My father sat with me and said, Son, what do you want to do? I said, my passion is finance, but I think I'll start a career professionally. He said, what if I convince the family to give you 200 square feet of office space at Flora Fountain and you start on your own?”

And so, with a tiny space in Mumbai’s business district and an even bigger ambition, Kotak launched a financial advisory service.

Cracking the Code: Bill Discounting and the Tata Name
The business quickly pivoted when Kotak was introduced to bill discounting, thanks to Sidney Pinto, a pioneer in Indian merchant banking.
Their first major client? NELCO, a Tata Group company. Kotak noticed that suppliers were stuck in long working capital cycles. He found a way to help all three parties, NELCO, suppliers, and his own venture, win.

“We would buy a bill of exchange at 16% and sell it to savers at 12% with a Tata name on the due date... This 4% spread is what built our business.”
By leveraging Tata’s credibility and offering better-than-bank returns to investors, Kotak created a model that not only solved a market pain point but also laid the foundation for future growth.

 

Reinventing Consumer Finance: The Maruti Play
India in the 1980s didn’t know consumer finance. Citibank had just started car loans at a steep effective rate of 39%. Kotak spotted an opportunity.

He approached Maruti’s then-CEO, Mr. Bhargava, with an unconventional offer: interest-free bulk bookings.
“We said, what if we gave you an advance booking for 5,000 cars, interest free, for six months? He said, if I’m getting money interest free, I’m very happy.”

This bold move allowed Kotak to secure steady vehicle deliveries. The only condition? Buyers had to take finance from Kotak’s firm, on the same terms as Citibank.
This hack gave them immediate delivery and a growing market of car buyers, effectively disrupting the auto finance space.

Building a Financial Powerhouse
As India liberalised in the 1990s, Kotak expanded into investment banking, partnering with Goldman Sachs, who picked up a 25% stake. The joint venture helped Kotak understand global capital markets and positioned him for bigger bets.

In 2001, Kotak applied to the Reserve Bank of India to convert his NBFC into a bank. Approval came with a condition: a front-door approach. By 2003, Kotak Mahindra Bank was born, the first Indian NBFC to become a commercial bank.

Later, he bought back stakes from Goldman Sachs and Ford Credit, consolidating control and ensuring independence.

Crisis, Caution, and Clarity: Navigating the 2008 Meltdown
When the 2008 global financial crisis hit, Kotak’s cautious approach paid off.
“A very important lesson: Be very careful when you're reading a global newspaper. It colors you about your strategy in India. Your strategy has to be based on your facts here.”
While many banks struggled due to reckless lending between 2008–2011, Kotak Mahindra remained relatively insulated, earning market trust and regulatory goodwill.

Strategic Expansion: The ING Vysya Merger
In 2014, Kotak Mahindra made one of its boldest moves yet, merging with ING Vysya Bank, acquiring 44% owned by ING Group. The merger gave Kotak deeper roots in South India and propelled it into India’s top league of private lenders.

Read More - Why Cash Flow Matters More Than Profits: Uday Kotak’s Finance 101

Lessons for Entrepreneurs: Passion, People, Process
Reflecting on his four-decade journey, Uday Kotak’s message to aspiring entrepreneurs is clear:
“Start up, be at it, pursue with passion. As your creativity grows, keep making sure you're having outstanding people work for you and build process along the way.”
 

From a 200 sq ft room to becoming India’s largest private bank, Uday Kotak’s journey is the blueprint of modern Indian entrepreneurship. Grounded in cash flow economics, powered by timely innovation, and steered by measured ambition, Kotak Mahindra’s story is far more than a financial success—it's a masterclass in sustainable business building.