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

In an exclusive conversation with Republic Media Network Editor-in-Chief Arnab Goswami as part of the Legends series, banking stalwart and entrepreneur Uday Kotak unravelled the core principles of business success, placing cash flow at the heart of financial strategy over traditional profit metrics.

“Profits Don’t Matter. Cash Flow Does.”
Kicking off the discussion with a personal anecdote, Kotak recalled the words of his mentor: “P&Ls don't matter, profit and loss account doesn't matter. What matters is cash flow and discounted cash flow. You must make sure that you are focused on cash flow in the ultimate analysis, because that's what will count,” he said, adding that these were simple but powerful lessons taught to him by Professor Munkaiker.

Kotak elaborated this concept for new-age entrepreneurs chasing unicorn status, saying: “In the initial stages, you’re investing more than you’re earning, that’s okay. But you must have a clear game plan to see how and when your business will generate positive cash flow. That’s the true indicator of sustainability.”

Chasing Opportunity Before It Disappears
Reflecting on his early decisions, Kotak described how he deviated from his family's cotton business to enter financial services at a time when India’s economy was still protected. He was only 26.

He said, “The trouble with opportunity is that it never announces when it comes. It's only after it's gone that you realize you missed it.”
He emphasized the importance of foresight and agility.  “Before the view was clear that India is opening up, we got into consumer finance. Then investment banking when Controller of Capital Issues was abolished in 1991, mutual funds in 1998, life insurance in 2001, and banking in 2003. The idea was simple: don’t overthink, hire talent, get into the business, and build market share while ensuring cash flow.”

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Measuring Return on Time Invested (ROTI)
Taking the finance lesson beyond balance sheets, Kotak introduced an idea few CEOs speak about — ROTI: Return on Time Invested.

“Each of us has limited time on Earth. Are we making progress at the speed we need to?” he asked.  “This also comes from the concept of discounted cash flow, but applied to life itself.”
He said that India must improve institutional efficiency to improve citizens' ROTI, citing delays in the judicial system as an example: “Why should cases in courts take years? It’s holding back not just justice, but productivity.”
 

He further argued that the difficulty of getting good returns on time in sectors like manufacturing is a reason why many Indians prefer working in services like food delivery.
“We must make ROTI manufacturing easy and attractive, that’s what we need to crack if we want to transform India.”

The Big Takeaway: Sustainable Entrepreneurship Over Speed
In an era where many founders dream of becoming billionaires within months of seed funding, Kotak’s advice is clear: cash flow trumps vanity metrics.