In a pointed critique of past industry practices, Kotak Mahindra Bank's Chief Executive Officer, Ashok Vaswani, stated that large Indian banks which sold stakes in their financial-services subsidiaries to foreign investors ended up sacrificing significant long-term value. He emphasized that retaining full ownership of such businesses provides a crucial strategic edge.
The High Cost of Monetizing Subsidiaries
Speaking at a media interaction in Mumbai on Wednesday, Vaswani urged journalists to examine the historical record. He suggested they look into how major banking groups monetized their subsidiary holdings in earlier years. "Every time a big group sold some part of their stuff, usually they sold it to a foreigner. And then look at how much money the foreigner has made at the cost of the group," Vaswani remarked. He described the resulting financial arithmetic as "a very interesting maths."
This trend saw numerous Indian banks divesting portions of their mutual fund, insurance, and securities businesses to unlock immediate capital. These very segments have since experienced substantial growth, potentially meaning the selling banks missed out on future upside.
Kotak's 100% Ownership Model: A Conglomerate Advantage
Vaswani positioned Kotak's contrasting approach as a key to its success. The bank maintains complete ownership across its 19 financial-services subsidiaries, a strategy he credits with building enduring embedded value for the organization. "Kotak is the single broadest financial conglomerate in India. There's nobody else like Kotak," he asserted. "We manufacture every single financial-services product there is and we own all those subsidiaries 100%."
Cross-Selling Synergies in Action
The CEO highlighted the powerful synergy of cross-selling across different business lines, particularly within institutional banking. He provided a vivid example of how the bank serves large corporate clients holistically. "It is so beautiful to see when somebody like Hyundai or LG comes to do an IPO — the corporate banker introduces the investment bank, research does a paper on them, the treasury does the FX, the consumer bank picks up the balances," Vaswani explained.
This integrated model allows Kotak to cater to a customer's entire spectrum of financial needs through one channel. Vaswani concluded by noting that the bank's core strategy for the past two years has been intensely focused on this customer-centric, unified approach.
