But Where Are The IPOs?

Kotak may have been able to take advantage of the shakeout happening in the broking market, but there's little he can do in the primary markets, which in good years have brought the investment bank 25 per cent of its revenues as a lead manager. Last year, for instance, KMCC was at pole position in terms of the amount raised via public issues, lead managing 13 of them, totalling Rs 5,250 crore. This year, of course, the IPO market is dead, and therefore Shanti Ekambaram, Executive Director, KMCC, is looking to the fixed income securities (debt-raising) and M&A to make up for the loss of primary market business. ''For the first six months, we were on track, and by March the aim is to reach where we were last year,'' she says.

Kotak is counting on the hope that in a downturn, companies will feel more of a need to restructure. And the first six months haven't been too bad, with KMCC concluding six deals worth Rs 1,400 crore. Since September, another Rs 150 crore worth of deals have been sealed: the sale of the stake of the Gujarat Propack promoters to Cosmo Films (enterprise value: Rs 80 crore) and a placement of roughly 20 per cent of Spectramind's equity worth $14 million (Rs 67.2 crore); $10 million (Rs 47.9 crore) was placed with Wipro and $4 million (Rs 19.2 crore) Chrysalis.

But investment banking is just one element-albeit a major one-of the entire Kotak blueprint. The topper from the Jamnalal Bajaj Institute of Management Studies (in 1982) says he's in not terribly keen to be known as a universal bank, but he would like to have a presence in specialised services. ''And in each of the segments we are in we want to have the cutting edge,'' he adds with a flourish. That means that Kotak wants to be in the top three in each of his businesses.

One of those activities could be banking, the objective of which is to have a ''delivery platform.'' ''Could be'' are of course the operative words here. The licence hasn't yet come through, some seven months after the proposal. Recent reports indicate that the joint parliamentary committee (JPC) is keen to probe the role of KMCC in the merger of ICICI Bank and Bank of Madura. KMCC advised ICICI Bank during the merger, even though the Kotak group held 11.4 per cent of Bank of Madura's equity pre-merger, and the feeling is that there could have been a conflict of interest. Market analysts point out that as long as the JPC probe into KMCC's involvement in the deal is on-and that could go on for some time-Kotak's licence will continue to gather frost. Kotak insists that the banking venture isn't keeping him awake at night, but it's clear that a bank would go a long way in realising his retail ambitions and becoming a universal bank. ''Fact is that Kotak was late in going for a banking licence. He should have got in when the first round of licences were being dished out. Since then, nobody else has received a licence,'' points out the CEO of an NBFC. A senior official at one of the institutions points out that the chances of the RBI granting a licence are bleak simply because there's still so much consolidation left to be done in the banking sector that adding to capacity by doling out new licences just doesn't make sense.

Bad Investments?

An area in which Kotak drew plenty of awe and envy has been his telecom investments, where he's made big money not by concluding deals but by picking up equity stakes in various telecom circles. His investments in companies like Fascel, Hutchison and Usha Martin, amongst others were at one time valued at roughly Rs 400 crore-double the money he had sunk into this companies. These days, however, the magic appears to be waning. Last year, KMFL booked a loss of Rs 6.9 crore for the sale of Matrix Information Services.

Shivaji Dam, Managing Director, OM Kotak Mahindra Insurance Co

They're Hiring! As Shivaji Dam, Managing Director, OM Kotak Mahindra Insurance Co will tell you, it isn't easy to get ''good'' people. Dam wants to end the first year with 2,000 agents and he's got 600 so far. So where will the rest come from? You could always raid the Life Insurance Corp. But there are other quarters too. For instance, Dam is targeting chartered accountants and management students. He's also going after middle-class housewives, bank employees, who've taken voluntary retirement, journalists, who can rely on their network and retired people. It's not as if you could walk in. To start with, there's a five-day selection workshop, after which two of out every three who apply get rejected. The wages aren't anything to be sneezed at. If you sell three policies a month you could make Rs 10,000. Don't forget that each policy comes in for renewal, and after seven years you could be making more from renewals than new business.

There's also the investment in financial daily Business Standard, by virtue of which Kotak-via group company Kotak Mahindra Investments-now holds 61.5 per cent of the company. Although sales and other income was up by 32 per cent and operating losses down by 45 per cent, break even is still a long, long way away. As of last year, total losses stood at Rs 55 crore. The ongoing year won't provide much succor, thanks to the slowdown in advertising sales. Clearly, Kotak is counting on foreign media being allowed into the country, but the question is for how long can he hold on. Kotak for his part insists that BS is a value proposition and there is room for one more financial newspaper. As for the losses, he isn't too perturbed; he points to the equity capital of Kotak Mahindra Investments, which has a share capital of Rs 55 lakh. ''Whatever happens at BS, my loss will be restricted to that figure,'' explains Kotak.

For the man who was recognised at the World Economic Forum as one of the ''Global Leaders of Tomorrow,'' such rough weather isn't usual. He is after all the one who globally reputed names paid through their noses to be associated with. Goldman Sachs for instance paid a premium of Rs 630 per share when it took a 25 per cent stake in KMCC. Ford Credit forked out all of Rs 3,600 per share for its 40 per cent holding in KMP. And that magic hasn't faded: recently Old Mutual of the UK brought in roughly Rs 75 crore for its 25.24 per cent stake in OM Kotak Mahindra Insurance-the same amount KMFL invested in the company for the rest of the equity. ''Along with business sense, a joint venture also has to make financial sense,'' quips the classical music purist,who's been playing the sitar for more than a decade now.

Today, of course, the burning issue is whether Kotak can make business and financial sense of all his businesses in markets that have slowed down and appear to be in no hurry to look up. He's also got to convince investors that there's much more to the group than just KMFL. But as an analyst points out, shareholders don't get to participate in the gains made by the other companies, like KMCC for instance, which has in recent years made money hand over fist. The flip side of that argument of course is that shareholders don't have to carry the can when some of the non-KMFL businesses are ravaged during a lean season. Kotak says he's ready to consolidate his group accounts, but that would also mean bringing in the losses of the insurance business-which for sure won't break even before five years. And he's in no hurry to play pioneer here. After all, if the major institutions have spun off insurance into separate subsidiaries, thereby protecting the flagship, why should he invite consolidation of a long-gestation venture. That's the paradox staring Uday Kotak in the face today: he's got plenty going for him in the long term, but then again, remember that adage about the long term and mortality?

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