Uday Kotak to lead new IL&FS board

The government’s choice of Uday Kotak to lift the multi-billion Infrastructure Leasing & Financial Services Ltd out of bankruptcy should be no surprise. He is one of the few bankers in the country who have navigated banking crises successfully not once, but at least thrice.

Even for Uday Kotak — who witnessed the Harshad Mehta scandal in the early 1990s, the CRB scam, the bursting of the tech bubble and the post Lehman credit crisis — the job at hand is of monstrous proportion. The balance sheet size of IL&FS is ₹1,15,815 crore.

What is Kotak’s selling point? A sense of caution. When many bankers were getting carried away by the growth opportunities from infrastructure lending, Kotak saw what all could go wrong. And everything has unfolded just the way he anticipated.

Thanks to his belief that banks are not designed to lend to infrastructure, his bank managed to keep bad loans low at 2.17% of total bad loans when it was 10.69% for India’s largest lender State Bank of India.

One of Kotak’s jobs is to untangle the numerous subsidiaries and associate companies which have mushroomed over the years under IL&FS. Should he aim to revive the institution, or seek moratorium on payments, sell assets and pay as and when an asset is monetised? That’s a difficult question to answer, but the rainmaker in Kotak could make it easy for government.

His instinct for deal making is legendary — from selling the ‘Good Knight’ mosquito coil brand to Godrej, to stepping in to buy a controversial stake in Asian Paints on behalf of UK’s ICI, to the takeover of ING Vysya Bank — all testify to his ability to sell assets at a valuation that few would complain about.

A key principle that Kotak has kept as a bedrock of his business is to keep it simple. That helps him see the risks associated with complicated lending practices and instruments that could initially appear exotic but blow up during times of stress.

While his business has thrived for more than three decades during the ups and downs of the Indian economic cycle, Kotak’s desire to live through the tests could help him overcome the obstacles at IL&FS too.

“If what you create does not outlive you, then you have failed,” Kotak had told ET in an interview. “The thing that excited me then, and that excites me now, is the fun in the journey, and not the destination.”

Over a period, Kotak Mahindra Bank has become a lender with a market value of ₹2.14 lakh crore, but what has guided Kotak has been the belief that he has to fend for himself and ‘there’s no big brother’ to bail him out. The task before him now is challenging and he will need all his wits to revive IL&FS and bring down its debt.

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