A self-made entrepreneur like Rana Kapoor is looking for future growth in the next generation of startups that could show the same level of commitment, audacity and passion as he himself showed in its early days as a first generation entrepreneur
The word “startup” was yet to catch the fancy of new-age entrepreneurs, and angels were still more of heavenly creatures than investors with a large war-chest and a larger heart. India had started shining a wee bit, yet for three banking professionals to think of creating a worldclass bank by themselves in a country where inefficient public sector banks still set the rules of the game was more like a reel life story than one that is real.
However, the enormity of the task ahead did not deter Rana Kapoor and his two partners — brother-in-law Ashok Kapur and Kapur’s colleague Harkirat Singh — to make an audacious offer to Rabo Bank of Holland, who were looking for opportunities in India, to help them set up an NBFC business and a bank, which the three of them would run.
After some hard negotiation, the deal got through and the three pooled in Rs 9 crore to start a joint venture in 1997. Rana Kapoor put in Rs 40 lakh from his own pocket and the rest came as joining bonus from Rabo Bank.
Six years later, the three had sold their stake in Rabo for Rs $10 million each, which formed the seed fund for their next venture — opening a bank in India. They applied for a bank licence and the trio received a banking licence from the Reserve Bank of India in 2003 and set up YES Bank, one of the only two new full-stream banks to have opened in the last decade.
To open a bank and name it “YES Bank” tells you the confidence that the founders have on their new venture. As the bank grew its presence and stature, the bank lost two of its founders — Harkirat Singh (due to differences of opinion, as is common in businesses) and Ashok Kapur (to a terrorist attack in Mumbai. The third, Rana Kapoor, stood firmly like a pillar of the bank.
Under Kapoor, who is now the managing director and CEO, YES Bank has managed to sail through different business cycles to emerge a decade later as the country’s fourth largest private sector bank in India. It is already valued over Rs 11,000 crore (net worth) — in today’s startup parlance, a unicorn (valuation of $1 billion or more) in its own right.
Dreams: An entrepreneur’s seed capital
It all begins with a dream, says Rana Kapoor when he looks back at his entrepreneurial journey. “You have to believe in God and you have to have a dream,” says Kapoor when asked about the secret of a successful venture.
For Kapoor, the dream to start a bank took roots when he first saw the large bank buildings in the US while he was in the country doing is MBA from Rutgers’ University in late 1970s. And that dream started to take shape as he joined Bank of America in 1980. In the 16 years he spent in the bank, he learnt the tricks of the banking trade and also held several positions of responsibility, including assignments in Asian countries, and went on to head the bank’s wholesale banking business.
He also won accolades from the bank for his stellar performance there, and was presented the Eagle Pin by the Chairman of Bank of America in 1990, the highest professional recognition at the bank.
In 1996, he joined ANZ Grindlay Investment Bank — the same bank that had rejected him in 1980. In ANZ Grindlay, he was involved in raising funds for Jet Airways’ fleet acquisition and Sunil Mittal’s telecom venture.
He had another stint — this time with the Dutch Rabo Bank, an association that paved the way for his journey to YES Bank. While in Rabo Bank, he was instrumental in Tata Tea acquiring Tetley, one of the biggest overseas acquisitions by an Indian company at that time.
The audacity of YES
YES Bank is the founders’ audacious journey as a bank that does not hesitate in saying YES to opportunities a fledgling free-market economy was ready to provide to businesses and entrepreneurs.
Kapoor says, “The reason behind naming it YES Bank was my firm belief that our bank’s differentiation begins with its service and trust mark YES. YES represents our true spirit of becoming a high quality, customer centric, service driven, Indian Bank.”
According to him, the brand also reflects the mood of the nation, a part of the country’s momentum.
The audacity did not stop at just the name. Within a year of starting banking operation (in August 2004), the bank decided to go public by offering 25 per cent stake to the public in June 2005. The issue was subscribed 25 times.
Acknowledging investors’ faith in the bank’s public issue, Kapoor had then said, “The overwhelming response received in the primary markets epitomises the faith and confidence YES bank enjoys in the banking and financial services domain. It also symbolises the enormous potential YES bank is perceived to have in this highly competitive industry.”
With Kapoor at the helm as CEO, the bank was already making its presence felt in the corporate and investment banking front. YES BANK’s Investment Banking Group was ranked 1 in M&A “Outbound Cross Border Transactions” in the Bloomberg League Tables. In 2008, its investment bankers were involved in a deal where Pune-based Suzlon acquired Belgium wind turbine gear box maker Hansen Transmissions International NV for $560 million. In yet another M&A deal that year, the bank helped United Phosphorous acquire Advanta Netherlands Holding BV for $120 million.
There was sadness, too. In 2008, Kapoor lost its second partner, Ashok Kapur, to a deadly terrorist attack in Mumbai that shook the whole world. As if that jolt was not enough, the global economy was going bust triggered by the fall of large financial companies, globally.
But for Kapoor, that “adversity brought opportunity” for the company. According to him, that was the time they concentrated on building infrastructure and brand — an otherwise costly exercise made affordable by the downturn.
Already proving its mettle in corporate banking, the bank was now planning for the second phase of its expansion — the entry into retail segment. By 2010, it had announced its foray into the retail banking space, a key component in the growth of its business into a full-fledged bank.
In an interview to a newspaper, Kapoor had then said that “by virtue of its name “YES” is destined to emerge as a retail bank. And he had ambitious growth targets. “In my view, banks like ours which are still at a high growth phase, should be able to grow at double or even triple the banking system growth rate,” he had said.
Of course, he was banking on technology and a model under which it had outsourced all its technology needs — a clever strategy since it allows it to attain “scalability at a marginal cost”.
He had seen India, a grossly under-penetrated on retail services, with an enormous opportunity to spread its presence with “a superior client experience through well-trained staff”.
Kapoor’s vision paid off as the bank managed to grow (income) at a CAGR of 35 per cent from 2007-08 to 2014-15, not a mean achievement given both the global and the domestic economy were mostly in turmoil during the period.
Vision for tomorrow
Running a business at a time of enormous uncertainty and challenges is like wearing a crown of thorns. You have your fair share of controversies and difficult times. Kapoor has seen it all, be it the ugly spat with his late partner Ashok Kapur’s wife and daughter, or the mounting bad corporate loans that threatens to shake the very foundations of the banking sector.
However, Kapoor has his eyes clearly fixed at future even as he continues to fix the problems he faces in the present. He believes the next phase of growth would come from sectors such as agriculture, healthcare, hospitality, infrastructure, education and renewables.
“We believe these are industries where India will build competitive advantage and as a new age, non-legacy bank we aim to build skills which are going to meet the future requirements of our country,” he had said in an interview.
For the banking sector to grow, he says the industry would have to invest in new businesses and inventions. He believes financial technology and cashless economy would be the key themes for next stage of growth of the bank.
The bank’s recent tie-ups with FreeCharge, which is launching a mobile wallet service and T-hub, a public/ private partnership between the government of Telangana, three of India’s premier academic institutes (IIIT-H, ISB & NALSAR) and other private players to promote FinTech start-ups, are testimony to its future roadmap as envisaged by the MD and CEO himself on many platforms.
It is only fitting for a self-made entrepreneur like Rana Kapoor to look for future growth in the next generation of startups that could show the same level of commitment, audacity and passion as he himself showed in its early days as a first generation entrepreneur.