Mr. Nilesh Shah, MD — Kotak AMC shares his interesting Career Journey

if you have been tracking Mutual Funds, you would have certainly stumbled upon the name — Nilesh Shah. He is the MD of Kotak-AMC and part of the PM Economic Advisory Council

This week he shared his interesting Career Journey in this video- various facets of his personal life such as being so humble in his demeanour, losing his father in early childhood, the support he received from neighbours, transitioning from a Gujarati Medium schooling background to being one of the most prolific speakers on the Indian markets After a Gold Medal in CA Exams, he was about to join L&T and was advised by the interviewer not to settle for stability so early in life. He was asked to rather try his fortunes in the financial markets — thus landing in ICICI as a Merchant Banker, transition to Stock Markets and now managing an AUM of 100,000+ crores. He talks about the role of serendipity, patience and constant learning. His vision for his life on Maslow’s Hierarchy, now that he has pretty much achieved it all in terms of money and fame.

Q1. Despite achieving so much, how do you maintain such a calm exterior, such careful choice of words?

Ans: First, it is experience. Every time I tried to become arrogant, I failed miserably. Just from a professional career point of view, I was a gold medalist chartered accountant, went for my first day at ICICI with the attitude that I am the number one chartered accountant in the country. I recognized all colleagues were infinitely more knowledgeable than me and they were far more humble than me. When I came into the market managing money, my performance was fantastic but there were other people who were generating equally good performance and they were far more humble. So every time I have tried to be arrogant, I have failed miserably, and then I recognized why become arrogant and fail miserably when you might as well remain humble, at least you will avoid failure.

Q2. You lost your father at a very young age, so how did it impact you as an individual? How was the entire journey of growing up?

Ans: When you lose someone at an early age, it does create emotional imbalance, and financial insecurity. Fortunately, for me my mother was very strong and she ensured that we continued to study and she took care of our household. I stayed in a ‘chawl’ system in Mumbai. There was a beautiful movie called ‘Kathaa’ which depicted Mumbai’s chawl system. So there was a lot of positivity during that difficult journey. Everyone in the chawl was happy to help, we celebrated festivals even though we didn’t have money. Everyone was helping each other whenever there was a problem in someone’s household, entire chawl, more than 200 families were together to tackle it and at every level I received enormous support from people who are just happy to help and somewhere that made me believe in god that if you do good things, good things will happen to you. I was tremendously lucky that so many people came to help me at every stage of my life and it is because of their blessing and their love that I have reached here. If I can do something good for the society, I will be only repaying the debt which I incurred in my early career. I won’t be building new things; I am just repaying my old debt.

Q3. Many youngsters who do have vernacular as their mother tongue and the primary language, find this transition very difficult. How did you manage this entire journey from Gujrati medium to English being so fluent?

Ans: I will give a lot of credit to my friends. We were all from Gujrati medium moved into English medium and I was in one of Mumbai’s most elite college Sydenham, clearly there was a differentiation between vernacular medium students and people coming from English medium background. Somewhere all the vernacular students came together and said that it doesn’t matter whether we can speak fluent English or not but we can still score better than the English medium educated students, we can still do well in exams. Fortunately our professors supported each other and it was no wonder that most of the toppers from my college days were from vernacular medium. More importantly, this was a period where I recognized English is an acceptable thing. You were allowed to express yourself in English in social communication so that also gave us confidence that people are not judging this on basis of how you speak, people are judging you based on what you are putting in front of them. Fast forward into ICICI, in those days again my English was not that good, and at no point did my seniors penalize me because I was not a good speaker or a writer. They encouraged me to keep on improving. I still remember one of my boss made me rewrite a letter 18 times and finally I got frustrated saying that I am a vernacular medium student so please help me, and he said “No Nilesh. How long will you carry the baggage of a vernacular medium student. Get out of that baggage and start practicing what is supposed to be a good letter writing and I will keep on guiding you till you write a perfect letter.” That kind of encouragement pushed me to read, write, keep on rectifying my error and over a period of time I did not realise when I became a prolific speaker as well as writer in English. More importantly, one more thing has actually benefitted me as well as my other peers, I was a very good reader all throughout my life and there was a public library in Kalbadevi road where I would go and read for entire day. it exposed me to Hindi literature, Marathi literature, Gujrati literature. I was not that good in English literature but I read a couple of things there also. Now when you read, you are able to collect so many thoughts and when you put that thought in front of the audience people actually doesn’t recognize whether you are a good English speaker or not. They are actually interested in what kind of points you are making so I think it’s a mindset issue, do in English it’s fine, if you speak in your mother tongue it’s fine, as long as you are putting relevant points in front of the audience they will be happy with it.

Q4. What really triggered CA and the CMA decision way back in the 80s? Were you the first of your kind in the family? What was your mantra in becoming a gold medalist in CA?

Ans: I decided to become CA because that was the most cost effective course available. I could have earned stipend or salary and yet get a professional degree. If I would have wanted to become MBA that was not possible and for me early money was as critical. Fortunately, I had a chartered accountancy firm which paid me much more than my stipend. Of course I had to work for it but it allowed me to earn money as well as get a professional degree. I have seen many of my friends and acquaintances who went towards making money because of family circumstances and compromised on professional degree, and this is a very bad decision. Even if you have to eat one time a day because you are not earning enough, do it but earn a professional degree because that will allow you to excel in your career. I am not saying that having a professional degree is must for excelling in career, there are many businessmen, many employees who don’t have an MBA and yet are doing well in life but I am talking about average. It is important to get a professional degree which will give you head start in life.

I didn’t have the luxury of a lot of time to study so I used to go to a library to study where all the students would come together. There is a library called Petit library in Mumbai, I believe even today many CAs pass from there and when you are studying seriously for 2 months with all the friends together, and constantly you are focusing on studying, it does create an edge for yourself, it does excel you, you are able to solve your doubts, you are able to understand others’ viewpoint. For those corridor conversations, those tea time conversation, somewhere it gets stuck into your mind and it can incredibly help in the exam. Gold medal is probably luck; out of 50 chartered accountants I was lucky to be number one, but the effort put in by the 50th ranker and the effort put in by the 1st ranker is virtually the same. Maybe the 50th guy put far more effort but he was not lucky. So I have never ever allowed this gold medalist chartered accountant to come to my mind except for my first day at ICICI. I think every CA who passes exam has put in equal effort, it’s just that on that particular day I was lucky.

Q5. You had also shared that you had, as a fresher, been interviewed by L&T, inspired by the interview to try your hand at equities — early 90s. Please tell us more.

Ans: As I mentioned earlier, I have received incredible help from strangers and being a gold medalist chartered accountant we got invite from L&T. I went for an interview, cleared it, had to do a medical checkup, cleared it, we were given a visit to Sprawling Complex in Powai and finally at the end of the day, I was to meet this particular gentleman. He had a very big cabin, very elderly gentleman and he told me “Nilesh, if you are going to join L&T you are most welcome, but your life here will become too comfortable. There will be bus which will pick you up, bring you over here, there will be canteen where you will eat and then there will be bus which will drop you back. At this age, go for challenges, go for financial services sector which is opening up where there will be lots of opportunities.” I collected the appointment letter and said I will think about your advice and I am glad I followed the gentleman’s advice. By stroke of luck, I got to know someone who was working in ICICI, went to meet him, and he put me in touch with ICICI HR department. They interviewed me and offered merchant banking division. It was one of the most coveted division within ICICI and I was lucky to get break over there. Again in that interview, I wasn’t fluent in English but my CA background came handy as I was able to reply many questions related to law and taxation. These became my strong points and in that organisation many people came to me for their questions related to law and taxation. They were far better in structuring, and in presentation. Finally I recognized that in order to excel over here, I need to understand market. I went out to brokers, fortunately were all Gujratis and Marvaris, I could connect with them in my mother tongue, I could build rapport with them and I was able to get market knowledge which was helping me rising the issues. Slowly slowly I built on my own strength rather than trying to compete on my weakness and that allowed me to grow in my career. Everyone is blessed with different abilities and it is important to build on your strengths and work on your weaknesses rather than compete on your weaknesses with the outside world.

Q6. You were the only one in your family who chose service — what was the underlying thought process?

Ans: As I mentioned, my financial background was such in the initial days where security was more important. Secondly, over a period of time my career started in organisations which encourages professional entrepreneurship. From day one I was entrepreneur in my job. I was taking initiatives which were not expected out of me. For example, in ICICI I was working in merchant banking division. It wasn’t expected that I should become expert in market but I leveraged my strengths of being a Gujrati and connected with Gujrati and Marvari community to understand about the market, to understand about distribution and how markets are working. That strength allowed me to move into mutual funds investment management. I was supposed to do investment management, focused on sales and marketing because in those days we were managing very small sum of money and there was not enough base work in managing money. We went to meet clients, build relationship and doing sales marketing and other work made us wholesome fund managers. If we focused only on investments, we would not have created brand for ourselves. So over a period of time I ended up becoming professional entrepreneurs and it is graciousness of my organisations like ICICI securities, Templeton, ICICI Prudential mutual fund, Axis Bank, when they allowed my professional entrepreneurship to grow, they allowed me to go outside of my job profile and add value to myself as well as to my organisation. So everywhere if you are going to do what is expected out of you, it’s going to give you one level of satisfaction and one level of growth. The moment you step out of your comfort zone and start doing other things and it adds value to you as well as to your organisation, your growth rate becomes better and better.

Q7. Amidst Franklin, ICICI, Axis and now Kotak, it has been nearly three decades. Any interesting moment — good or bad bosses, heaven sent opportunities to learn, etc. that you would like to share?

Ans: I am really lucky to have incredible bosses all throughout. They all have nurtured me, they have made me aware of my shortcomings, they have helped e overcome them. I was never a perfect employee but I was always lucky to get perfect bosses. It’s a great luck or advantage when you get such good bosses. Till today, I am in touch with all my bosses and I seek their guidance whenever I am in doubt and they all have helped me throughout my journey. I remember I was going in lift with my boss in ICICI and they were thinking about sending someone to Singapore to learn foreign exchange market and we were going down from fifth floor to ground floor. The moment I reached ground floor, I overheard them talking about it and I said I am interested in going. I have never been out of India, I have never learnt what was FX, I was doing very well in my merchant banking division, but I said if I am going to learn something new in Singapore, why not? They sent me over there, obviously, that was within one year of my joining ICICI, I was going for the first time abroad. I was amazed at those large trading desks and deep markets and I was keenly observing what others were doing. One day the regional boss of that organisation came to me and said “what are you doing?” and I said I am trying to learn what’s happening and I was supporting someone who was doing market making in Singapore and I said if you give me some limit, I will outperform my boss and he count down the limit from this risk limit to me so that I can trade in same dollar. What I had observed was that the desk at which I was working was hitting either bid or offer. They were not doing market making. I worked with the Singapore dollars brokers and started doing market making. So my position was one or two million dollar but I was constantly doing market making and earning small spread. I ended up increasing volume of the organisation multiple times but at the end of the day I was always ending with positive PNL because I was just doing market making my position was zero at the end of the day, but the jobbing which I did was able to create money for me. Obviously it created pressure on the back office because suddenly they had to manage lots of deal tickets but that’s what this person observed and he really appreciated and thanked saying “keep on doing this”. There were many such memories where you had to create an opportunity for yourself, you have to think out of box, you have to think how do I outperform my competitors. There is a shortcut and then there is a right way of doing things. If you take shortcuts, eventually it will come to harm you. if you take right steps, eventually it will benefit you. shortcut is always easy but it is always dangerous. Right path is always difficult but it’s always profitable. So think how you can benefit from your current environment and maximize return by minimizing risk. This simple rule will always work for you.

Q8. A fund manager’s job — one feels it’s quite glamorous. But I also sense that the bid to generate alpha might often turn out to be extremely demanding. Isn’t it? How do you manage the stakeholder’s expectations?

Ans: You have to disengage yourself from material goals. At Kotak mutual funds, I am not chasing alpha, I am not chasing profitability. In fact in all our offices across most locations, we will find something called a wish tree. When a distributor or a client comes, we ask them to write what do you expect out of us. Of course there are few guys who will say we wish you to be the largest mutual fund in the country but many people have written I am investing my surplus to get a retired life, I am investing with the view to get my daughter married, I am investing with the view to get my son educated and so on and so forth. These are the wishes for which we are working and to achieve that we will do everything possible. There are many simple suggestions that I am giving you my money because I trust you. Now when your objective goes from profitability AUM and performance to maintaining trust, all the noises are out. Every step which I take in my organisation, we just have to follow one thing: is it going to increase trust of my investors in my business? Is it going to increase my investors’ confidence in my brand? If it’s going to increase trust, let’s do it, if it’s going to destroy trust let’s not do it. Now, we have a vast set of investors, many are more knowledgeable than us, many are smart people, equally knowledgeable to us, but there are many people who have invested their life savings because they believe they can trust us. Every step we take at Kotak is only towards this one particular goal of enhancing investors’ trust and confidence. If it means I have to manage money on a longer term basis, so be it. If it means I have to generate alpha, so be it. If it means I have to run my business fairly in compliance with all rules and regulations and it does put the pressure on me because others are not doing similar level of compliance, so be it. I am here for the long term. As long as I am increasing my investors’ trust and confidence, no power in the world can hold me down for a longer period of time.

Q9. Which segment do you enjoy more — fixed income or equity? When bets go wrong — be it equity or debts, what do you tell yourself?

Ans: When you have to manage money you have to manage money whether it’s debt, equity, doesn’t matter; principles of managing money remains the same. In fact to a great extent I believe I am in advantageous position as I was with someone who’s just specialised in debt or equity because I am able to cross-pollinate ideas from one side to another. Looking at the share price movement of a stock I can try t estimate what will be it’s impact on it’s credit profile. Looking at the credit profile of a company I can cross-pollinate that idea into its equity performance. So giving this wholesome understanding of debt and equity market has really helped me. I have seen many failures in debt and equity market. When I started managing IPOs, most of the IPOs which I have managed in 1991, 1992 and 1993 period, all of them have lost money for investors. Not even one company is trading below the issue price at which I have done the issue. Well we went wrong in pricing, the issues in picking up the right businesses because post CCI there was a huge greed in pricing and we couldn’t price the companies properly. In 1997, when I joined Franklin Templeton, my first set of investments were resulted into default. This was a very harrowing experience where companies in which we invested with the hope that they will go up on rating curve actually went down on rating curve. That was again a learning when I started managing equity, there was TMT bubble and we didn’t come out as good as some of other fund managers. It was an opportunity to differentiate yourself vis-à-vis others but you ended up becoming part of the crowd rather than standing aside. So, at every level there was an experience, 2008 was another humbling experience where we lost between 50 to 60 of NAVs as market corrected from 21000 to 8000. At all this point of time you kept on learning and you ensure that those mistakes are not repeated in the future. Every failure is a learning opportunity. You can’t avoid making mistakes but ensure that you don’t repeat the same.

Q10. In your TEDx talk, you emphasised a lot on being proud of ourselves, our Indian raw mentality and we being a nation where Australia, Philippines & sub-Sahara exists — what’s your vision for our country & its youth? The comparison with China that you often make also comes pertinent here.

Ans: Essentially the journey of a country can’t happen overnight, it happens over a period of time. From time immemorial till probably 18th century, India was centre of the world contributing on an average one-fourth of global GDP, we were the only country where diamond was produced, we were the only country where one after the other attacks used to happen because we were so rich. Somewhere post 18th century when Englishmen came, they destroyed our education, they destroyed our culture, they made us feel as if we are inferior quality and that has actually resulted into degradation of our culture. If we put it in a very lighter way just look at our cricket team. We had fantastic cricketers right from when we started playing first test before World War II. All the way till 70s and 80s exceptionally good batsman, spinners, some of very good fast bowlers and yet we were never a consistent winning team. We used to win occasionally but we were a never consistent winner. Even though Kapil Dev did win the world cup and made India’s name proud, the consistency was still missing. Now see what happened now; we are consistently there in top teams, every team is afraid of India, they consider as a worthy competitor. A lot of that transition can be reflected in Sourav Ganguly taking his T-shirt out on Lord’s balcony. If I believe the gossips, Andrew Flintoff in Wankhede stadium was moving in certain manner which was not liked by Indian cricketers and they gave it back. They took the world on a level playing field. We were equal to all the Australian and English cricketers. That self-confidence allowed them to conquer the Cricket team championships. Of course, they are talented and disciplined and adopting modern technology, but most importantly they have no self-doubt of superiority of anyone else compared to them. They think we are equal to everyone else and that mindset is allowing Indians to outperform other teams consistently. What happened in cricket we need in our economy. We need to be proud of our culture, proud of our heritage, we have to give respect to all the cultures but at the same time give respect to our own culture. We are not inferior to anyone; others are not superior to us. Once that realisation comes, we will be able to compete with level playing mindset.

Q11. You’ve pretty much achieved it all, so what’s next on Maslow’s hierarchy — your long-term goals for yourself?

Ans: It’s a very satisfying journey in terms of money, recognition, but is it satisfying in terms of positively impacting life, today’s mutual fund industry we have about 9 crore or two and a quarter group unique investor, whereas we should have reached 25 crore people. So when we look at past we have done lots of things, when we look at potential we are barely scratching the surface. Now the intention, motivation is to ensure benefits of mutual fund reaches out to every man, to every household, to every Indian. In some sense I call it freedom struggle too. My grandfather’s generation, they all took pride in saying that we also contributed our way to India’s freedom struggle. That itself gave them so much of pride. Now, India is already independent, what are we trying to achieve. Well, we are trying to keep India financially independent. Today FBI’s ownership of Indian equity is roughly about 21–22%. They own more than what retail investors own in India. Many of our large companies today are technically Indian companies but when they do well, the benefits of that are more visible in Singapore, Tokyo, London, New York, rather than in Jaipur, Ahmedabad, Rajkot and so on and so forth. It is our job to spread awareness about equities, financial planning, regular investment, asset allocation, long term investment, and ensure that one, we make Indians wealthy and second, we retain Indian companies’ ownership with India. In Ramayana, there’s this story about Ram Bhagwan building setu to Lanka and monkeys were carrying large stones and boulders and putting into the sea. There were squirrels who were also carrying small stones and putting into the sea. One of the monkey scolded squirrel that please don’t come in my way, you will end up getting crushed and the squirrel said “look I also want to contribute in building the setu” and apparently Ram Bhagwan was pleased and he put his finger on squirrel and that’s why those stripes are there in the body of a squirrel. We are the squirrels of modern Ramayana, when country is progressing in building bridge to the future, we have to contribute to the extent possible. I can’t carry big boulders on my shoulder but my ability to carry a small stone I will keep on filling the gaps and I hope at some point of time when the bridge is built, our contribution also will be recognised.

Q12. What do you do to unwind yourself from your hectic schedule?

Ans: Yes I am very busy but is it creating pressure on me? Answer is no. I enjoy what I am doing and I have never thought this as my work, I have taken this as my ‘Ibadat’. Second, clearly as you age your body and mind needs to be taken care of and spirituality, yoga, meditation, does help in calming your body and mind. For maybe 40–45 years, I took my body for granted but now I have to take care. Meditation is helping immensely and either it’s divine or otherwise but many times a lot of ideas come post meditation. When your mind is calm, you are able to think through the noise and clutter. In investment apart from all the fundamentals analysis somewhere there is importance of gut feeling. You have to take a call and a calm mind and a strong body probably allows you to take better gut call. So, I have followed the path of meditation in yoga, Shambhavikriya is fantastic, it really calms your mind. It also helps improve your immunity and more importantly it also helps me in taking better decision. This in some sense is my winding now, in some sense it is my way to rejuvenate myself and becoming better in what I am doing. At the end of the day, no matter how hectic things are, as long as you are taking this as your ‘Ibadat’, it doesn’t matter, you don’t really recognise the burden of carrying the weight.

Q13. How old are your daughters? What career advice would you give to them? Do you want them also to become Chartered Accountants or do they have different career aspirations?

Ans: It is their career, if they need any guidance from me, me and my wife are always available, but they have to follow their passion. Each one of us have certain ability and passion. If we follow our passion, we will probably do 120% output with 100% effort. If we follow something else which is not our passion, we will still deliver 80% output with 100% effort. My advice to my daughters will be: follow your passion, do what you think is right for you because that’s where you will be able to excel. My elder daughter has pursued the path of Biology. She has graduated in Biology and right now she is aiming to become public health policy expert. My younger daughter wants to become doctor. She is studying medicine, she’s preparing for medical exam in the NEET exam. It’s their passion and I am sure whatever path they follow, if they are following their passion they will do well.

Q14. What would be Nilesh Shah’s advice right now be to Nilesh Shah at the age of 20?

Ans: I would have learned far more than what I have done at the age of 20. I would have learned from others’ mistake rather than making those mistakes to learn from myself. It’s always important to learn from others’ mistake rather than make a mistake and pay a price and learn. If I was smart at the age of 20 or 25, or 30 or 35, I would have learned from others’ mistake and not commit the same mistakes. Many things I would have done differently if I would have learned from others’ experience. Learning from others’ mistake is possible only if you are ready to acquire knowledge, you process data, you process information and arrive at conclusions. So invest in building knowledge, invest in learning, that will be the most important competitive edge which a person can create.