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Size matters, but so does form

Axis Bank storms its way to the apex of the league of best banks, courtesy a measured focus on growth, returns and efficiency. And there’s a plan to scale up, too.

twitter-logoAnand Adhikari | Print Edition: December 13, 2009

On June 1, when Shikha Sharma took charge as Managing Director & CEO, Axis Bank, it was a baptism by fire of a unique kind. Most CEOs are ushered into their new offices with much fanfare by their new colleagues and employees. Sharma wasn’t that fortunate. Instead, she was air-dropped into Ahmedabad—where the bank has its registered office—bang in the middle of a frenzied annual general meeting (AGM), the 15th since the bank came into being in December 1993 (as UTI Bank). Sharma has, in the process, earned the unenviable distinction of facing her shareholders before getting a chance to meet her colleagues.

The 51-year-old Sharma—a nonbanker till Axis Bank came along (she was with ICICI before the bank was merged into the development financial institution)—for her part prefers a different metaphor from the one of a fiery initiation. “I was dropped at the deep end,” quips Sharma as she gazes into the Arabian Sea from the 13th floor corner room of the headquarters of India’s third-largest private sector bank. The central office is located in Maker Tower ‘F’, which stands on the southernmost tip of the financial capital in the Cuffe Parade district, offering a spectacular view of the sea. “It was quite a frightening experience,” recalls the ICICI Group veteran of close to three decades as she returns to her aquatic analogy. “Any which way you look at it, I could either swim or sink. (In hindsight), it was a great way to get ‘dropped’,” grins the IIM-A alumnus.

Day 1 didn’t end there. The AGM was followed by a Board meeting, where some big-bang decisions were taken. The biggest among them: The Board approved a plan to borrow and raise funds worth Rs 3,000 crore in 2009-10.

And you thought bankers (even newly-anointed ones) lead boring lives! Sharma, of course, wasn’t alone at the AGM and the Board meeting. “They (the directors) actually made it easier for me,” she says. Since then, Sharma has been relying on her senior colleagues pretty often. After all, this is by and large the team—former Chairman & Managing Director P.J. Nayak, who abruptly exited the bank in April, being the most notable exception—that’s been responsible for making Axis the Best Bank in BT-KPMG’s study for 2008-09. In the process, not only did Axis displace last year’s winner, Bank of India, but also widened the gap between itself and HDFC Bank, a winner for five consecutive years till 2006-07. For good measure, the study has also thrown up Axis as the most consistent performer over the past three years.

Axis Bank has survived its fair share of upheavals—a failed merger with Global Trust Bank in 2001 and, more recently, Nayak voicing his dissent on the decision to appoint Sharma as MD & CEO. The latter resulted in the bifurcation of the CMD post. For Axis, to emerge king of the hill against such a backdrop in a challenging environment is doubtless creditable. What’s paying off in these tough times is the early focus on creating a strong retail liabilities (deposit) franchise and also gradually flagging off retail lending.

Sharma today is in the right place at the right time. And she’s candid about her initial days at Axis. “I didn’t know actually what was happening in the first month,” she admits, But it didn’t take her long to get into the groove. “Now, I don’t feel there has been a big change. Today, I have a feeling of continuity rather than change,” she adds.

It’s been quite a journey for this army man’s daughter, who set up ICICI Securities (then a joint venture with JPMorgan) in 1993 and ICICI’s personal finance services in the late ’90s (the latter was responsible for the early retail thrust of ICICI Bank). In 2000, came the challenge of setting up a life insurance business for the ICICI Group and take on the formidable Life Insurance Corp. At Axis, it’s a totally different ball game, but Sharma has been quick to get into a banker’s garb. Five months into the new job, and she’s set the ball rolling by creating four strategic business units: Corporate, retail, non-banking subsidiaries and corporate centre. Next on the anvil: Increasing the board strength from 12 to 15 directors.

For an “outsider”—Nayak was rooting for internal candidate Hemant Kaul, Executive Director (Retail), who recently left the bank—Sharma isn’t having too much trouble gaining the support of the top brass. M.M. Agrawal, Deputy Managing Director, who was also a contender for the top post, says: “She has brought her own touch to the management.”

One way she’s been doing that is by beefing up the team with talent from outside, wherever a gap exists. For instance, Srinivasan Varadarajan was roped in from JPMorgan to head the corporate banking vertical. “Our effort is to take it to the next level,” says Varadarajan.

On the retail side, the bank is a relatively late entrant, as its initial focus was on creating a strong liabilities (deposit) base. Now, it’s ready to go after retail customers. Today, retail assets constitute 20-22 per cent of the bank’s total advances (in ICICI Bank’s case, that figure is 48-50 per cent and for HDFC Bank, it is 58-60 per cent). “Our retail assets are a bit under-represented,” says Sharma. Also on the anvil is a rural banking strategy. “The idea is to scale up our agricultural portfolio as also other businesses in rural pockets,” says S.K. Chakrabarti, Executive Director (Retail, SME & Agriculture). Sharma will also have her hands full scaling up the nonbanking subsidiaries—private equity, asset management, sales and distribution and broking, most of which are at the take-off stage (see ... And New Opportunities Will Help it Scale Up).

Clearly, the next phase of growth for Axis is to gain size, although Sharma isn’t losing sleep over it. “The aim is not to build the largest bank. Our intent is to build the most valuable bank,” she stresses. Yet, she’s keeping her eyes open for acquisitions that could help Axis ramp up rapidly—just the way rivals ICICI Bank (by buying out Bank of Madura in 2001 and Sangli Bank in 2007) and HDFC Bank (which bought Times Bank in 2000 and Centurion Bank of Punjab in 2008).

Even as Sharma settles into her five-year tenure, she knows very well that every day counts. She’s done well to stay afloat in the deep end of banking so far, but in the days ahead, she will have to keep swimming strongly to stay ahead of the banking pack—often upstream, and against strong currents of cut-throat competition and economic change.

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