Business Today

Return of the professionals

There’s a CEO churn of huge proportions taking place at India Inc. Right from family-run businesses to affiliates of global multinationals, high-flying professionals are taking over, writes Anand Adhikari.

twitter-logoAnand Adhikari | Print Edition: July 12, 2009

The CEO Shuffle
Why the hot seat just got hotter.
• Family businesses run by professionals get a better valuation
• Economic downturn has made result-orientation a priority
• Global MNCs who have made domestic acquisitions often dictate top-level changes
• Professionals often become a buffer when there are multiple successors amongst the promoters

In October 2008, Amitabh Chaturvedi took over at the helm of the Kerala-based Dhanalakshmi Bank. When the 41-year-old head honcho, who’s done high-profile stints at ICICI Bank and Reliance Capital, landed at the Cochin airport for his first day as CEO, instead of being taken to the bank he was driven straight to the Guruvayoor temple in Thrissur district! Chaturvedi had to take off his banker suit and slip into a dhoti (“for the first time in my life,” he grins). The chartered accountant took it all in his stride. “I wanted to get into the system and win the trust of the employees,” he points out.

Cut back to Mumbai. In March, Asian Paints caught analysts and company watchers off-balance when it announced that P.M. Murty, a professional who has spent 37 years with the paints major, would be the next Managing Director & CEO. The terms of the three promoters—Chairman Ashwin Choksi, 66, Vice Chairman Ashwin Dani, 66, and Managing Director Abhay Vakil, 58—were not renewed. The trio, which has an equal shareholding in what is Asia’s largest paints company, has opted for non-executive positions as additional directors. More surprising than the promoters stepping down was the Asian Paints board’s decision to anoint a non-family member as CEO, considering there are two contenders from within for the top slot: 39-year-old Jalaj, son of Ashwin Dani, and Manish, nephew of Ashwin Choksi. Asian Paints had issued a terse one-liner to the BSE about the change at the helm; the management was not eager to participate in this feature.

Atul Sobti
MD & CEO , Ranbaxy Laboratories
Less than a year after being appointed for five years by Daiichi Sankyo, which bought into Ranbaxy last year, Malvinder Singh was abruptly replaced by professional CEO Atul Sobti
Satish Jamdar (L) & Ashok Advani
Managing Director-designate and CMD, Blue Star
Promoter Ashok Advani will hand over day-to-day charge of the air-conditioning major to professional Satish Jamdar, who takes over as MD in July.
Sanjay Aggarwal
CEO, SpiceJet
Aggarwal , who has come as a representative of new investor Wilbur Ross, replaced Siddhanta Sharma, who ran the low-cost airline for the last four years since its inception.
Amitabh Chaturvedi
MD & CEO, Dhanalakshmi Bank
Chaturvedi is perhaps the only seasoned professional managing a regional bank in India. He joined last October from Reliance Capital after the bank’s promoters decided to take the bank pan-India.
Romesh Sobti
CEO & MD, IndusInd Bank
The Hinduja-owned private sector bank got a shot in the arm when Sobti joined the bank with half a dozen top ABN professionals in tow.

The professional is back. There’s no escaping the churn in the corner rooms of India Inc. Right from familyrun firms, to banks, to affiliates of global multinationals, and to businesses that have attracted strategic and financial investments, high-flying professionals are being roped in to take over at the helm. The reasons for the churn are many: The most obvious one is the economic downturn, which has put pressure on CEOs to deliver; those who can’t are being replaced. Then, global multinationals that have bought out Indian companies are making their preferences clear about who they want as their CEOs—as in the case of Daiichi Sankyo-Ranbaxy, the Japanese pharma major, which perhaps preferred a professional as CEO rather than a former promoter of the business that they had acquired. The upshot? Exit Malvinder Singh, enter Atul Sobti, who was elevated from COO to CEO. Finally, more and more family businesses are realising that bringing in professionals works well for valuations.

The Asian Paints case might also indicate that professionals often play a transitory role till such time that a family member is ready to pick up the reins. Says renowned management guru M.B. Athreya: “Once the scion, who is as qualified as a professional, matures, the professional CEO will hand over the baton to him.”

Not too different from the change at Asian Paints is the one at another Mumbai-based family business, Blue Star. India’s largest air-conditioning and refrigeration company was founded by Mohan Advani some 65 years ago. For 25 years, the second-generation Advanis have been at the controls—Ashok, 67, is currently Chairman and MD and Suneel is Vice Chairman and MD. Come July, Ashok will pass the baton to Satish Jamdar, a professional who came on board in 1996 and who has 30 years of experience with companies such as Siemens and Alstom. The Advanis could have opted for a family member as CEO—Suneel’s son Vir, 34, is currently Executive Vice President at Blue Star.

To be sure, building professionally-managed companies has become a mantra for Indian family-run business. At many such groups, the next-gen successor and the professional are succeeding at working together to create value. Dr Reddy’s Laboratories is a classic example of the professional and the family as a team. The Hyderabad-headquartered pioneer in drug discovery has G.V. Prasad as Vice Chairman & CEO; and promoter K. Anji Reddy’s 46-yearold son Satish Reddy as MD and Chief Operating Officer.

Others have taken the cue. “I have been grooming a younger team of capable professionals over the last couple of years, and have been progressively moving out of day-today operations,” points out Blue Star’s Ashok Advani. A Harvard graduate, Advani toiled for 15 years at various positions, right from shopfloor to corporate office, before taking his place in the corner room.

Irrespective of a successor within the family being in line, there’s a clear case for promoters to bring in professionals— and the more experienced they are the better. Last fortnight, TVS group member Gopal Srinivasan announced a prize catch—he succeeded in roping in D. Sundaram, Vice Chairman, Hindustan Unilever Ltd (HUL) as Vice Chairman & MD of TVS Capital Funds, a mid-cap equity fund with assets of some Rs 600 crore. Sundaram, who has over three decades of experience at the consumer care and foods giant, will replace Srinivasan at the helm, come July.

CEO rejig
The S.P. Hinduja-owned IndusInd Bank saw a major change of management early last year when the promoters brought in former ABN AMRO Country Manager Romesh Sobti as MD & CEO. Before that Bhaskar Ghose had nurtured the bank since 2001. Sobti says he got charge of a bank that was quite a jumble. “There was actually no product to sell and the bank was not known as a mass bank in the market,” he explains. Sobti has now set a three-year agenda to broad-base the product basket and rope top-notch professionals into the 15-yearold bank. He’s already poached half-a-dozen senior bankers from ABN AMRO. “Our immediate priority is to restore the health of the bank by improving its profitability, productivity and efficiency,” adds Sobti.

Often, investors-come-lately are responsible for the change management. Consider SpiceJet. A year ago USprivate equity (PE) firm WL Ross & Co. announced that it would pump $80 million (Rs 345 crore) into the low-cost airline in return for a little less than 15 per cent stake.

The investment would also allow WL Ross to call some of the shots—like appointing a CEO of its choice. A few months after committing equity, the PE firm made a shortlist of possible candidates to replace the CEO at that time, Siddhanta Sharma. Topping that list was Chief Operating Officer & Chief Strategy Officer for Flight Options Sanjay Aggarwal, who duly took over the controls at SpiceJet. Aggarwal’s mandate is to make the airline a professionally-run organisation. His immediate priority is to tide over the losses—which at one stage were running in three digits. Another Chief Executive in a hurry is Chaturvedi of Dhanalakshmi Bank, who wants to pitchfork Dhanalakshmi amongst the top five private banks in the country by 2014.

Unlike in the past, CEO lifecycles are getting shorter, and gone are the days when the men at the top could be assured of decades at the helm. Consider Kunal Dasgupta, CEO, Sony Entertainment—now known as Multi Screen Media— who was the face of the network for the last 14 years. Today, Sony lags broadcasters like Colors, Star TV and Zee. Result? Exit Dasgupta. Chairman Manjit Singh, who has taken charge as interim CEO, is on the lookout for a captain to steer the ship. “We want to be amongst the top three channels in the next 12-18 months,” says Singh.

Now that’s a tough mandate, if there was any. But then CEOs don’t have it easy, whether they are from within the family or without. At a time when conditions in the market place are rough, competition is cut-throat, shareholders and boards are becoming more demanding, and product cycles are shortening, CEOs are under pressure like never before. Those that can build solid teams around them, which in turn can go ahead and execute an immaculate strategy, will be the ones who will win—and be noticed.

  • Print
A    A   A