BT-YES Bank Best CFO survey: Delhi's Doyens of Dough
June 3, 2013BEST CFO OF A PSU (LARGE): P.K. Bajpai, BHEL
Sell the Story
Across the globe, today's CFOs are juggling more balls in the air and that, too, in front of an audience which is more demanding and knowledgeable than ever before. Never before has it been more complex, multifaceted and rewarding. Changing regulations, enhanced disclosure norms, greater shareholder involvement, and a subdued business environment have dramatically changed the role of the CFO, especially of state-run organisations such as Bharat Heavy Electricals (BHEL).
BHEL's major challenges in the previous fiscal year emanated from a variety of external factors. The challenge was to at least maintain the top line, if not grow it, and sustain the bottom line. An even greater challenge was to manage liquidity with minimum borrowing cost.
Limited receipt of advances due to constrained order inflows to BHEL during 2011/12 and 2012/13 did impact the working capital position. Real time monitoring of inflows and outflows through e-banking resulted in fine planning of cash flows and also helped to close the fiscal year with a healthy cash and bank balance. Adoption of innovative cash and financial management techniques resulted in earning average interest yield significantly more than the market rate and also helped in bringing down the average borrowing cost below industry average. Understanding the "emotional drivers" of different groups, selling changes to staff, board members and to stakeholders is not easy for any CFO, especially of a staterun company. I believe an effective CFO needs to exhibit confidence borne from a healthy self-belief, paint a clear vision of what the organisation and finance team can achieve, and determine what legacy he wishes to leave with the organisation.
BEST CFO OF A PSU (MEDIUM): Ram Singh, EIL
Spot the Opportunity
Engineers India operates in a highly competitive and complex hydrocarbon industry. The economic slowdown and stagnancy in the hydrocarbon sector in India made EIL's journey very challenging. We saw the difficult times as an opportunity to foray into new businesses and to expand overseas.
For me, the main challenge was to manage the unlimited opportunities in a competitive environment and manage profitability. This was ensured through a flexible bidding policy for securing business and driving cost efficiencies across activities. Aggressive treasury management led to post-tax returns of over 10 per cent on mutual fund investments. We have also set an exemplary benchmark of mitigating project risks through a robust enterprise risk management framework.
Today's world of finance is diverse, complex and multifaceted. Against this backdrop, the CFO's role takes on critical importance. A proactive approach, analytical skills and foresight help manage potential threats to the organisation's growth. Top priority is given to optimisation of returns for sustainable business growth.
CONSISTENT LIQUIDITY MANAGEMENT (MEDIUM): Ambarish Raghuvanshi
Take a Stand
The important point to note about managing cash flow, working capital or liquidity is that it is not about the finance area alone. It is an allpervasive ethos that spans across the sales function and finance. When times are tough, clients resort to one of the two or both: they ask for looser credit/payment terms and they ask for discounts. We stuck to our payment terms in 2012/13, because any dilution of these terms becomes the norm for the future. This view comes from a long-term approach to business and the confidence to walk away from some deals.
What has also helped is an improvement in our competitive position over the past few years. This allows us the flexibility to set our terms together with pricing, since both of these are indexed to the competitive position. At the same time, we have got better payment terms from our business partners and vendors, leading to longer payment cycles.
Our biggest cost element is employee-related expenses. We have not compromised on paying our associates on time, whether in the form of fixed salaries or in paying sales incentives since employee morale is far more important than any benefit to be derived by prolonging payment cycles. So, in summary, set the terms of trade early, be a market leader (great if you get there), align the sales team performance with the terms of trade, maintain discipline and do not dilute standards. And finally, talk the same language.
BEST WOMAN CFO: P. Alli Rani, Concor
Walk the Tightrope
Container Corporation of India (Concor) does not fit the common description of a government undertaking. It is the market leader and the most profitable player in a sector that has 15 competitors. It has a huge shareholding by foreign institutional investors. And it holds the record in the logistics sector for per employee productivity. For the CFO, this is a tough environment to work in where, while the expectations are pegged at high levels that prevail in the private sector, the working strategies have to satisfy government guidelines and the concept of doing business with the taxpayer's money.
This is not much different from tightrope walking. Add to this the turbulent business environment during the past four years wherein the tightrope walking got more perilous with the rope itself swaying dangerously in the stormy world of global trade. Identifying income streams in new businesses, balancing the spend, guessing margins in a new territory, and these to be done while fighting competition in a sector perceived as the star sector of the recovery phase has been tough.
The CFO has to be farsighted to accurately identify and factor in future profits into investment decision making. No wonder, risk management has been made part of the CFO's portfolio at Concor. This is exactly what keeps the CFO going, ready to take the blame but enjoying the limelight when results reflect their contribution in a job well done in a tough environment and the admiring glances say, "We knew we could rely on you."