BT-YES Bank Best CFO survey: Mumbai's Money Moguls
June 3, 2013BEST CFO OF AN MNC (LARGE): R. Sridhar, HUL
Manage the 3 Ps
We live in a volatile, uncertain, complex and ambiguous (VUCA) world. This means some of the previous management approaches and tools (for example, forecasts, forward plans) will be less successful, and corporations will need to embrace and embed new capabilities to compete and win. While the strategy to succeed in a VUCA world may differ across sectors, three key elements will be relevant in most circumstances. These I call the 3 Ps - "People, Processes, Portfolio".
PEOPLE: Getting our people to adopt a mindset that "change is the only constant" is a critical leadership responsibility. This is not jingoism but a genuine change in mindset, which embraces VUCA developments as opportunities instead of merely risk, and has to be led from the top.
PROCESSES: Internal processes need to adapt in terms of flexibility and agility. Taking an example from my industry (consumer goods), volatile commodity prices meant that our profit and loss forecasts were redundant within a matter of days/weeks. We had to adapt internal processes to halve the time taken from first information to action in the market.
PORTFOLIO: It is critical to regularly review and refresh the portfolio of categories and products with an eye on the present and the future. For instance, companies may ignore products at the mass end of the consumer pyramid in favour of premium products. A sharp rise in inflation could force consumers to down-trade, and companies that have ignored the value-formoney sector may end up on the losing side.
In summary, developing the 3 Ps and halving the time taken for all key decisions and actions will strengthen the ability of companies to navigate the VUCA world, and win.
BEST CFO of AN MNC (MEDIUM): Yogesh Dhingra, Blue Dart Expres
Plan a Way Out
As the Chief Financial Officer and Chief Operating Officer of a leading express player, Blue Dart, I follow a very simple thumb rule - starting a month, quarter or year by assuming that it will be the most difficult one. This enables better planning and ensures prudent measures. It is not what one does but what the planning strategy is that makes one a winner.
After successfully weathering the 2008/09 economic slowdown, we encountered the slowdown of 2012/13 and managed to sail through. Keeping the investment cycle and service quality, innovation, etc. ongoing was a result of starting from the worst so that you always land up with a good scenario.
Organisations need to carve a niche for themselves in a cut-throat market. One can be a niche player only if one offers something that is different, unique and relevant. A well thoughtout business plan, close monitoring, continuous innovation, adopting prudent and conservative measures to mitigate costs, and customer centricity will help an organisation navigate uncharted waters. Tough times call for tough steps and being prepared with a Plan B or C is the key to bouncing back in a slowing economy.
Remember if "Plan A" does not work, the alphabet has 25 more letters.
REMARKABLE LEVERAGE MANAGEMENT (LARGE): Kailash C. Birla, UltraTech Cement
Work the Levers
Leverage management at UltraTech is part of the core strategy without in any way compromising growth and business leadership. We decide leverage based on capital structure, debt servicing, and investor requirement and then arrive at an optimum ratio. One of the cornerstones of our strategy is to maintain top credit ratings for both long-term and shortterm debt, to ensure that we attract the best proposals from lending agencies.
Once we decide the quantum of borrowing, we opt for rupee or external commercial borrowing or international bonds. While we evaluate foreign currency borrowing, we consider the fully hedged cost for decision making. This approach eliminates foreign exchange losses as is the case with many Indian companies. Let me drive home two examples of leverage management.
First, on an acquisition: ETA Star Cement (West Asia) was acquired using a mix of internal accruals and debt. We opted for a higher leverage to acquire ETA due to a significantly lower interest cost and existence of natural hedge. Debt was largely through international borrowing.
Second, treasury management: We maintain appropriate treasury levels and earn competitive returns. Our treasury returns are among the best in the industry. Our treasury also helps us to defer borrowing when interest rates are not in our target range. As a result, our average cost of long-term borrowings has been below 8.5 per cent while short-term borrowings have been less than 8 per cent. The consolidated debt-to-equity ratio is 0.48, while the ratio net of treasury is 0.17.
ENHANCING COMPETITIVENESS THROUGH M&As: Sushil Agarwal, Aditya Birla Nuvo
Mergers and acquisitions have played a key role in the company's transformational journey from a manufacturing company in the late 1990s to a $4.5 billion conglomerate today. The underlying strategy of every merger or acquisition has been to acquire an established platform in a promising sector, followed by capturing growth potential, deriving synergies and achieving leadership position. Two of our recent acquisitions are worth mentioning - those of Columbian Chemicals and a controlling stake in Pantaloon Fashion. The Columbian Chemicals deal was not only aimed at becoming the world's largest carbon black player but also to derive synergy in logistics, sourcing and technology.
The Pantaloon deal provides us an established, popular and fast-growing platform. Additionally, the deal will result in synergies in terms of raw material sourcing, and rentals. These benefits will accrue gradually.
Today, each of our businesses has attained market leadership, led by our continuous thrust and investment in enhancing competitiveness even during tough times. This is evident from the fact that most businesses have been consistently outperforming the industry.
CONSISTENT LIQUIDITY MANAGEMENT (LARGE): R. Shankar Raman
Stay in Shape
We are passing through a phase of economic turbulence that has severely tested our business plans shaped in the post-crisis period of 2009-2011. Back then, it was believed that India got past the aftermath of global economic turmoil of 2008 almost unscathed thanks to its prudent fiscal policy, robust business models, mature capital markets and economic potential. Frankly, corporate India did not anticipate its growth engine could slow down so significantly in just a year or two and that risk capital would make such a hasty retreat.
Since there are no "ifs" and "buts" in the real world and the present reality is strikingly different, we are in the process of realigning our plans to the new business environment. New conditions demand new approaches and hence we are retooling our strategies. While some of our businesses are reviewing business value propositions, some others are relocating their operations to more cost-efficient locations. Many are reassessing their supply chain efficiencies and time-tomarket plans. Some are taking their business global and to relatively more rewarding geographies.
New positioning, additional product functionalities, revised execution strategies, larger customer accreditations, and multiple alliances are our newly coated business plans. It is recognised in board rooms that it is important to stay positive during the downturns and be in reasonably preserved shape for the uptick as and when growth conditions return.
COMMITMENT TO TRIPLE BOTTOM LINE: P. Ganesh, Godrej Consumer Products
Be Green, It Pays
Being socially responsible is not new to Godrej. We have been at the forefront of philanthropic and social activities for several decades. We crafted a long-term vision called "Godrej Good & Green" for playing an active part in creating a more inclusive and greener India. By 2020 we aspire to: (a) Train one million youth in skilled employment. (b) Achieve zero waste, be carbon neutral, have positive water balance and 30 per cent renewable energy. (c) Have a third of our revenue comprising good and/or green products and services.
These goals are a crucial part of our business planning discussions and we have made specific commitments towards achieving them. We have cross-functional teams from supply chain, marketing, R&D and finance that work on improving our gross margins. These teams explore energy conservation and waste elimination options and have generated savings in excess of Rs 200 crore over the past three years, a winwin on both the business and Good & Green fronts.
Another great example is the cross-functional initiative led by the finance team to optimise capital employed and enhance economic value added. By encouraging suppliers to switch to paperless processing, we have ensured a faster transmission of funds and in return, better credit terms for the company, another win-win. Our teams continue to look for opportunities, both big and small, to be Good & Green. We have made a good start towards realising our Good & Green ambitions and are excited about the potential it holds.
Figures for 2011/12; Source: Annual Reports