Wednesday, September 15, 2010
interview with Tata Fiance's CEO Praveen Kadle
( Interview with Praveen Kadle, CEO, Tata Finance)
These were systemic problems, especially the high cost of operations. The market share was coming down and [there were problems with] product acceptability in the car division. It was quite clear that the company had to clean up its act as soon as possible. So from 1999 or 2000, we started looking at the cost structure. We brought down costs significantly. We improved employee productivity significantly. We restructured our operations. Some of the non-performing assets (NPAs), or underperforming assets, were either sold or were made to sweat a lot so that we could get back returns. I think working capital management was one of the key areas where we did significant restructuring. We used to have a huge inventory problem and about 27% of our total revenue was locked in net working capital -- not gross. So we decided to make the company get into some kind of reverse mode. From positive net working capital where a lot of money was blocked, we thought that we should get into negative net working capital.
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So in 2007, we started Tata Capital.
Also, India requires a huge amount of financial inclusion. Therefore, one can also get the social objective achieved without compromising on the commercial aspects of doing the business. We are in the corporate finance business, where we lend to corporate clients, mostly to mid-size and small companies, which are today not getting the right kind of credit from the banking system. We are also in investment banking, where we support mid-size companies [that] are not getting the right kind of financial advisory or investment banking advice. We are looking at the capital market in a big way, both in equity as well as in the debt market -- especially the debt market, which needs to be strengthened.
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Kadle: Unfortunately, Indian regulations don't allow large corporations like the Tatas to get into full-fledged banking or commercial banking. So we are registered as a non-banking financial services company, which doesn't allow us to get access to the low-cost current accounts and savings accounts of retail consumers. So we certainly have a cost disadvantage on the funding side. But what we are trying to do is to keep our operations cost-efficient by using technology and by using highly-motivated employees to have much better employee productivity and the right kind of processes.
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ndia Knowledge@Wharton: What has been the biggest leadership challenge you have faced in your career? How did you overcome it? And what did you learn from it?
Kadle: That is a difficult question. In terms of leadership challenges, I worked as a CFO all along and now I am a CEO. A CFO is always supposed to be a critic of the company's financial health and tries to help the company improve its financial health. As a CEO you are supposed to set the whole game plan in terms of growth and at the same time, sound financial health, sound processes and all that. So from being a bean counter to now actually be somebody who is executing, I think, is a key challenge.
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These were systemic problems, especially the high cost of operations. The market share was coming down and [there were problems with] product acceptability in the car division. It was quite clear that the company had to clean up its act as soon as possible. So from 1999 or 2000, we started looking at the cost structure. We brought down costs significantly. We improved employee productivity significantly. We restructured our operations. Some of the non-performing assets (NPAs), or underperforming assets, were either sold or were made to sweat a lot so that we could get back returns. I think working capital management was one of the key areas where we did significant restructuring. We used to have a huge inventory problem and about 27% of our total revenue was locked in net working capital -- not gross. So we decided to make the company get into some kind of reverse mode. From positive net working capital where a lot of money was blocked, we thought that we should get into negative net working capital.
--------------------------------------------------------------------------------------------------
So in 2007, we started Tata Capital.
Also, India requires a huge amount of financial inclusion. Therefore, one can also get the social objective achieved without compromising on the commercial aspects of doing the business. We are in the corporate finance business, where we lend to corporate clients, mostly to mid-size and small companies, which are today not getting the right kind of credit from the banking system. We are also in investment banking, where we support mid-size companies [that] are not getting the right kind of financial advisory or investment banking advice. We are looking at the capital market in a big way, both in equity as well as in the debt market -- especially the debt market, which needs to be strengthened.
----------------------------------------------------------------------------------------------
Kadle: Unfortunately, Indian regulations don't allow large corporations like the Tatas to get into full-fledged banking or commercial banking. So we are registered as a non-banking financial services company, which doesn't allow us to get access to the low-cost current accounts and savings accounts of retail consumers. So we certainly have a cost disadvantage on the funding side. But what we are trying to do is to keep our operations cost-efficient by using technology and by using highly-motivated employees to have much better employee productivity and the right kind of processes.
---------------------------------------------------------------------------------------------------
ndia Knowledge@Wharton: What has been the biggest leadership challenge you have faced in your career? How did you overcome it? And what did you learn from it?
Kadle: That is a difficult question. In terms of leadership challenges, I worked as a CFO all along and now I am a CEO. A CFO is always supposed to be a critic of the company's financial health and tries to help the company improve its financial health. As a CEO you are supposed to set the whole game plan in terms of growth and at the same time, sound financial health, sound processes and all that. So from being a bean counter to now actually be somebody who is executing, I think, is a key challenge.
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