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TIME FOR ACTIONUDAY KOTAK CALLS FOR

POLICY PUSH p. 12

KIMSUKA NARSIMHANA WOMAN OF

SUBSTANCE p. 26

SOCIAL NETWORKING CFOs ARE CAUTIOUSLY

OPTIMISTIC p. 22

VOLUME 01 ISSUE 05 Rs.50A 9.9 MEDIA PUBLICATION

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Larsen & Toubro’sY.M. DEOSTHALEE preparesfor the infrastructure boom p.16

ENGINEERTHEFINANCIAL

1A P R I L 2 0 1 0 C F O

contentsAPRIL 2010VOLUME 01, ISSUE 05

cover story16 THE FINANCIAL ENGINEER

Larsen & Toubro’s Y.M. Deosthalee prepares for the infrastructure boom

By Bennett Voyles

cfo profile26 A WOMAN OF SUBSTANCE

PepsiCo India’s Kimsuka Narsimhan is a CFO to watchBy Ullekh N.P.

view from the top12 POLICY PUSH

The Centre must look at ways to rev up the economyBy Uday S. Kotak

i think14 FOR A PERFECT TOUCHDOWN

The civil aviation industry should focus on efficienciesBy Rajesh Magow

in practice38 DOUBLE IMPAC T

Global firms can’t choose between India and China. They have to choose both

By Vikram Kotak

32 WISER EXPENSE MANAGEMENT Automation is perhaps the best way to monitor, slash costs

By Ullekh N.P.

36 SMART STRATEGIESA few tips on leadership, risk and performance

By Deepak Garg

42 PROGRAMME FOR ALL SEASONSA good contract risk and compliance plan builds trustBy Dave Zechnich and Chris Lee

big picture22 SOCIAL NETWORKING STATUSCFOs don’t rule out gains from social networking sitesBy Priyam Mahajan

insight44 BUDGETING IN VOLATILE TIMESA few ways for companies to adapt more quicklyBy Mahmut Akten, Massimo Giordano, and Mari A. Scheiffele

cfo lounge53 GIZMOS55 TRAVEL

03 from the editor’s desk04 letters to the editor06 topline50 leader’s world54 art review

12 Uday S. Kotak

26 Kimsuka Narsimhan

14 Rajesh Magow

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AD INDEXLeasePlan Cover on Cover | HP Inside Front Cover | LifeSize 05 | Birla Sun Life 09 | Empronc Solutions 11 | IBM 41 | Oracle Inside Back Cover | ICRA Back Cover

3A P R I L 2 0 1 0 C F O

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EDITORIAL EDITOR: Anuradha Das MathurCONSULTING EDITOR: Ullekh NPCONTRIBUTING EDITOR: Bennett Voyles

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editorialULLEKH N.P.ullekh@9dot9.in

A dream plan to connect, unclogALL OF US love and hate India, in parts. One of the more depressing mo-ments is when we come out of the airport. On our return from overseas trips, we come out of the airport feeling, invariably, that we are destined to return forever to a world of chaos. It is a forlorn feeling, and a constant one—so far.

Although India is getting richer, our new wealth has mostly served to add more bottlenecks on the way home. India’s famous love affair with cars and SUVs has far outstripped the construction of more roads, flyovers, bridges, and train lines. McKinsey analysts forecast that weak infrastructure may suppress India’s GDP growth through 2017 by as much as 1.1% a year. The seminar-room comparisons with China on this count are painful and humiliating. And most experts keep arguing from podium to podium that inadequate infrastructure is holding the country back.

Fortunately, their observations are not ignored by our current policy makers. Prime Minister Manmohan Singh has given infrastructure a national priority. He believes that large-scale infrastructure development will help the country reach a 10% annual growth rate. Thanks to his leadership, infrastructure spending in this five-year plan has doubled to $500 billion. From 2012-2017, it is supposed to double again, to $1 trillion.

In this issue, we look at a key player in that mission, Larsen & Toubro, the engineering powerhouse, and how 64-year-old CFO YM Deosthalee is prepar-ing the company to meet that challenge.

A die-hard patriot, husband of a social worker, admirer of Mahatma Gandhi and his social cause, Deosthalee is also a practical financier, known for his abil-ity to execute the financial side of long-time chairman AM Naik’s vision.

Writes our contributing editor Bennett Voyles: “The fact that L&T is home-grown makes it extremely valuable to the government … lives and livelihoods of millions, and perhaps even the future economic development of the country, may depend to an extent on how well L&T handles the burden of this expected growth.”

“Chances are good that Deosthalee and the company will continue to learn and adapt,” he adds.

Let there be less chaos heading home!

4 C F O A P R I L 2 0 1 04

letters to the editor

EXCELLENT PRODUCT; RIGHT FOCUS ON CFOSI have been reading with keen interest the CFO India maga-zine for the past couple of months and I am glad to note that the coverage of contemporary and very relevant topics has improved significantly ... I find an added value through the coverage of industry stalwarts which will truly benefit the entire finance fraternity. —BR Jaju, director, Welspun Gujarat Stahl Rohren Ltd

GOOD SHOWI am extremely impressed with the magazine. It offers a complete picture of the finance function. —Aekta Kapoor, Delhi

CFO India offers a good, light read. There aren’t too many jargons or technical details. That is why the magazine stands out, compared with other industry magazines ... headlines are snappy, too.—James Mathew, Delhi

ON THE BALLAdi Godrej has made a very valid point: CFOs may have adapted well, but companies must step up training.—Baiju Kalesh, Mumbai

The cover story by Bennett Voyles is brilliant. Indeed it’s very creditable on your part to pick up an aspect which is so apparent, but yet not widely discussed earlier. —Robin Banerjee, CFO, Suzlon Energy

VOLUME 01 ISSUE 04MARCH 2010

A Fair Game

SMOOTH TRANSITIONCFOs HAVE ADAPTED QUICKLY TO NEW REALITIES: GODREJ p.10

THE INDOMITABLE NEDUNGADI

HE FACES TOUGH TIMES p.24

THE UNION BUDGET IN LINE WITH GLOBAL

TRENDS p.34

VOLUME 01 ISSUE 04 Rs.50A 9.9 MEDIA PUBLICATION

FEBRUARY-MARCH 2010

KEEP IT UPI am greatly impressed with the digital version of the maga-zine. It is like an e-book. Keep it up. —Kamlesh Mehta, executive director, Rolta India Ltd

A QUESTION OF TALENTThe basic flaw that results in an acute lack of talent is the inability to catch finance professionals young and groom them all the way. Many companies are happy with business processes being streamlined than preparing a CEO for tak-ing up and managing future business situations. —S Kesavan, executive director, operations and finance, Brakes India Ltd

INSIGHTFULThis (the article titled “Think Regionally”) is indeed a very short but precise and comprehensive analysis of the trend. —Pranav Koshal, CEO, Bulls-I

OUTSTANDING PRODUCTCFO India has too many more pluses than minuses. The news items in the magazine should be replaced with analytical sto-ries ... that is a suggestion from me ... otherwise all write-ups so far—cover stories, CFO profiles, travel—are brilliant. Try setting your standards high. All the best to the whole team! —Murali Gopalan, Mumbai

6 C F O A P R I L 2 0 1 0

topli ne04.10

topli neRBI MOVE

THE RESERVE BANK OF INDIA HAS HIKED THE CASH RESERVE RATIO (CRR) by 25 basis points from 5.75% to 6%, in a move aimed at controlling the inflation spiral with-out choking growth.

The CRR is the amount of funds required to be kept with the RBI. If the RBI decides to increase this percentage, the banks’ availability of funds comes down. Typically, since banks don’t earn any interest on the money they park with the RBI, they will be left with no other option but to hike interest rates to make up for the resulting loss. However, most banks have indicated that they will likely not pass on the increased cost to the borrowers at this time as there is currently suffi-cient liquidity in the system.

The central bank has also decided to increase the repo rate under the Liquidity Adjust-ment Facility (LAF) by 25 basis points from 5% to 5.25%. The bank also increased the reverse repo rate under the LAF by 25 basis points from 3.5% to 3.75%. The bank rate, however, was left unchanged at 6%.

As a result of the increase in the CRR, Rs 12,500 crore of excess liquidity will be

Growth is important, too

PH

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A full and fair discussion is

essential to democracy. —GEORGE SOROS

topli ne

7A P R I L 2 0 1 0 C F O

topli neFACTORY OUTPUT

Still going strong

absorbed from the system. RBI Governor D Subbarao said that the monetary policy is aimed at anchoring inflationary expectations while preparing to respond “appropriately, swiftly and effectively” to inflation-ary pressures. The inflation rate is nearing 10%. The central bank has pegged annual inflation based on the wholesale price index for March 2011 at 5.5%.

“There is clear evidence of demand side pressures building up ... with the recovery now firmly in place, we need to move in a calibrated man-ner in the direction of normalising our policy instruments,” the RBI said following a recent announcement.

Announcing the policy measure, the central bank said it would closely monitor the price situation in the economy and would take further action as warranted.

The Reserve Bank, which has visibly shifted its policy priority to infla-tion from growth, also warned that with growth expected to accelerate next year, capacity constraints will most likely put additional pressure on prices. The central bank said that “demand-side inflation should not become entrenched”.

On the other side, the huge Rs 4.57 lakh crore government borrowing is likely to pose a bigger challenge to the central bank to manage in the current fiscal as compared to last year—the RBI has expressed concerns that this may crowd out private demand.

The rate hike will gently tighten money supply and help moderate inflation—which is hovering close to 10%, finance minister Pranab Mukherjee said. He, however, felt that inflation has peaked and would begin falling and ultimately be lower than 5.5% projected by the RBI for this fiscal. “These policies should have a gentle impact in tightening money in the economy and should soften inflationary pressures fur-ther,” he said.

The RBI began exiting its accommodative policy stance in January by hiking CRR to 5.75% and the short-term rates by 0.25% each in March.

IIP NUMBERS SHOW THE ECONOMIC RECOVERY IS ON FIRMER GROUND.

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India’s industrial production maintained a high

growth of over 15% for the third month in a row in

February, signalling that the recovery process is on

firmer ground.

However, with industrial growth at 15.1% for the

month, as measured by the Index of Industrial Pro-

duction (IIP) data, it is lower than 16.7% growth

achieved in January this year and a robust 17.6%

notched up in December last year. Experts say this

is due to the partial withdrawal of the stimulus mea-

sures coupled with the moderation in output wit-

nessed by sectors such as cement and steel.

As per the IIP data, 14 out of the 17 industrial

groups showed positive growth in February 2010.

According to the use-based classification, the capi-

tal goods and consumer durables sectors recorded

high growth of 44.4% and 29.9%, respectively.

The slide in specific industries such as cement

and steel was expected, as was clear from the core

sector data which had earlier revealed a deceleration

in cement output to 5.8% in February as compared

to a growth of 8.3% in the same month in 2009.

Finance Minister Pranab Mukherjee in the Budget

for 2010-11 partially rolled back the stimulus by rais-

ing excise duty by 2% to 10% and taxes on petro-

leum goods that pushed up the prices of petrol and

diesel by more than Rs.2.50 a litre.

A report quoted Crisil’s principal economist

D. K. Joshi as saying that the growth in industrial

production would moderate in the coming months

due to the base effect and further tightening of the

monetary policy by the Reserve Bank of India (RBI).

8 C F O A P R I L 2 0 1 0

topl

ine

INFOSYS LTD, TATA CONSULTANCY SERVICESand Wipro Ltd hired more than 20,000 employees in the January-March quarter, with improving business conditions propelling their recruitment plans, a Press Trust of India report said.

According to human resources experts, IT and IT-enabled services are expected to see a huge jump in hiring this year and major companies in the sector have already set the pace. The three IT companies put together have made net additions of 20,014 employees (taking into account attrition) in the January-March quarter, the report added.

IT giant Infosys hired as many as 9,313 employ-ees in the quarter, but the net addition after taking into account attrition was 3,914, according to the company’s financial statement for the period.

The hiring increased the total workforce of the company and its subsidiaries to 1,13,796 employees at the end of March this year.

Another information technology major Tata Consultancy Services took on board a net 10,775 employees in the last quarter of 2009-10 fiscal. TCS’ total employee strength has soared to 1,60,429 at the end of the last fiscal.

The hiring momentum picked up from the third quarter of the last fiscal, when TCS had made 7,692 net additions, compared with just 320 recruitments in the previous quarter.

THE ROW BETWEEN THE SECURITIES AND EXCHANGE BOARD OFIndia (SEBI) and the Insurance Regulatory and Development Authority (IRDA) over the regulation of unit-linked insurance plans (Ulips) is all set to enter the Supreme Court.

SEBI had early in April banned 14 life insurance companies, including those belonging to the Tatas, SBI, ICICI, HDFC and the Reliance Anil Ambani Group from raising funds through Ulips.

Reacting to the order, IRDA chairman J Harinarayan had said, “I don’t think their (SEBI’s) position is well-founded.” Insurance companies have to take legal recourse since the order was issued against individual com-panies and IRDA is not party to it, he said.

Two days after the ban, on April 12, Finance Minister Pranab Mukher-jee restored the status quo on Ulips and sought a legally binding verdict from the courts.

JOB MARKET

SEBI VS IRDA

Software giants in hiring spree

Locking Horns

Big Cinemas buys screens in 27 US cities

SCREEN PRESENCE

In an effort to cash in on the craze for Bollywood films among the South Asian population, which is estimated to be nearly four

million in the US, Big Cinemas has acquired 188 screens in the

country, a report said. Big Cinemas is a member of the Reliance Anil

Dhirubhai Ambani Group.

THE LEGAL BATTLE OVER ULIPS WILL BE FOUGHT IN THE SUPREME COURT

10 C F O A P R I L 2 0 1 0

topl

ine

GOLDMAN SACHS GROUP AND US SENATOR Carl Levin, who leads the Senate’s Permanent Sub-committee on Investigations, have fired opening shots ahead of a congressional hearing, releasing conflicting evidence of the investment bank’s tactics during the mortgage market’s collapse, a Bloomberg report said.

“Levin has posted internal Goldman Sachs e-mails on his website that he said show the firm ‘made a lot of money by betting against the mortgage market’”, the report said.

Goldman Sachs responded with documents indicating the firm lost money on mortgages in 2008 and that executives didn’t know the market would fall, it added.

CEO Lloyd Blankfein, 55, and six current and former Goldman Sachs employees will have to face questions from Levin’s panel against the backdrop of fraud claims from the US SEC. The regulator sued the firm on April 16, saying it defrauded investors when selling a debt instru-ment tied to mortgages.

Goldman Sachs, which contests the SEC’s claims, said Levin’s committee has “cherry-picked” evidence and jumped to conclusions “even before holding a hearing”, according to the report.

“Investment banks such as Goldman Sachs were not simply market-makers, they were self-interest-ed promoters of risky and complicated financial schemes that helped trigger the crisis,” Levin, 75, said in a statement released with the e-mails.

One of the e-mails provided by Levin shows Blankfein telling colleagues on November 18, 2007, that the firm was making more money from its so-called short bets on mortgages than it lost on its investments related to home loans.

“Of course we didn’t dodge the mortgage mess,” Blankfein wrote in an e-mail dated November 18, 2007, that was among eight pages of documents made public by the senate’s Per-manent Subcommittee on Investigations.

“We lost money, then made more than we lost because of shorts. Also, it’s not over, so who knows how it will turn out ultimately.”

Another document contains an exchange between CFO David Viniar and Gary Cohn, the firm’s president and chief operating officer, about the fixed-income division’s profit and loss state-ment in July 2007.

GOLDMAN SACHS

Top executives feel the heat

The smallest 3-D mapTECH MARVEL

SCIENTISTS AT IBM ACCOMPLISHED THIS FEAT THROUGH A BREAK-THROUGH TECHNIQUE THAT USES A SILICON TIP WITH A SHARP APEX.

IBM SCIENTISTS HAVE CREATED A 3D MAP OF THE EARTH SO small that 1,000 of them could fit on a single grain of salt, a report said.

They accomplished this through a new, breakthrough technique that uses a tiny, silicon tip with a sharp apex—100,000 times smaller than a sharpened pencil point—to create patterns and structures as small as 15 nanometre at greatly reduced cost and complexity.

A nanometre is a billionth of a metre. This patterning technique opens new prospects for developing nanosized objects in fields such as electronics, future chip technology, medicine, life sciences, and optoelectronics.

To demonstrate the technique’s unique capability, the team created several 3D and 2D patterns, using different materials for each one, a report by IANS said.

GOLDMAN SACHS SAYS A CONGRESSIONAL PANEL IS JUMPING TO CONCLUSIONS EVEN BEFORE HOLDING A HEARING.

Facts & TriviaZODIAC SIGN: Pisces

LAST BOOK READ:On the Brink by Hank Paulson

NEWSPAPERS HE READS: Business Standard, Times of India, Economic

Times, Indian Express, Hindustan Times

THE MANAGING DIRECTOR OF KOTAK MAHINDRA BANK talks about policy measures that could give the Indian economy a big push.

UDAY S KOTAK

12 C F O A P R I L 2 0 1 0

view

from

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top

The Indian economy has come out relatively unscathed from the global economic meltdown, thanks to the spirit of the Indian entre-preneur and a proactive policy regime. Experts say that our economy will grow between 7% and 8% in the current fiscal year; Standard & Poor’s has recently upgraded India’s sovereign rating to stable from negative. All this is good news.

Now, it is essential that India grows at that pace to bring prosperity to thousands of poor households. Finance minister Pranab Mukherjee underlines this mission, and his Budget provides a thrust to agriculture, infrastructure and financial services. His resolve to contain the fiscal deficit would mean that various subsidies could be surgically cut through better design and delivery.

Mukherjee also signalled the Central government’s intent to provide room for the private sector to drive India’s future growth. I feel the disinvestment target of Rs 40,000 crore is a significant one, and that would help the govern-ment finance larger social objectives.

In my opinion, four major steps that could really push our economy in the right direction are:1. Fiscal measures: a) Fiscal consolidation: The Government cannot persist with large fiscal defi-cits, and we need to initiate fiscal consolidation if we wish to avoid a modern-day Greek Tragedy arising out of a large fiscal deficit. As opposed to China, where the large fiscal deficit was directed to augment infrastructure spending, the impact of fiscal deficit in India was to increase aggregate consumption. Additional outlay on subsidies, pay revision, farm-loan-waiver plan and increased cov-erage of employment guarantee were not intended as fiscal stimuli per se, but they did have significant counter-cyclical impact. b) Managing inflation: Food inflation has shown an alarming acceleration in the past couple of months. Although this is predominantly a supply-side phe-nomenon, it can fuel inflationary conditions result-ing in an abrupt or early exit from an accommodat-ing monetary policy stance. Such a premature and

sudden move could stall the growth momentum. 2. Current-account deficit: The December-quarter current-account numbers reflect deficit being high-er than 3% of the GDP with trade deficit being $10 billion a month. Our policy-makers have to balance the challenges of capital flows and exchange rates in the backdrop of a growing current-account deficit.3. Continuing financial reforms: Financial reforms are “not about whether foreigners can own 49% in life insurance JVs or 26%,” or whether “we have X number of private banks or Y”. It is essential to encourage development of domestic Institutions. Encouraging more domestic participation in equity markets would help strengthen our institutions.

The capital expenditure target of the Central gov-ernment in 2010-11 is budgeted at only 2.1% of the

GDP. At a time when containing fiscal deficit is a priority, additional spending on infrastructure can come about only by containing subsidies. 4. Reforms in the agriculture sector: One sector that still retains the “Hindu rate of growth” is agriculture. I am sure that if we put aside populism and embrace long-pending economic reforms in agriculture, India can easily clock double-digit growth. These reforms could include abolition of restrictions on the movement, storage, trade and processing of agricultural produce, recognition of futures markets and overhauling of the Agricultural Produce Market Committee’s leaky PDS system.

Managing the expectations and well-being of a billion-plus people offers an enormous challenge, especially in a democratic set-up that has to grapple with regional political agendas, vagaries of nature and the scrutiny of a vigilant media.

We are in the midst of exciting times, and I have a firm belief that the current fiscal year will usher in the “Decade of India and its people”.

I feel that the disinvestment target of Rs 40,000 crore is a significant move ... it will help the Centre finance larger social objectives.

13A P R I L 2 0 1 0 C F O

view from

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14 C F O A P R I L 2 0 1 0

i think

15A P R I L 2 0 1 0 C F O

INDIA’S CIVIL AVIATION SECTOR HAS recently started showing signs of recovery following a massive slow-down, largely because of a rise in demand, indicating that the travel industry as a whole is finally picking up momentum. In fact, air passenger traffic in the country grew nearly 23% between August 2009 and January 2010, according to data released by the Director General of Civil Aviation. This growth has naturally helped improve the load factor of almost all the airlines. A few of them have also reported profit-able quarters recently. This is certainly good news for all those who are associ-ated with this sector and the Indian economy in general.

In my view, here are some major factors that possibly caused a crisis situation in the airline sector. We must examine them by all means so that we can look at ways to avert or tide over similar crises in the future.

Artificial demand-creation early on with aggressive, but unsustainable pricing by some of the low-cost carriers (LCCs) a few years ago didn’t help the

cause, as most companies got carried away and built excessive capacity well ahead of time.

The demand correction that followed, partly due to the upward price cor-rection by the airlines and the recent economic slowdown, resulted in a huge demand-supply gap.

All this also led to a couple of air-lines reaching a point of no-return and forced the industry into an early consolidation mode which was driven more by the “market-share rush” than a comprehensive strategic move.

The rise in prices of aviation turbine

fuel and a lack of focus on operational efficiencies were the other main rea-sons for the crisis in the sector.

Some of the reported operational metrics with regard to employees per aircraft were way off the international benchmark at least in the case of a few of the airlines.

Besides, poor infrastructure meant that airlines spent more time hovering over airports, resulting in high operat-ing costs for most companies. Any improvement on this count is unlikely in the short term.

Now, while the recovery trends are encouraging, there is still a long way before the sector fully recovers from the impact of the massive estimated cumulative financial loss to the tune of Rs 10,000 crore in the last fiscal year.

The Commonwealth Games that the country will host later this year—for which India’s capital city Delhi is get-ting a makeover—should hopefully help improve demand further, but domestic airline operators should put a lot of focus on planned capacity expan-sion and operational efficiencies.

RAJESH MAGOWFacts & Trivia

ZODIAC SIGN: LibraPAST EMPLOYERS: ebookers/

Travelport (India), Aptech, Voltas (ebookers was taken over by

Travelport)

FAVOURITE BOOK: We Are Like That Only by Rama Bijapurkar

FAVOURITE HOLIDAY DESTINATIONS: Phuket, Mauritius

THE CFO OF MAKEMYTRIP.COM says that the country’s civil aviation sector is on the recovery path. He expects airline operators to focus more on enhancing efficiencies.

Air passenger traffic rose 23% between August last year and Jan-uary 2010 … the travel segment is gathering momentum.

i think

16 C F O A P R I L 2 0 1 0

COVER STORY

BENNETT VOYLES

WALL STREET’S COWBOYS have given financial engineering such a bad name it’s easy to forget that in the right hands, it can be a powerful tool, a skill that helps build bridges, train lines and power stations.

For 36 years, that’s the kind Y.M. Deosthalee has practised for Larsen & Toubro, expertise as crucial to L&T’s success as its more vaunted engineering and project management skills.

Deosthalee’s efforts have won the $9.9 billion engineering powerhouse a set of competitive financial advantages every bit as important as the vaunted skills that have built vast infrastructure projects all over India and as far away as the Persian Gulf.

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Larsen & Toubro’s Y.M. DEOSTHALEE

prepares for the infrastructure boom

THE

ENGINEERFinancial

17A P R I L 2 0 1 0 C F O 17A P R I L 2 0 1 0 C F O

“ALL OF OUR

BUSINESSES ARE

PEOPLE-ORIENTED

BUSINESSES. MAK-

ING SURE THAT WE

ATTRACT, RETAIN AND

MOTIVATE TALENT IS

OUR BIGGEST

CHALLENGE.” !

THE FINANCIAL ENGINEER | COVER STORY

COVER STORY | THE FINANCIAL ENGINEER

18 C F O A P R I L 2 0 1 0

Of course, in business, no good deed goes unpunished. L&T’s successes have helped the country grow, but they have also helped create more demand for its skills. Today, at 64, an age when most executives begin to wind down their careers and head out to the golf course, Deosthalee faces his biggest challenge yet: reshaping L&T so it can handle India’s ever-growing demand for infrastructure.

ROAD BLOCKSMost analysts have argued for years that inadequate infra-structure is one of the key factors holding India back. Power plants, roads, train lines, airports—you name it, India needs a lot more of it. In fact, McKinsey & Co. analysts estimated in August 2009 that weak infrastructure may suppress GDP growth through 2017 by as much as 1.1% a year.

Such observations have not gone unnoticed in a govern-ment led by a professional economist. Prime Minister Man-mohan Singh is giving infrastructure a top national priority, and sees it as a key factor in helping the economy reach a 10% annual growth rate. By the end of India’s current five year plan, infrastructure spending will have doubled from the last five-year plan, to $500 billion. In the next five-year plan, 2012-2017, spending is supposed to double again, to a total of $1 trillion by 2017.

If the government follows through, L&T is certain to be a key partner in the campaign, an unusually professional con-tractor in an environment where top-flight skills in engineer-ing and project management are the exception rather than the rule.

The fact that L&T is not family-owned also plays well with the government, says Partha Mukhopadhyay, an analyst at the Centre for Policy Research, a New Delhi think-tank. “Obvious-ly, for various kinds of reasons, it’s difficult for governments to have any kind of special relationship with family-owned businesses,” he says.

In such an environment, analysts expect L&T to profit hand-somely in an area that even now represents roughly 60% of the company’s business.

Broker Motilal Oswal Securities forecast a return on equity of more than 18% a year over the next four years, the result of expected growth not just in infrastructure but in other lines of business as varied as financial services and shipbuilding—a portfolio broad enough that analysts sometimes describe L&T as “the Indian GE.”

It’s an enviable position—but not without risks. The govern-ment’s need and L&T’s demonstrated talent for managing massive projects put the company in a position not unlike a key military contractor in wartime. On the one hand, the company’s rare skill-set—and the fact that it’s a home-grown one—makes it extremely valuable to the government. On the other, lengthening its order book increases, maybe even mul-tiplies, the managerial challenge: the lives and livelihoods of millions, and perhaps even the future economic develop-ment of the country, may depend to an extent on how well L&T handles the burden of this expected growth.

AN INDIAN PATRIOTBoth the patriotic and the economic promise of the infra-structure mission seem to suit Deosthalee. Married to a social worker, Deosthalee seems to have an unusually active social conscience for a businessman. At some point, he says, he defi-nitely wants to do some work in the social sector.

He already does a little social work himself now, “in a very small way”, he says, and would like to do more one day. He is concerned in particular about the state of education in India. “The first and most important thing India needs today is tre-mendous and high-quality education,” he says.

Another hint that this social interest runs deep: Deostha-lee doesn’t count businessmen among the personalities who have influenced him most. Instead, he lists Mahatma Gan-dhi, Rabindranath Tagore, and astrophysicist Jayant Narlikar, as the top three. Why those particular heroes? “There is so much transparency and cleanliness in their conduct, their behaviour, and their approach to life,” he explains. “I think that has touched me very much.”

However, the Mumbai native is also very much the 75-mil-

“It’s (infrastructure) much improved compared to what it used to be, but it still has some way to go before we can call it perfect.” —SAMIRAN CHAKRABORTY

REGIONAL HEAD OF RESEARCH, STANDARD CHARTERED BANK, INDIA

THE FINANCIAL ENGINEER | COVER STORY

19A P R I L 2 0 1 0 C F O

lion-rupee-a-year executive, taking pleasure in working out deals and making sure the company is running as efficiently as possible, keenly supportive of Chairman and Managing Director A.M. Naik’s cultural transformation of the company from its roots as a somewhat sleepy engineering firm founded by two Danish engineers in 1938, into a driven, entrepreneur-ial juggernaut.

Deosthalee is a stickler for quality and good processes, according to R. Shankar Raman, senior vice-president for finance and a colleague for the past 15 years. At the same time, Raman says, he’s also looking for constant innovation and improvement. “He gets restless if there’s a fair amount of repetition,” he says.

“He’s a tough guy in negotiations,” Raman says. And he often takes a tough line from the start. “Many times, to start with it looks very unreasonable, but most of the time we actu-ally get out of the transaction the value proposition that he was targeting.”

At the same time, however, he is “fairly swift to sense a deal breaker”, and is open to win-win outcomes even if it means leaving a little money on the table.

Another long-time colleague, executive vice-president M.S. Krishnamoorthy, describes Deosthalee “as a very sober sort of a man”. Within his team, however, Deosthalee shows another side. “He’s a great guy to work with and a lot of fun,” says Raman—a boss with a steady mood, quick to celebrate a success. “Even in a difficult corner, we can look at the fun side of the scenario and maybe crack a joke or two.”

BUILDING THE MACHINEIn other parts of Mumbai, it’s a hot and sleepy Saturday morn-ing in April, but not in Deosthalee’s office at L&T’s headquar-ters. At 9:45 am, his corner of the Ballard Estate is already humming.

From the stately colonial building in the Fort section of Mumbai—built appropriately enough from stone quarried in the early 1900s during the building of another great infra-structure project, Mumbai’s Indira Docks—the lean and ener-getic executive speaks rapidly and precisely, ticking off the ways he has prepared L&T for the campaign ahead.

At the top of his list is the fact that L&T now has a cost of capital roughly half that of the average Indian company, about 5.5 or 6% compared with the typical 10 or 11%.

Some of that premium is due to the confidence investors place in L&T’s capacity to complete projects. The rest is the product of a combination of old-fashioned fiduciary responsi-bility and creative financing.

Deosthalee says he always tries to keep the parent company highly liquid, which helps give investors some added reassur-ance that their money is safe.

At the same time, L&T is also opportunistic when it comes to raising money. The company looks neutrally at whether to

THE HR HATOne of the unusual features of Y.M. Deosthalee’s role is that he is both CFO and director of HR.

By rights, this should be an uneasy mix. Many financial people

are skeptical of human resource expenditures. One American

HR professor, Richard Beatty of Rutgers University, has even

gone so far as to write that CFOs are right to distrust HR

departments. On the whole, the financial view of HR tends to

see HR as an unloved stepchild– a cost-center, pure and simple.

Deosthalee doesn’t see it that way. Human resource develop-

ment is an investment, not a cost, he insists.

“If you are spending money on developing

employees, it is not an expenditure. It

is an investment in the growth of

the organisation,” he says.

Although a chartered

accountant by training,

Deosthalee seems to

have found the two roles

complementary. For one

thing, it’s easier for a

finance person to assess

the returns on a given invest-

ment. For another, he says,

finance is also “a people-oriented func-

tion. It’s a function which depends on the skills of individuals”.

Shankar Raman, the senior vice-president for finance, argues

that the dual role gives Deosthalee an excellent platform as a

change agent within the company, making it possible for him to

take important ideas directly to the employees.

For his part, Deosthalee says that an understanding of HR is

essential for any business leader. Even before he took over the

HR function, he says, “I realised that if you want to be a good

business person, you need to understand human resource

management.”

raise cash through debt and equity, and instead uses what-ever money looks cheaper in the market, according to Deost-halee. He says L&T also borrows from foreign lenders (on a hedged basis in these volatile times), to hedge the risk of its international business—which is now about 17% of the total revenue—expand its funding sources, and help keep its funding costs low.

Second, he says, L&T is investing in companies, at the sub-sidiary level, making investments in heavy engineering firms that expand the company’s technical capabilities.

Third, L&T is investing directly in the public-private part-nerships that finance many of these projects, through spe-cial purpose vehicles. At the same time, he says, his team is developing a facility to syndicate loans in the special purpose vehicles. This will serve as a channel for funding both L&T’s

COVER STORY | THE FINANCIAL ENGINEER

20 C F O A P R I L 2 0 1 0

own projects, and through its finance arm, third-party infra-structure projects.

Finally, Deosthalee has led an effort to tighten working capital, a key expense and risk for any contractor. Through a recent education programme, “Cash is King”, Deosthalee’s team educated managers about the value of keeping a tight rein on working capital, shrinking working capital require-ments from 30-35% of revenues all the way down to 12-13%.

THE HUMAN FACTOR As the head of human resources as well as finance, Deostha-lee is also pushing a number of HR initiatives to ensure that L&T has enough talent to meet its obligations.

“All of our businesses are people-oriented businesses. Mak-ing sure that we attract, retain, and motivate talent is our big-gest challenge,” he says.

Most of the time when an executive talks about talent, he means talent in the executive suite, or maybe top-flight engi-neers. Deosthalee is more egalitarian, including not just the people who will win the bids, or the engineers who will design them, but the plumbers, electricians, masons and other skilled and semi-skilled artisans who will actually build L&T’s future projects. “We need lots of people for these areas—for the country as well as for the company,” he says.

Deosthalee is right to worry. Despite a work force of nearly a billion, skilled labour is not always easy to find. Nationwide, McKinsey estimates that demand exists for 2-3 million new skilled and semi/skilled workers every year within the con-struction industry alone.

To build more expertise for the company, L&T has estab-lished a management training centre, built a diploma col-lege for engineering, which employees’ children can attend for free, promoted e-learning courses, and sponsored insti-tutes to train thousands of electricians, plumbers, carpenters, and other skilled craftsmen. In all, more than 10,000 people, nearly a third of the L&T payroll, have studied under the com-pany’s auspices in the past three years, he says.

“Learning development is core to Larsen & Toubro,” Deost-halee says.

TRAFFIC JAMS Of course, no matter how powerful your vehicle, you can still get stuck in traffic.

For the most part, India’s infrastructure projects are plagued with problems. McKinsey claims 30% of projects are never awarded. Of those that are awarded, the average project is completed with time and cost overruns of 20-25%—and that’s just the average. Some of the problems have to do with the government, others with the contractor. Not following the kind of best practices for lean sourcing (a methodology L&T uses), for example, inflates costs by 20 to 30%, according to McKinsey estimates.

Any number of things can go wrong in infrastructure devel-opment, even in its first stages. For example, many see the bidding process in particular as an area that could use more improvement. “It’s much improved compared to what it used to be, but it still has some way to go before we can call it per-fect,” says Samiran Chakraborty, regional head of research for Standard Chartered Bank in India.

Overall, the Mumbai-based analyst says, the process often remains fragmented and somewhat murky.

The regulations of public-private partnerships that the gov-ernment sees as a core financial tool for infrastructure devel-opment are also overly complex and not well-understood by most contractors, Chakraborty says.

“It is still not widely known how well these schemes have run or how much return these private parties earn,” he says.

In spite of the billions promised by the government, financ-ing is also not all that easy to come by yet either, analysts say. “Our banking sector is still not large enough for it to be able to handle many very large projects,” Chakraborty adds. Already, he says, three-fourths of incremental bank credit is flowing into infrastructure.

Government macroeconomic concerns also limit foreign participation in the market, according to Deosthalee. A fur-ther challenge for L&T, at least in power generation and tele-com, is its size. Many projects are smaller than the “multi-million-dollar deal minimum” that the company has set for itself, which may also limit its market share. Smaller, 50-100 MW power plants, for example, are popping up all over—a

“The fact that L&T is not family-owned plays well with the government … for various kinds of reasons, it’s difficult for governments to have any kind of special relationship with family-owned businesses.”—PARTHA MUKHOPADHYAY AN ANALYST AT THE CENTRE FOR POLICY RESEARCH, A NEW DELHI THINK-TANK

THE FINANCIAL ENGINEER | COVER STORY

21A P R I L 2 0 1 0 C F O

AT THE FEET OF THE MASTERIn the 15 years he has worked with Y.M. Deosthalee, senior vice- president R. Shankar

Raman says he has picked up some important management

tips. Among them:

YOU CAN’T PERSUADE EVERYONEOpinions always diverge. “The

trick is to get a line of best

fit, cutting across all opin-

ions... to some common

goal,” Raman says.

FIRST THINGS FIRST

“When it comes to time man-

agement, Deosthalee’s ability

to ‘cut through the important

from the peripheral’ has been

an important example to

Raman.

KEEP YOUR MOOD STEADY

Unlike some managers,

Deosthalee tends to maintain

the same mood. “We don’t

have to guess what his mood

is going to be,” Raman says.

“That’s a great comfort.”

PLAY IT STRAIGHT

“You can afford to be very

straightforward in your deal-

ings and it need not neces-

sarily be a disadvantage,” he

says.

huge opportunity, but too small for L&T to bother with. “It’s only when projects can larger and more complex that

L&T is able to bring its core business skills and advantages into play,” says says Mukhopadhyay.

Smaller deals make it difficult for an L&T to provide its core advantages “because it’s only when projects become larger and more complex that L&T’s core business skills and advan-tages come into play”, Mukhopadhyay says.

Not good news for L&T, but Mukhopadhyay argues that the country will muddle through anyway.

He argues that the “macro concerns” about infrastructure are overblown, brought on by comparisons to what he sees as China’s overcapacity.

From a macroeconomic point of view, he says India’s infra-structure-development difficulties may not be as serious as they sometimes appear. “One of the simple tests for that is that you really can’t have an economy growing at the rate of 8 to 9% unless there is something happening on the infrastruc-ture front,” says Mukhopadhyay.

STILL LEARNINGWithin the company, too, challenges lie ahead.

As the last few years of General Electric have demonstrated, it’s not easy to be a large conglomerate. Year by year, the executive team has more ventures to consider and look after, concerning the 40% of the business that is outside infrastructure, principally ship-building, finance, and IT—that bring with them new risks.

The executive team is also getting older. Most of the board of directors have careers that stretch back to the 1960s. One of these days too, Naik, the company’s hugely successful 67-year-old CEO, will need to pass the torch. At the same time, ana-lysts note that many of the newest players in the infrastruc-ture space are developers in their own right, and that could change the competitive dynamics.

Overall, however, chances seem good that Deosthalee and the company will continue to learn and adapt—for the same reason they became adaptable in the past: “There was no choice,” Krishnamoorthy recalls: “If you didn’t have it, you would not have survived.”

22 C F O A P R I L 2 0 1 0

big picture

CFOs in India may not have started using social networking sites for

business purposes in a big way, but they don’t dismiss their benefits either.

PRIYAM MAHAJAN

Too EarlytoSay TheyROCK

that they keep grabbing headlines, thanks to the high and mighty including politicians, actors, businessmen and crick-eters, who use this brand-new platform to express their views or push their agenda.

On their part, the country’s finance professionals haven’t yet started tapping into the trend as a business opportunity in a big way, nor are they using them to air their opinions, but

THE AGE OF revolution of the socialist kind has come and gone. And it seems we have just stepped on to the age of revo-lution of the social networking kind. Yes, the world is wit-nessing a rapid growth of online social networking sites that help people connect and reconnect with friends and friends of friends and friends of friends of friends. It is just plain truth that these sites in the cyber world are growing so fast

23A P R I L 2 0 1 0 C F O

big picture

a beginning has been made—the majority of them refuse to dismiss the potential of these online avenues in benefiting their business.

In fact, most of these more than 140 executives surveyed by The CFO Institute are members of at least one social network-ing site. While more than 40% feel that it is too early to make a verdict on the impact that sites such as LinkedIn, Facebook, Orkut, MySpace and others will have on businesses, nearly 25% of the respondents say these online forums have helped their companies in connecting and reconnecting with people. Only 14% say that they don’t expect social networking sites to help them achieve business goals.

Most finance professionals who took part in the survey—nearly 59% of them—are members of the popular site, Face-book. LinkedIn came close behind at 57.4%. While 19% of them are members of Orkut, 12% are on social networking, micro-blogging site Twitter; less than 1% of these executives are on MySpace.

Social networking started flourishing as a trend only in the past 6-7 years. LinkedIn, a networking platform for profes-sionals, was launched in 2003, Orkut in 2004 and Facebook in 2006. Currently, there are more than 200 social network sites in the non-niche space.

More than 66% of the finance professionals quizzed say the main purpose behind using these “friend-of-friend” sites is what they are meant for: networking; but not exactly for busi-ness purposes. More than 46% say they use them exclusively for social networking. However, there are rays of hope still—at least 29% already use them for business matters.

Naturally, the results are slow, too, but there are results still. While a whopping 75% of them say that none of those they

interacted with on these online social networking platforms currently work for them, some 19% say at least a few persons they “met” on these forums are now their employees.

Most CFOs are disinclined to fix an appointment via these sites. They are also reluctant to communicate with their boss-es through these sites. Interestingly, despite their busy sched-ules, CFOs find time for social networking on the web. Most of them say that even while they are on the road, it provides them an option to stay in touch with close friends and mem-bers of the family, besides helping them unwind and recharge their batteries.

Finally, asked whether they are interested in following The CFO Institute on a social networking site, a majority, as high as 88%, said yes, indicating their readiness to network on the web for business purposes as well as to keep themselves

Most CFOs find time for social net-working. Many of them say it helps them stay in touch with close friends and members of the family.

Are you a member of a social networking site?

Which social networking site are you currently using?

Have social networking sites been benificial for your business?

23%

77%

Yes

No

Facebook Linked In MySpace0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.058.8 57.4

19.9

11.8

0.7

in p

erce

ntag

e

Don't know

Not relevant to me

No, it has not been beneficial

Yes, it has been beneficial

Too early to tell

05 10 15 20 25 30 35 40 45

0

4

14

26

42

abreast of developments in the country’s finance community. They also said that most of these sites helped them track the latest coordinates of their partners and potential employees.

It seems that, besides healthy skepticism, there’s nothing that could possibly stop these profession-als from converting the now-under-tapped online social networking sites into platforms of frenetic business networking in the near future. But for the time being, professional relationships continue to thrive and flourish offline, on tried and tested methods.

Orkut Twitter

24 C F O A P R I L 2 0 1 0

big

pict

ure

Networking Social Business Other0

10

20

30

40

50

60

70 66

46

29

9

in p

erce

ntag

e

The main purpose of social networking

How many people you met on social networking sites are now working for you?

Benchmarks for adding a friend on a social networking site

Are you hesitant about using the “wall” to communicate with potential business partners?

Have you interacted with your boss through these networking sites?

Is it easier to check the co-ordinates of business partners or potential employees on social

networking sites?

Does social networking help you unwind and stay in touch with friends and family?

How much time do you spend for social networking?

51.5

23.5

2.9

Less than 1 hourLess than 3 hoursAlmost 5 hoursMore than 7 hoursDon't know

None

Less than 5

Less than 10

More than 10

0.0 10.02 0.03 0.04 0.0 50.06 0.07 0.08 0.0

75.8

19.5

2.3

2.3

Overseas requests

Other

People I have heard about

Number of mutual friends

Current company name

Professi onal qual if ic ations

Friends/acquai ntances

0 10 20 30 40 50 60 70

2

4

32

33

35

37

62

53%47%

!"#$%

79.7

20.3

YesNo

90.2

7.50.8 1.5

NeverSometimesOftenVery Often

58.7

41.3 YesNo

Woman Substanceof

26 C F O A P R I L 2 0 1 0

CFO PROFILEKIMSUKA NARSIMHAN, CFO, PEPSICO INDIA

she is re-reading Rubaiyat by Omar Khayyam to re-discover the scholar’s philosophy “beyond mere words”. It may be a sheer coincidence that she adores “the poet of destiny”, but her role at PepsiCo has got a lot to do with shaping destiny—her company’s. It seems she is a CFO to watch.

THE INDIA ARM OF PEPSICO INC IS NO LONGER BLEEDING. AFTER INCURRING LOSSES IN the country for many years, the US drink giant is finally realising that its long-term investment strategy is actually paying off: the domestic unit has started contributing to the parent’s profit. But wait, that is not all. Many other regional centres of PepsiCo, from East Africa and the Middle East to the Far East, are looking at replicating the India way of developing low-cost, high-quality, indigenous products. It is a heady concoction of creativity and opportunity the country has to offer for the American company. And clearly, the challenge now lies in the opportunity to expand PepsiCo India, the country’s fourth-largest consumer products company, and achieve profitable growth that creates shareholder value.

ULLEKH NP

27A P R I L 2 0 1 0 C F O

Facts & TriviaZODIAC SIGN: Taurus

PAST EMPLOYER: Unilever plc

CURRENTLY READING: Rubaiyat by Omar Khayyam, Lustrum by Robert Harris

FAVOURITE HOLIDAY DESTINATION: Chennai

FAVOURITE SPORTSPERSON: Florence Griffith Joyner

FAVOURITE BUSINESS LEADERS: NR Narayana Murthy, Ratan Tata

NEWSPAPERS SHE READS REGULARLY: Economic Times, Business Standard, The Hindu-Business Line

FAVOURITE CUISINE: South Indian (vegetarian)

FAVOURITE MUSIC: Carnatic Classical

GIR

EE

SH

G V

28 C F O A P R I L 2 0 1 0

cfo

profi

le

In this game that PepsiCo is playing, the CFO’s role is abso-lutely crucial, because it is all about partnering well with other functions of the company for profitable growth, says 45-year-old Kimsuka Narsimhan, the chief finance officer of PepsiCo India. “In that sense, I am at the right place at the right time,” she adds proudly.

The battle ahead, according to her, is not just for the share of India’s Rs 8,000 crore carbonated soft drink market, which its arch-rival Coca-Cola dominates with the Thums-up brand, or the Rs 3,000 crore juice and juice drinks market. The “real battle” is for the share of the market that remains largely untapped, including those in the heartland, rural markets. Currently, PepsiCo has a 40% share of the country’s carbonated drinks market and 35% of the juice and juice drinks segment. The opportunity that Narsimhan is talking about, the humongous, untapped market, is larger not just compared with the devel-oped nations, but even with several other countries in the emerging markets. The per capita consumption of beverages in India is lower than that in poorer, neighbouring Pakistan, but it is expected to soar in the next few years.

For this simple reason, India will continue to be an invest-ment market for PepsiCo because the golden period of the company’s growth in India is yet to come, says Narsimhan.

Industry experts say, going forward, the leadership at any food and beverages company in India needs to have a thor-ough understanding of the money they are going to spend on marketing if it wants to make inroads into villages and smaller towns. Simply put, the need of the hour, all of them say, is that the finance function and the marketing function in the com-pany must go hand in hand.

It is that very leadership attri-bute of “partnering well with other functions” that Sucheta Govil, former chief marketing officer, food segment, at Pep-siCo India, has always admired about Narsimhan, besides her sense of timing. “She always knew when to rein in costs and when to push ahead with investment plans,” notes Govil, adding that “she believed in the great value-add of great quality marketing”.

“She has played a key role in PepsiCo India’s leadership in the past four years and she will continue to play an even more crucial role,” adds she. Govil also remembers how the Frito-Lay business of the company

moved from strength to strength in India under Narsimhan’s leadership.

LEARNING LAB FOR THE WORLDIndia is very hot indeed for PepsiCo Inc. and Narsimhan and others know it.

In fact, the chief executive of the global parent, Chennai-born Indra Nooyi, recently called her company’s offices in the country the “learning lab for the world (global parent)”.

Nooyi also said that in line with its renewed focus on healthier drinks, snacks and indigenous products, PepsiCo in India will come out with a range of products meant for the Indian market that use domestic produce. In an interview to the Business Today magazine, Nooyi added that the company plans to launch prod-ucts based on the traditional Ayurveda medicine system.

“The cuisine here is rich, there are a variety of beverages here; and we are looking at how we can leverage the best of PepsiCo India, and build it to scale … the best vision for the next 10 years has come from this region … there are huge opportunities in India. Just look at Aliva crackers,” she told the magazine. Aliva, baked savory crackers catering to the Indian palate, was launched last year and it became a huge hit. The product has zero trans fat, the company claims.

Without doubt, PepsiCo has been veering towards high-qual-ity snacking and beverage products, including health and well-ness offerings, and Nooyi, of Indian origin, wants its domes-

tic arm to be at the forefront of that change, keeping local tastes in mind. In that context, it is remarkable that the technology of an Indian product, Nimbooz, was used by PepsiCo to launch a Hibiscus-based drink in Egypt.

PepsiCo has announced that it aims to triple its $10 billion health drink business over the next 10 years.

“We will continue to have products which cater to all groups … but the intention is to shift more towards health and wellness products … not just because the consumer wants it but we want to shape consumer behaviour as well ..., says Nar-simhan. According to industry estimates, while 81% of Pep-siCo’s revenues in 2000 came from carbonated drinks, the share is down to 45% in 2009. While the foods segment con-tributed only 14% and non-car-

“The CFO’s job is a good combination of a thinker and a doer ... finance guys are the keepers of the corporate governance flame.” KIMSUKA NARSIMHAN

29A P R I L 2 0 1 0 C F O

cfo profile

bonated drinks 4% of the company’s sales in the beginning of the last decade, in 2009, 37% of its revenues came from foods and 18% from non-carbonated drinks.

And Narsimhan, like others in Team India, expects sheer demographics to push India to the forefront of PepsiCo’s growth. “I believe that in terms of attractiveness of the con-sumer base, too, we will possibly overtake even China.”

COMPLEMENTING MARKETING, CORPORATE GOVERNANCEAs Govil vouches for, Narsimhan seems to know only too well about the role that marketing plays in a company’s growth and the complementary role finance has to play alongside other departments. The CFO of PepsiCo says the company must target “not only those who don’t consume us. Our focus also has to be on people who don’t consume us enough … there is so much of white space there.”

Well, that is a target for marketing professionals as much it is for her.

About PepsiCo India’s bottlers, Narsimhan says that the company tries its best to eliminate the scope for conflicts and friction through a shared agenda. “Franchisee bottlers are our partners in growth. And we have a clear growth target on invest-ment, volume and pricing … we share all our plans with them and they are part of our expansion,” she says. According to her, the big task is to deliver a product “at a price customers expect, and the company finds profitable”.

Quiz her about her eclectic, good taste for other functions, and she says that CFOs tend to wear different hats at different times. “I believe that being in finance is the closest to running a business without actually running the business. Finance executives are more partners than bookkeepers ….”

According to her, making the transition from finance to general management is a lot easier than the shift from many other functions. “The CFO’s job is a good combination of a thinker and a doer,” she sums up, adding that most often “we are the keepers of the corporate governance flame.”

SWEET HOME CHENNAILike Nooyi, Narsimhan, too, was born in the coastal city of Chennai, formerly Madras, into what she calls a closely knit family. She loved her home and home town so much that she didn’t join an MBA course, and instead chose to become a chartered accountant, because she didn’t want to leave both. But after she became a CA, she never stayed at home!

As soon as she finished her studies, she joined Unilever plc in Mumbai, a city that, she claims, has “great buzz” unlike

Delhi. The posting was like a dream come true for Narsimhan because ever since she was 14 or 15, she always wanted to become part of the corporate world.

In fact, Narsimhan is a breakaway from the usual mould of professionals from her family: most of them are engineers. She is among the very few to take up accounting as a career.

And she ended up working with Unilever for 18 years. “It was fantastic. I joined them as a rookie. It is where I learnt the functional skills of being in this profession … I must have performed some eight roles there,” Narsimhan remembers.

When she left the company four years ago, she was regional head for finance for ice cream in Asia.

Work, she says, has taken her to different parts of the world, and she confesses that she has eaten all kinds of food in the world. “But I am a reasonably strict vegetarian.”

While she is no foodie, she is a voracious reader, gorging on at least 2-3 books at any given point of time. Currently, she is re-reading Omar Khayyam’s Rubaiyat, alternately, with a book by Bill Bryson and Lustrum by Robert Harris.

“If you are expecting me to say I read management books,

you will be disappointed,” she says, laughing.She pauses for a while and starts to talk about her immedi-

ate family. Her father used to be on the board of an English company in Chennai and mother a homemaker.

Her brother and sister-in-law are software engi-neers. She speaks meditatively about her being in the old economy business, while they are in the newest business segment. Then the conversation drifts from family to sport, and about her being an athlete in school, participat-ing in 100m races and relay racing. She suddenly remembers that she had learnt Carnatic music as a kid, but she “was a connoisseur and not a performer”. She also talks about her love for works of art—especially those by the likes of FN Souza and Jamini Roy.

Then she looks up and down—as if life has come a half circle for her—and starts to talk about PepsiCo again. “Before I became CFO of both the food and beverage businesses two years ago, I was at the divisional headquarters in Dubai and prior to that I was the CFO of the foods segment in India.”

“Here, they lay equal emphasis on people results and busi-ness results.” There has never been a dull moment in Pep-siCo, she confides in softly. And then smiles the smile of someone who’s forever destined to succeed.

She expects sheer demographics to push India to the forefront of PepsiCo’s growth. In terms of attractiveness of the consumer base, too, India will possibly overtake even China, she says.

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Read on to find out how a leading phar-maceutical firm realised substantial savings and conve-nience through fleet outsourcing.COMPANY

A pharmaceutical company with an extensive national sales and distribution network.BACKGROUND

Company-owned fleet that included various makes and models of cars used by their sales staff and senior managers.

High, uncontrolled and unpredictable maintenance costs.

Resale of used cars at the time of disposal was a challenge, thanks to unpredictable resale values.

Decisions on choice of models were not based on total cost of ownership or usage. OPPORTUNITY

LeasePlan’s fleet audit revealed that costs could be brought down significantly.

Comparative analysis convinced the company of cost savings through outsourced fleet management. ROADBLOCKS

Top and middle management had differences of opinion on outsourcing of fleet.

Staffers who owned company cars showed resistance to this change.

ENSURING A SMOOTH GEAR SHIFT

Companies often face a bumpy ride when it comes to managing their fleet of cars

SOLUTION

LeasePlan’s “Total Cost of Ownership” (TCO) model for vehicle outsourcing made sure only efficient car models are to be used by the company, thereby reducing costs significantly.

LeasePlan’s fixed monthly outflows provided immunity from maintenance and damage risks.

Resale risks for these vehicles were completely managed by LeasePlan.

Existing fleet was outsourced to LeasePlan through the “Sale and Lease Back” mechanism.

All new vehicles were leased through LeasePlan. All old vehicles (more than 4 years’ old) were replaced

with new leased vehicles from LeasePlan. OUTCOME

Savings—company hived off their entire fleet to LeasePlan. Cost reduction: between 20% and 25%. Release of capital from non-core assets sitting on company’s books.

Better accounting and peace of mind! Outflows have become predictable and under control.

A definite cultural change among the staff. Increased acceptability of LeasePlan’s services within

the company.

LeasePlan case study

automation

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There is, perhaps, no expression as over-used in business circles, especially when the financial cycle turns from boom to bust, as “cutting costs”. Yet, compa-nies often get trapped in the entropy of being where they are, delaying the adoption of new technologies and other innovations that help achieve the ultimate goal of optimis-ing spend, even in a sluggish market.

There’s always a hidden trap that companies ought to watch out for if they really want to keep the spends well-managed: manual controls with over-dependence on people. What they need in place are automated spend- management systems that reduce the need for human intervention besides raising efficiency.

A survey by Empronc Solutions and The CFO Institute reveals that most companies in India, across business segments, are yet to think out of the cage when it comes to managing costs. The survey assessed how companies manage their expense-management processes, the prob-lems they face and the benefits they seek from a solution. It also looked at how such solutions can help companies achieve their business objectives.

It’s not that they aren’t aware of their own follies: in fact, as many as 64% admitted that high people-dependency was the key problem in their current expense-manage-ment system.

EXPENSE MANAGEMENT MAY GET SOME TOUCH OF CLASSA survey by Empronc Solutions and The CFO Institute reveals that automation is one of the best ways to monitor and slash costs

For 93% of the respondents, “freeing up the employees” is the key benefit they hope to derive from automation or an expense-management solution, which is essentially the use of IT to cut the need for human participation.

Experts warn that one of the biggest casualties of over-dependence on people is a decline in transparency, and almost 80% of those who took part in the survey said they were only “somewhat satisfied” with the level of visibil-ity in each process of their current expense-management

BY ULLEKH N.P.

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solution. The survey was conducted using a questionnaire which was dis-tributed to 302 companies, covering segments such as information technol-ogy, manufacturing, retail, financial services, healthcare and the media. Respondents comprised finance direc-tors, CFOs, vice-presidents of finance and financial controllers.

BUSINESS OBJECTIVES When asked to rank the primary

objectives of their expense-manage-ment systems, most companies ranked “cost data with control” as their princi-pal objective. This was closely followed by “enhancing efficient organisational processes”. These results reflect both the short-term need of managing the economic slowdown and the long-term need to have organisational efficiency.

Nearly 50% of the companies sur-veyed identified problems in gaining access to reports and also recognis-ing and rectifying errors while meet-ing compliance requirements—which explains why more than three-fourth (78%) of the respondents were not very satisfied with the level of visibility pro-vided by their current expense-manage-ment system.

For 94% of the respondents, Payment without Purchase Order and travel-type of expenses to vendors accounted for a fourth of their total expenses. Also, more than 90% of those surveyed said a fourth of their expenses were on employee reimbursements.

Worse, while only 63% of the com-panies had automated travel expenses, only 44% had automated employee

integrity. Besides purchased categories, employee-related spend, utilities and contracted recurring spend account for a large pie of the company’s costs.”

He added: “There are multiple ways to monitor spend and automation is prob-ably the best in today’s environment ... factors such as transparency, compli-ance, integrity with respect to budgets, requirement of system-driven controls, etc. become paramount. The adopted processes need to be standard, robust, and efficient.”

The survey, in fact, exposes certain drawbacks in the spend-management solutions of most companies surveyed. Since cutting costs is always a major concern for them, companies must to constantly review various innovative options—only an integrated spend-management system can ensure that employees save valuable time. Cutting costs, as we all know, doesn’t hurt a company’s bottom line!

reimbursements. This certainly means that travel, employee reimbursements, recurring contracts and utilities are some areas where automation will help in a big way in enhancing efficiency.

WORST FEARS COME TRUE Talking of the results of the survey, Jayant Dwivedy, CEO, Empronc, said: “Companies that are unable to track spend overlook an important oppor-tunity to optimise costs and ensure

“There are multiple ways to monitor spends and automation is probably the best in today’s business environment ... take a holistic view before adopting a solution.”—Jayant Dwivedy, CEO, Empronc Solutions

3.35

3.26

3.103.06

3.00

2.97

2.58

2.422.06

Ranking of primary objectives of expense management on a scale of 1 to 4; 1 = not important, 4 = very important

% of respondents who chose the following options

Cost data with control

Enhancing efficient organisational processes

Tracking ability against targets/budgets

Adherence to corporate-expense policies

Improving employee productivity

Meeting compliance requirements (regulatory)

Promoting early disbursal

Improving online status visibility

Reducing cost of audit

64

41 41 36 36 36

14

Key Problem Areas Under Current Solution Systems% of respondents who chose from multiple options

Highly People-

dependent

Multiple Escalations

Unclear Account-

ability

Delayed Vendor

Payments

Slow Speed of Employee

Reimburse-ments

Changes Cannot be Accommo-

dated

Accounting Entries Not Generated

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leadership

CFOs, as a species, have to be in command of their senses round the clock, meditating over numbers and waiting for the next best opportunity to trim costs. But it is only when tough times strike do we find their firefighting skills on formidable display. It is no wonder then that the recent economic tur-moil has propelled them into the limelight.

These top finance executives, now work-ing in close collaboration with CEOs and the board, increasingly need to demonstrate visionary leadership, and innovative and stra-tegic execution while displaying ever-greater levels of endurance and adaptability, especially in these turbulent times. But while it is true that their role has expanded greatly, there is a growing conflict between varying demands, and this has crucial implications for CFOs and their companies.

Quite ironically, at a time when businesses want their CFOs to become actively engaged in the stra-tegic direction of the business, they themselves believe that they are still far too distracted by the fundamental operational demands of the finance function, including compliance and corporate governance.

SMART STRATEGIES FOR UNCERTAIN TIMES

Leadership, managing risk and performance … one without the other just won’t cut it in today’s highly competitive environment.

BY DEEPAK GARG

A recent briefing organised by 9.9 Media in association with Oracle put the spotlight on such issues and looked at ways to tackle them as CFOs get ready to take on newer responsibilities.

Pramath Raj Sinha, group managing director and CEO, 9.9 Media, and the founding dean of the Indian School of Business, Hyderabad, started off with his take on a suc-cessful framework for business leadership.

Sinha shared a guideline of three key elements of business leadership that must be focused upon to suc-cessfully manage businesses. They are: alignment, execu-tion and renewal.

He went on to explain each one of them: PH

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ALIGNMENT: Direction: articulate where the com-

pany is headed to and how to get there, and align people around that vision.

Leadership: ensure that leaders shape and inspire the actions of other organi-sational members to drive better perfor-mance.

Environment and values: shape the quality of employee interactions (cul-ture, work interactions) and foster a shared understanding of core values.

EXECUTION: Accountability: design/structure

reporting relationships and evaluate individual performance to ensure that people are accountable and take respon-sibility for results.

Capability: ensure that the requisite institutional skills and talent exist to support the company’s strategy and cre-ate competitive advantage.

Coordination and control: Measure and evaluate business performance and risk.

Motivation: Inspire and encourage employees to perform and stay with the company.

RENEWAL: External orientation: engage in con-

stant two-way interactions with custom-ers, suppliers, partners or other external groups to drive value.

Innovation: generate flow of ideas and change such that the company can sus-tain itself, survive and/or grow over time.

At a time when firms want their CFOs to focus on strategies, they themselves believe that they are still distracted by operational demands of the finance function.

Sinha added that all of these elements should be routinely considered as a checklist for successful leadership. “We may not excel in all of them, but these key elements will help us identify where we need to improve,” he said.

Thomas Oesterich, chief EPM strate-gist, Oracle Industries Business Unit, also shared his insights on strategies and tools that help CFOs drive and manage performance management in their organisation. He identified five “high-impact” strategies that one could pursue to make a difference in opera-tions. They include conserving cash, driving down cost of goods sold, getting closer to customers, increasing produc-tivity and reining in HR costs, and man-aging risk and performance.

With respect to managing risk and performance, companies, for many years, have been able to create competi-tive advantage from ERP standardisa-tion. Its purpose was to create excellent operational processes by focusing on:

reducing cost inefficiencies improving product and service qual-

ity and increasing the speed of production

and delivery.Although efficiencies can still be

gained, due to the widespread adoption of enterprise resource planning, the competitive advantage of operational excellence is beginning to decline, Thomas noted. “Oracle’s vision is to build on this operational excellence and create the next wave of competitive differentiation—what we call ‘manage-ment excellence’”, he said.

He added that smart companies enhance their performance manage-ment system by integrating all strategic management processes. He also out-lined a few ways to gain excellence in management through the “strategy-to-success” framework:1. Get insight: make sure you have

access to all the relevant data in and outside the company.

2. Monitor continuously: keep a vigilant eye on your operations all the time.

3. Plan flexibly: stick to reality instead of sticking to the plan.

4. Rethink yesterday’s strategy: create models to analyse different future scenarios.

5. Invest and divest wisely: Be a bit smarter about saving cost. Make sure you divest with the goal of freeing up funds to invest again.

6. Build trust: The crisis spread out because of a lack of trust, restoring trust is also a part of the solution.Thomas also said that good manage-

ment comes from understanding how resources can be deployed to fuel activi-ties, and how activities lead to higher sales and profitability.

Well, there was no final verdict at the briefing with the speakers stressing that while it is tough to predict the future, CFOs could take precautions and be prepared for the worst. After all, tough times don’t last, but tough guys do.

“Good management comes from understanding how resources can be deployed to fuel activities, leading to higher sales and profitability ... it is also crucial to create new models to analyse different future scenarios.”—Thomas Oesterich, Oracle Industries Business Unit

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growth

India and China together comprise nearly 40% of the world’s population, but only 16% of its GDP, 10% of its market capitalisation and a miniscule 2.6% of the S&P Global Broad Market Index! But these figures are bound to undergo a sea change in the years to come. These two countries have witnessed a radical economic transfor-mation in the past two decades. However, it seems that their most exciting and reward-ing journey of getting recognised as super-economic powers may have just begun.

It is interesting to note that in the past, India and China had exhibited tremen-dous capacity for wealth-creation, economic development and innovation. In the 11th century, more than half of the world’s GDP was produced by these two economies. Now, in the 21st century these two economic giants are once again on the centre-stage, with almost everyone predicting them to be the world’s next superpowers in the next few decades. Their significance has further increased following the global financial crisis. It is true that the economies of these countries also decelerated during the crisis. But they were among the first ones to get on to the recovery

DOUBLE IMPACTGlobal corporations can’t choose between India and China. They have to tap opportunities in both these

economies in order to forge ahead. BY VIKRAM KOTAK

path. Both India and China combine low incomes and low wages with significant innovative potential. As a result, they have a clear competitive edge over many other economies in the world.

Instead of being just content with the labour arbitrage advantage, these economies are now investing heavily in building technological capabilities. Rising incomes are creating a large middle class with higher disposable income, which continues to spur consumer demand.

It is true that China has grown much faster than India in the past few decades; however, growth in the latter seems more robust as it is driven by higher domestic demand. China’s growth, on the other hand, is largely driven by higher fixed investment.

China has far superior physical infrastructure com-BY B

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pared with India, but our infrastructure sector throws open immense opportu-nity; in China, there seems to be exces-sive capacity that may not be optimally utilised for years. While China can boast of a strong manufacturing base, software development is India’s forte.

China follows an authoritarian, cen-trally controlled political system while India has a democratic dispensation. China puts public rights before private rights. China’s economic foundations are based on government-determined prices where as India, mostly, follows market-determined rates. By various estimates, the Chinese currency is undervalued by 10-40%. An undervalued exchange rate not only creates excess money but also makes the “asset- allocation” decision dif-ficult for investors. On the positive side, it reduces import inflation. Given the country’s reliance on exports, Chinese authorities don’t seem keen on following a market-driven exchange rate.

India is way ahead of China in devel-oping a private-sector financial system. India’s private-sector banking is easily available for the private sector besides retail credit whereas the Chinese bank-ing system continues to lend heavily to support the public sector.

India has a much more mature, devel-oped and transparent financial market compared with China. India has four times the number of listed companies that China has, although the former scores in terms of size of new issuances and market capitalisation.

Enhancing the depth of the Indi-an financial sector has facilitated an

increasingly more efficient use of its savings. The country’s private sector is driving efficient use of savings unlike in China, which continues to rely heav-ily on the state-owned financial system.

India can boast of better corporate governance standards and its compa-nies are more commercially driven. This explains why, despite China’s supe-rior economic growth, India has gener-ated higher rate of return on assets, has lower non-performing loans in the banking sector and the performance of stock markets has been better.

Another key area of difference between India and China is the freedom

of the press. A free and active press is a vital ingredient of an open economy. In China, the state continues to provide the information that it believes the mar-ket requires while the free and active press in India provides all the informa-tion candidly for the markets.

India has huge demographic advan-tage over China. India scores over China in the availability of talent pool and entrepreneurial skills.

Currently, China has the compara-tive advantage of cheap labour in the manufacturing sector, but wages are increasing and China could soon lose its advantage to India which has nearly half-a-billion young work force ready to enter the manufacturing sector. It is estimated that between 2010 and 2020, some 120-130 million Indians will enter the job market against 20 million Chinese. By the middle of the 21st century, India is likely to have more working people than those in China. In India, 140 million villagers are likely to migrate to cities by 2020 and 700 mil-lion, a population equivalent to that of Europe, by 2050. While China contin-ues to be a manufacturing and export-

“Better corporate governance explains why India has gener-ated higher rate of return on assets than China.”—Vikram Kotak

INDIA VS CHINAParticulars India China

Incremental Capital Output Ratio Over 5% 2-3%

Public Spending on Education 4% ~ 2.8%

Return on Assets 4.1% 2.4%

Share of EM export in total export 52.10% 28.40%

Exchange rate appreciation in FY10 -11.4% -0.1%

Share of global GDP (in PPP terms)

2008 2035

Share Rank Share Rank

China 11.5% 2 30.0% 1

US 20.7% 1 16.0% 2

India 4.8% 4 14.3% 3

Japan 6.3% 3 4.6% 4

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thdriven economy not willing to move to a democratic political system, higher domestic consumption, better diversi-fication in manufacturing and services, less reliance on net exports and under-leveraging will continue to accelerate growth in India.

To reach to the next level of techno-logical development and expertise, espe-cially in manufacturing, India needs to focus on education and technical skills. This is clearly a prerequisite for reaping the potential benefits of India’s demo-graphic profile. These, coupled with concrete measures to improve agricul-ture productivity, will lead to inclusive economic development.

In the 20th century, the world’s eco-nomic growth was driven by the US, Europe and Japan. But now, as we look ahead, these developed nations are plagued by slow growth. On the other hand, India and China have vibrant economies. IMF expects both India and China to grow at 8-10% in 2010, com-pared with a 4% growth in the world’s

output. China is likely to become the second-biggest economy by 2016. India is projected to become the third larg-est by 2035 with its economy only a little smaller than the US. By this time, the Chinese economy is projected to become almost double that of the US.

The start of the second decade of this century is clearly marking an inflexion point, a profound and momentous shift in global economic and political power, and India and China stand to gain tre-mendously from this change. These two economic powers, despite the structural and ideological differences, have one thing in common—they both are engines of global growth and important destina-tions for global manufacturers and inves-

tors, due to sheer size and scope. While per capita incomes in India and China remain low, their economic advantage—thanks to sustained economic growth, enormous populations, huge domestic production bases and markets, integra-tion into the rest of the world’s trade and financial flows—makes their current and future development impossible to ignore.

For global corporations, there can be no growth plan without their participation in India and China. For investors, it won’t be a choice between India and China—they will need to embrace both.

China is likely to be the second-biggest economy by 2016. India is projected to become the third-largest financial power by 2035.

THE AUTHOR IS CHIEF INVESTMENT OFFICER, BIRLA SUN LIFE INSURANCE COMPANY LTD.

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risk management

Over the past decade, many firms have stepped up their use of outsourc-ing, licensing, sales channel and other relationships to extend their enterprises. These relationships are especially beneficial during tough economic times as they help organisations cut costs, boost revenues and stay competitive.

But these arrangements also pose risks that financial executives must recognise and address. The most obvious are the risks of contractual nonperformance or noncom-pliance. Other, more specific, risks include: financial viability of counterparties, deterio-rating service levels in outsourcing arrange-ments, intellectual property violations, mis-reporting of revenue in sales channels as well as breaches of discount, rebate and warranty policies and procedures.

Given that risks are exacerbated during economic reces-sions, the downturn has prompted many firms to review programmes for monitoring their extended enterprise.

Known as contract compliance, contract management or vendor management, these programmes are often viewed as a “good enough” housekeeping function already in place.

CONTRACT RISK AND COMPLIANCE FOR ALL ECONOMIC SEASONS

A good CRC programme builds trust by increasing transparency and communication

BY DAVE ZECHNICH AND CHRIS LEE

As many firms have discovered, however, reviewing and revamping these programmes can generate significant returns. And lessons learnt and discipline adopted dur-ing a downturn will stand a company in good stead when business conditions improve. Overall management of contractual relationships can best be achieved in the con-text of a contract risk and compliance (CRC) programme.

CRC expands contract compliance and vendor manage-ment to address a broad range of issues and risks in busi-ness relationships. It imposes greater discipline on con-tracting than a purely compliance-oriented programme while improving collaboration between parties.

Indeed, a CRC programme helps companies improve every aspect of relationships, from defining goals, to screening vendors, to negotiating terms, to managing the relationship to reviewing results.

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The current economic climate is a good time to review contract and ven-dor-management programmes or to institutionalise gains realised from any recent ad-hoc improvements. In either case, a strong CRC programme will enable organisations to derive the great-est benefit from business relationships.

SURVEYING THE LANDSCAPEA 2007 Deloitte survey found that a majority of contract risk and compli-ance programmes suffer one or more of the following shortcomings: lack of clear ownership and standardised pro-cesses; contracts without proper audit clauses; failure to detect overcharges and revenue leaks; misperceptions—internally and externally—about the programme; and orientation toward “policing” rather than collaborating.

Many survey respondents had over-looked opportunities to enhance the profitability of relationships or to shape vendors’ behaviors and attitudes.

Indeed, some companies could ben-efit from reshaping their attitudes.

For instance, 61% of respondents expressed concern that CRC activities could damage relationships. Yet the sur-vey found that 70% of vendors expect contract-related inspections and audits, and litigation was the result of substan-tially less than 1% of contract audits.

Generally, a solid CRC programme enhances, rather than damages, rela-tionships. CRC clarifies goals and expectations; specifies service levels and monitoring devices; calls for appropri-ate disclosure and information sharing; and helps both organisations to perform as specified. It does not primarily aim to expose dishonest behaviour, though it can. Instead, it aims to detect breaches that usually escape vendors’ attention.

A CRC programme extends the con-cept of vendor management to meet the needs of executives who oversee extend-ed enterprises. In rethinking contract compliance programmes, many finan-cial executives find the following points

useful: The programme must address a broad range of risks that a contractual arrangement can create, not just the bargaining points and compliance con-cerns. The programme should aim for transparency and mutual benefits.

A good CRC programme builds trust by increasing transparency and com-munication. Though CRC requires an investment, the related returns can be substantial, particularly when the pro-gramme aims to raise sales or cut costs.

Guided by these precepts, firms interested in enhancing their current programmes or establishing new ones should focus on design. Many ven-dor programmes lack a cogent design because they grew willy-nilly as an organisation expanded or because they

reflect only a legalistic, compliance-focused orientation.

PROGRAMME ACTIVITIESA good CRC programme starts before contracting begins, with analyses of likely costs and desired benefits and how to share them. The aim is a fair contract that motivates each party to perform as agreed.

Depending on the nature of the relationship and contract, the process moves on to define activity or service levels, sales volumes or warranty condi-tions and human resource, information technology or other considerations.

But the focus should be on relevant, practical metrics and on reports that management will actually use. In this case, the oft-heard “too much data can be worse than too little” applies.

The contract itself must specify tar-gets, metrics and access to one anoth-

er’s information. It must define the monitoring process and the right to “audit” information and activities, to conduct reviews and site visits, and to communicate with key individuals.

The resulting visibility into process-es and clarification of boundaries will enhance the relationship and generate trust. It is no coincidence that “transpar-ency” became such a watchword after the financial crisis. Given the conse-quences of its absence, it clearly makes sense to promote transparency in future relationships.

In that context, mechanisms for detecting and reporting changes in conditions, risks and objectives should be built into the contract and into the programme. That implies the contract

should specify the right to revise or renegotiate specific terms, and the con-ditions under which that right can be exercised. The overarching rationale of a CRC programme is to keep communi-cations open and baseline information transparent, thereby helping to prevent mistakes, misunderstandings, disagree-ments and conflicts as well as to create mechanisms to resolve any that do arise. Toward that end, external parties should be aware that a company has a CRC programme. They should understand its general goals, and needs early in the contracting process. That way, expecta-tions are either properly set at the outset or potential problem vendors can opt out before contracting begins.

Dave Zechnich and Chris Lee are partners at Deloitte & Touche LLP.

EDITOR’s NOTE: The full article — including six points of design and detailed features of a CRC programme — can be found online at www.financial executives.org/mag_issue_2009_09.

© 2010 Financial Executives International

The overarching rationale of a CRC programme is to keep communica-tions open and baseline information transparent, thereby helping prevent mistakes and conflicts.

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insight

Most companies find budgeting a formidable challenge even under stable conditions. Man-agers often spend significant amounts of time on it, only to be dismayed by how little value comes from four to six months’ effort. Under volatile conditions, when economic forecasts change from week to week, developing one reli-able budget to coordinate business units and track perfor-mance for an entire fiscal year is very difficult.

There’s no easy fix, particularly for very large corpora-tions. Executives can, however, take several measures to make the process more effective: for instance, scenario planning, zero-based budgeting, rolling forecasts, and quarterly budgeting. Central to all of them is a substantial increase in the CFO’s role and a radical speeding up of the budgeting process.

NEW APPROACHESFor many companies, allocating or withholding resources quickly may be the only way to navigate a tough environ-ment. A completely new approach to the budget process is often needed. The list that follows isn’t exhaustive, nor are the activities on it mutually exclusive. In some com-bination—depending on the business, size, complexity, and culture of the organisation involved—they can help companies improve the budget process.

JUST-IN-TIME BUDGETING FOR A VOLATILE ECONOMY

A volatile economy makes traditional budgets obsolete before they’re even completed.

Here’s how companies can adapt more quickly.BY MAHMUT AKTEN, MASSIMO GIORDANO, AND MARI A. SCHEIFFELE

1. Scenario planning with trigger events:In more stable times, the budget process is typically an exercise in consensus building—a lengthy and difficult effort to generate a single view of the future to guide a company’s investments and rewards over the coming year. While many management teams speculate infor-mally on how their businesses will evolve, few actively debate a number of scenarios or undertake the concrete short- and long-term financial analyses that would make

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such a debate meaningful. The process therefore isn’t agile enough to respond to sudden changes in the economy.

Executives at some forward-thinking companies, however, have not only formally developed concrete macroeco-nomic and business scenarios, includ-ing some considered extreme,1 but also modelled the implications of each scenario for their own businesses and customers, as well as for competitors. At the end of the process, these companies adopted a single budget, but they sup-plemented it with concrete alternative financial statements and business plans based on plausible future scenarios. This approach lets companies build flex-ibility into their cost structures so they can more easily shift from the primary budget if necessary.

Furthermore, these companies have also identified the handful of events—say, a change in the availability of short-term funding, the bankruptcy of major customers or suppliers, or a specific market share decline—that would trig-ger a shift from the primary scenario to an alternative. CFOs and the finance function monitor these trigger points and stand ready to alert the executive team if risk levels breach well-defined thresholds. The entire executive team would then immediately implement the predetermined contingency plans.

At one global health care products company, for example, executives monitor sales of specific premium product lines, a key indicator of the future course of revenues and profit-ability. When the executives saw that customers were buying fewer premium products and greater numbers of basic ones—or none at all—they shifted to a different budget and withheld part of the company’s planned second-half 2009 spending until the first-quarter numbers were clear.

This company is actually growing and doing quite well, but when its trig-ger points suggested weakness in a key indicator, executives quickly adapted their approach to resources and invest-ments for the rest of the year.

It’s important to note that the CFO need not apply contingency plans to the whole organisation; changes can be limited to specific business units, while others continue to implement the cur-rent budget.

2. Zero-based budgetingAmid today’s extreme uncertainty, most companies are cutting discretionary expenditures. The typical budget pro-cess is not, however, designed to make managers rethink their business mod-els if the recession persists or shifts the economy in a fundamental way. On the contrary, many current budgets are anchored in past ones, with incremental changes to adjust for inflation or spe-cific product trends.

Zero-based budgeting was developed during the inflationary environment of the mid-1970s to avoid precisely this trap.2 It starts the process wholly from scratch, assuming different end points for different industries and businesses, such as a 30% smaller overall market or a modified organisation or portfo-lio. Operating and capital expenditures

are then prioritised according to their alignment with the company’s strategy and their expected returns on invest-ment. Breaking down the budget into such discrete funding decisions makes it easier for the CFO and other senior executives to choose among competing claims on scarce resources.

Consider, for example the telecom industry, which has changed significant-ly in the past decade. Most incumbent operators project lower revenues in the near future but must still invest signifi-cantly in next-generation networks to be viable in the long term. To balance these competing demands, a European tele-

com player recently started a zero-based budgeting process by disaggregating its expenditures into logical decision units addressing different types of expenses, such as new capital expenditures (say, building a third-generation network) or maintenance. Each decision unit’s capi-tal expenditures (such as those for meet-ing licence requirements or growth in a targeted city) were then classified as “keep,” “discuss,” or “cut.” Finally, exec-utives based the priority of each capital expenditure on its financial returns and alignment with the company’s strategy. After only a few iterations, it reached its target capital expenditure level—a 20% reduction, which nonetheless supported investment in future growth.

Clearly, this approach can add a couple of months to an already long process. We therefore recommend zero-based budgeting only for areas promising the highest potential savings—for instance, capital expenditures, certain operating expenditures, and very focused costs, such as procurement. It’s useful to iden-tify a company’s biggest expenses and which of them can realistically be cut.

Some costs, such as those for employ-ees or a branch network’s real estate, are relatively inflexible and hard to change. Others, such as advertising or most cap-ital expenditures, could be reset from scratch every year.

3. Rolling forecastsMost companies prepare informal earn-ings forecasts on a monthly or quar-terly basis, usually in a planning group within the finance department. These forecasts, seldom tied to active deci-sions about the budget’s management, almost always involve nothing more than updated projections of year-end

For many companies, allocating or withholding resources efficiently may be the only way to navigate today’s tough environment.

insight

47A P R I L 2 0 1 0 C F O

(KPIs). Today’s focus on cash and risk management requires a reevaluation of metrics relevant to the quality, liquidity, and returns of assets and a shift away from the revenue and growth indica-tors emphasised in recent years. Often, the new focus just means reprioritizing performance metrics when budgets are prepared or incentive systems linked. Executives must also constantly assess the quality and health of all perfor-mance cells3 in order to detect any dete-rioration in key metrics—such as the number of orders or customers or the churn rate—more quickly.

A SHORTER PROCESSThe time the budget process consumes must fall dramatically: it can no longer start in September and go on until Feb-ruary or March, as it does at many com-panies. They can speed up the pace suf-ficiently only by substantially increasing the amount of top-down guidance from the CFO, synthesising tracked KPIs, and eliminating formal bureaucracy. In the usual approach, for example, top management introduces a budget that descends to the front line for fleshing out in detail and then returns to the top for finalising. One way CFOs could accelerate the process would be to con-duct negotiations between top manag-ers and the divisions during the first iteration and leave the divisions to man-age the budget’s implementation by the front line.

LEVEL OF DETAILIf an existing budget needs updat-ing rather than rewriting, a company doesn’t have to update it at the original level of detail. Business unit managers in many companies imagine that deep specifics and full financial statements reflect greater accuracy. At the level of individual units, for any given year, it’s hard to disprove that idea. Many busi-ness unit leaders produce a conservative budget, however, so that they are sure to meet or exceed expectations at the year’s

values. As a result, the company-wide process is opaque, no one is account-able for the outcome, and projections for the rest of the year are less and less valuable as it progresses. At one glob-al Internet provider, this haphazard approach meant that some business units projected meeting their full-year earnings targets despite growing gaps between the forecasts and the actual numbers. The finance department, try-ing to explain the actual numbers and to propose ways of closing the gaps, found itself caught between the CEO and the chief operating officer (COO) on the one hand and the heads of busi-ness units on the other. By the time the business units acknowledged that they would miss their targets, it was too late to take compensatory action.

Some leading companies have for-

malised a process that involves rolling 12- to 18-month forecasts for the most important financial variables. This approach increases the visibility of the process and accountability for it so that CFOs can act when forecasts start to diverge from actual performance. In companies we’ve observed, the CFO manages the process, convening busi-ness leaders, the CEO, and the COO each month or quarter to identify gaps and discuss how to close them.

For companies that aren’t accustomed to this kind of collaboration on their budgets, it represents a big cultural change: managers are accountable for their promises and must collectively adapt to the fast-changing macroeco-nomic climate. At the global Internet provider, simply getting everyone into the same room to discuss the growing gaps between forecasts and perfor-mance was a challenge. The CFO had to orchestrate a mind-set shift so that the

managers of units rallied around one another to solve the problem.

4. Quarterly budgetingIn periods of extreme uncertainty, some companies may need to set aside their long-term goals and concentrate on the next three months. Companies under that much stress, especially those attempting a turn around, ought to abandon annual budgeting and switch to a more tactical quarter-by-quarter process. These companies should focus on cutting costs and on managing their working capital and short-term financial needs, not on developing annual rev-enue or profit guidance. The quarterly approach allows companies to allocate their resources in real time, to make better forecasts, and to review their per-formance at the end of each quarter and

therefore identify and address problems more quickly.

In the longer run, quarter-by-quarter budgeting can stunt growth by overem-phasising the short term.

Whether a company sticks to its tradi-tional approach, implements one of the new ones described above, or combines them to meet its own needs, it should also improve the budgeting process as a whole. These improvements take time to implement, but when carried out from the top down, by the CFO and other senior executives, they can limit the amount of cumbersome work an organisation must undertake at the end of each quarter.

KEY METRICSAt a time when priorities and, indeed, the very business environment itself are changing rapidly, companies must review their key performance indicators

It’s important to note that the CFO need not apply contingency plans to the whole organisation; changes can be limited to specific business units.

insi

ght

48 C F O A P R I L 2 0 1 0

conditions. Those conditions can ren-der bonuses null as a performance incentive anyway. Why strive to meet a volume target, for example, if the down-turn makes it unlikely that you will?

Updating incentives when budgets change appeals to some people but may create great complexity in practice. Negotiating new targets and resetting incentives can politicize the budget pro-cess as managers maneuver to impose their own mind-sets: lowering targets to beat them comfortably. New targets and incentives also distract attention from the need to review the business plan and the allocation of resources.

A more appropriate way of structuring incentives is to start using relative tar-gets—such as market share, cost met-rics, or health indicators (say, customer satisfaction)—excluding uncontrollable variables. Such targets (for instance, the cost of an airline seat exclusive of expenses for fuel) are relatively insensi-tive to macroconditions and thus moti-vate managers to build the business no

end. When such unit-level numbers are aggregated, the resulting company-wide numbers are wildly off the mark. Knowing that business unit managers are typically too conservative, executives may pad their forecasts, making the end product all the more unreliable. On occasion, however, individual business units are too aggressive, and that’s why one global construction company, for example, missed its aggregate produc-tion targets for more than a decade. Less data can actually be more meaningful data if executives restrict the projections of business units to top-line estimates.

INCENTIVESAny time a budget is modified, changes to forecasts and expectations can affect management’s compensation levels and bonuses. Such incentives are typically aligned with specific levels of budget line items, such as volume forecasts, that companies may have to change so they can adapt to volatile economic

matter which scenario comes to pass.These times of economic volatility call

for a faster budget process more closely connected to strategy through the CFO’s active intervention. Despite the spe-cial challenges, companies can greatly improve their chances of coping with the uncertainty they now confront.

ABOUT THE AUTHORSMahmut Akten is a consultant in McKinsey’s Istanbul office, Massimo Giordano is a director in the Milan office, and Mari Scheiffele is a principal in the Zurich office.

NOTES

1 See Richard Dobbs, Massimo Giordano, and Felix Wenger, “The CFO’s role in navigating the downturn,” mck-inseyquarterly.com, February 2009. 2 Zero-based budgeting, first named by Peter Pyhrr in the Harvard Business Review (1970), gained prominence during the 1970s, particularly when President Carter introduced zero-based budgeting into the federal budget process, in 1977. See Peter A. Pyhrr, “Zero-base budgeting,” Harvard Business Review, 1970, Volume 48, Number 6, pp. 111–21. 3 For a perspective on how to reorganize performance cells by implementing a value creation approach, see Massimo Giordano and Felix Wenger, “Organizing for value,” mckin-seyquarterly.com, July 2008.

This article was first published in McKinsey on Finance Number 31 Spring 2009 and is also available on the McKin-sey Quarterly Website, www.mckinseyquarterly.com.

Copyright © 2010 McKinsey & Company. All rights reserved. Reprinted by permission.

Good negotiators always allow people across the table to save their face, says David Lim

ONE OF THE quickest, and the best, ways to increase your negotiating ability is to eliminate some common errors that even the most experi-enced guys make. An examination and constant review of the common errors listed here will help you get rid of these mistakes from your negoti-ating style and help you become a more effective negotiator in Asia.

1. LACK OF UNDERSTANDING OF YOUR STRENGTHSStudies have indicated that most negotiators tend to under-estimate their own power in a negotiation, mainly due to the

in Negotiations

LEADER’S WORLD

ABOUT THE AUTHOR

David Lim, founder,

Everest Motivation Team, is

a leadership and negotiation

coach, best-selling author

and two-time Mt Everest

expedition leader.

WINNING MINDSETS

LOSING THOUSANDSON THE BARGAINING TABLE:

Common

Mistakes

50 C F O A P R I L 2 0 1 0

complexity of negotiations. Cer-tainly, you are aware of the limits to your power in a given “negotiation situation”, but you are also often unaware of the limits to the power of the other party. This means, there is a consistent tendency to underes-timate your own power in a negotia-tion. In that sense, if you come from a non-Asian culture which insists on things being said all the time, you may miss calibrating the other side’s nuances. A Japanese execu-tive may say “this will be a bit dif-ficult” when he actually means “this is not going to happen at all”. Some-times, silence after a preliminary position is taken as a wise move as both parties sit back momentarily to absorb information. Sometimes, if the suspense is too great, the first party that proffers a concession, a sweetener, will be the one losing money at the end of the meeting.

2. JUMPING TO A CONCLUSIONOne of the most common errors made in negotiations is making assumptions rather than checking facts. A good example is of assum-ing what the other party’s desires are, rather than skillfully probing with questions to determine precisely what they want. Rather than assuming, the skilled negotiator becomes more effective by asking probing ques-tions which can sometimes determine the real needs of the other party.

In team negotiations, awareness of the more talkative mem-bers of the other party may allow you to engage them such that they may inadvertently reveal more than they had antici-pated. For example, they admit that they are running short of time as an event for which the vendor was being assessed has been brought forward. If you are a vendor, and have already engaged them for some time, the other party may feel too invested to start the process all over again. This knowledge, if extracted, can be immensely useful. The skilled negotiator avoids jumping to a conclusion.

3. FOCUSING ON POSITION, NOT INTERESTOne of the most significant findings to come out of the Har-vard Negotiation Project was the understanding that a very common error in negotiation was to focus on the other per-son’s position without looking behind that position to the real

needs and interests of the other party. The much-quoted example is of two daughters arguing over the last orange in the house. A wise father handed one of the daughters a knife and asked her to slice the orange into half, indicating that the other daughter would then select the other half of the orange. Egyptian leader Anwar Sadat’s historic break from the positional way of looking at issues led to the landmark Israel-Egypt peace deal, which led to nearly 30 years of peace between the two countries.

A brilliant solution? Not really. Because, you see, each of the daughters got only one-half of what they could have had, had they taken the time to look at the interest behind the position. One of the daughters wanted the orange for juice; the other needed the peels for bak-ing. Now, you might suggest that this is very simple example and that some of our most experienced business people would not make that mistake in the busi-ness-negotiating environment. Howev-er, in numerous business simulations, participants get caught up in positional arguments, and then may feel they have to continue behaving in a way consistent to that position.

5. ENTERING A NEGOTIA-TION WITHOUT A BATNAIn the book, Getting to Yes, Roger Fisher and William Ury point out the extreme importance of determining a BATNA (Best Alternative to Negotiated Agreement) before entering any negotiation. The only reason to negotiate in the first place is to arrive at a conclusion that is better than that which would be achieved without the negotiation. If we take the time to analyse our BATNA, we will then know clearly what our “best alternative” is. In the case of a business dispute, your BATNA might be a lawsuit and subsequent trial. In the case of nego-tiating the cost of a financial consulting project, your BATNA might be using another consultant.

Keep in mind an important caution here—don’t fall into the trap of cumulatively looking at all options and seeing the many different benefits inherent in all of them.

You will not have the option of all of them and, therefore, it is necessary to weigh your current negotiation situation with the best alternative to a negotiated agreement. One of the major advantages of having a BATNA in every negotia-tion is that it helps you determine your negotiating philoso-phy; whether one is “hard” or “soft”, “firm” or “flexible” now

“In Asian societ-ies which value relationships above transac-tions, being too tough over one single item can sour profitable ties.” —David Lim

51A P R I L 2 0 1 0 C F O

leader’s world

becomes largely a consideration of how strong a BATNA you have.

An extremely strong BATNA allows you to use the more risky tactics of “walkout” or “take-it-or-leave-it”.

6. GETTING HUNG-UP ON A SINGLE NEGOTIATED ITEMIn practically all negotiations, there is more than one item to be negotiated. Whenever this is the case, the skilled negotiator realises that they need not be hung-up on a single negotiated item. Well, price could be a good example. If price becomes a non-negotiable item for one side in the negotiation, the other side could concede price negotiations, if they got concessions that accomplished the same thing in the areas of interest rates, payment plans, quality and con-tent specifications, etc. The experienced negotiator looks at the total package and is not hung-up on a single negotiated item. In Asian societies which often value the relationship ahead of the transaction a lot, sometimes being too

tough over one single item can sour an otherwise profitable relationship. See the bigger picture.

7. ANYTHING I GAIN, YOU LOSEMany negotiators view each negotiation as a fixed pie. Anything I gain, you lose, and vice-versa.

However, this is not the case because of the many variables in the negotiation and the relative value of each of those factors to various negotiators.

Someone may concede on price to the other party who holds price as perhaps the key item in the negotiation.

However, that concession on price may have been achieved through the price-sensitive party conceding some-thing that was not price-related.

6. NOT ALLOWING THE OTHER SIDE TO “SAVE FACE” How many times do we see a negotiator recede into a corner when it is impos-

sible for him to complete a negotiation and save face at the same time?

The skilled negotiator understands this and looks for creative ways to help the other party save face, once they have backed themselves into a corner. For instance, when someone says “this is my final offer” and makes a big point of it, they have obviously created a situ-ation where they cannot make any com-promises and save face on their com-mitment. In that situation, the skilled negotiator must create additional facts and circumstances, and point these out to the other party in a unique way that allows them to reconsider their previous position based on new facts, thus offer-ing a face-saving deal. A good negotiator always allows people across the table to “save their face”.

DAVID LIM IS A LEADERSHIP AND NEGOTIATION COACH AND CAN BE FOUND ON HIS BLOG http://theasianne-gotiator.wordpress.com, OR david@everest-motivation.com

lead

er’s

wor

ld

53A P R I L 2 0 1 0 C F O

cfo lounge

GIZMOS

NEW LAUNCHES

Inspiron MiniGadgets that you can use both at work and at home—and feel good about.

The Samsung Corby

POWERED BY

THE MINI 10 is a solid little thing, with a very good glossy black finish. Build- quality is top class. The hinge mechanism is really sturdy. The keypad is one of the best we’ve come across on a netbook. Where most keypads are cramped for room, Dell wastes no space with a keypad bezel and provides really large keys, with great feedback. Bevelling is barely noticeable, but the keys are large enough to negate this effect. Typing is, as a result, much easier, thereby addressing our number one grouse with netbooks. The display is decent enough, although the colour and contrast take the proverbial toss.

The Mini 10 performs on a par with other netbooks based on similar confi gurations. It makes a very good buy for anyone looking for a solid netbook.

Price: Rs 17,400

India’s M

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MAGAZIN

E

TECHNOLOGY

SATIO IS ONE of the rare full-screen touch phones from Soni Ericsson. This is a bulky handset, but a good looker. The phone runs on an ARM Cortex-A8 600 MHz and the Symbian S60 OS. It has a resistive touchscreen. The built-in earphones give a decent output.

Soni Ericsson Satio

The phone comes with a whole bunch of widgets and apps for connecting to social networks and web services. The highlight of the phone is the slide-out QWERTY keypad.

The Zebronics Audiophile 5000 is a verybasic pair of headphones aimed at the very basic computer gamer. The built-in microphone is a good thing to have while multiplayer games online.

Zebronics Audiophile

54 C F O A P R I L 2 0 1 054

art review

SUMEDH RAJENDRAN IS not excited about getting phone calls from reporters every time there is a love affair between an Indian and a Pakistani or when there is a drama of the kind involving cricketer Shoaib Malik and Tennis sensation Sania Mirza. The fact that he is married to Lahore-raised artist Masooma Syed “doesn’t impact the way I think and make art”, he says. “I am secular by faith and I expect India-Pakistan ties to improve. I have nothing more or nothing less to say about these two countries which were once one. I hate this expression Indo-Pak couple,” says Rajendran, the first Indian sculptor to exhibit his works in Pakistan.

Born in 1972, Rajendran did his

BFA (Sculpture) in 1994 from

the College of Arts, Thiruvana-

thapuram. He completed his MFA

from Delhi College of Arts, New

Delhi, in 1999. He has done five solo exhibitions across La-

hore, Mumbai, New Delhi and London, and has participated

in several group exhibitions in India and abroad, including

Chalo! India at the ESSEL Collection, Vienna, and Indian

Summer at Galerie Christian Hosp, Berlin. He lives and

works in Delhi. Rajendran is married to Pakistan-born artist

Masooma Syed.

ABOUT THE ARTIST

Sculpting Brilliance

ARTIST OF THE MONTH

Sumedh Rajendran continues to dazzle viewers with his cerebral artBy Ullekh NP His first solo show, Pseudo-homelands, was held in Lahore’s

Rohtas Gallery in the winter of 2004. “My real love is art. So you can ask me questions about

my art,” says the 38-year-old who commands respect from artists and critics alike for his highly cerebral, skilful and dreamlike juxtaposition of a range of subjects and ideas in his sculptural works.

Though his first solo show was held in Lahore, it was his Mumbai art exhibition of 2005, Street-fuel Blackout, which catapulted Rajendran, an alumnus of Delhi College of Art, to the big league of India’s blue-chip artists. One of his stunning works at that show, Darkly Massive, created waves back then in Mumbai for its subtle portrayal of conflicts, political, social and cultural, and the predicament of urban Indian society in the post-globalisation scenario.

Visually pleasing and intellectually superb, his works, featuring contemporary urban as well as primal-era shapes, continued to dazzle discerning viewers in some of the next solo shows that followed such as Final Call, Chemical Smuggle (2007) and group shows such as Urban Still held in several galleries across India, the US and Europe.

His recent solo show, Dual Liquid, held at the Sakshi Gallery in Mumbai, had more to offer than mere magic with leather, tin sheets, perforated iron sheets, concrete and bathroom tiles—there were also photographic and collage works on display.

As an artist, Rajendran always puts the spotlight on torture or tools for torture, a recurring theme in his works. This year he will exhibit his works at the ESSEL Museum, Vienna, and a few other countries in Europe.

What does he actually want to do using his art? “I want to highlight inequalities,” he says. Whatever. You just can’t stop enjoying the ease with which the man puts together his works with a surgeon’s skill, by tearing apart objects again and again—only to put them all back in shape.

IN HIS WORKS, RAJENDRAN OFTEN PORTRAYS THE PREDICAMENT OF URBAN SOCIETY IN THE POST-GLOBALISATION SCENARIO

55A P R I L 2 0 1 0 C F O

cfo lounge

IT IS THAT time of the year again, especially in north India, to pack your bags and head for the hills to beat the scorch-ing heat. If you want to stay off the beaten track, avoid crowds, trek and then return spiritually charged, I recom-mend Tungnath in the Garhwal Himlayas.

For me and four friends, the trip to Tungnath was a revelation because we realised for the first time that there are places of religious worship in this country that aren’t crowded—you can walk for miles and not meet a single soul, a luxury for which we didn’t have to burn a hole in our wallets though we were ready to.

We drove from Delhi towards the hills of Uttarakhand and our first halt was at Rishikesh, where we went to the familiar spots of Lakshman Jhoola and a few temples and Gurudwaras. We left this Holy town, the point of the pil-gramge to Chardham (Yamnotri, Gangotri, Kedarnath and Badrinath), early next day, we broke off towards the right at Kundu, on the Rudraprayag-Kedarnath route; Kedarnath is towards the left.

Our next stop was 70 km away, in Chopta, from where you start the trek to Tungnath, home to the highest Shiva temple in the Himalayas.

It is not easy to find a good place to stay in Chopta, but we

TRAVEL

A Trip to Die ForUllekh NP believes that the world is divided into two kinds of people: those who have been to Tungnath and those who haven’t.

CHANDRASHILA, A ROCK FACE BEHIND THE TUNGNATH TEMPLE, OFFERS AN UNHINDERED VIEW OF THE NANDADEVI AND SEVERAL OTHER PEAKS.

were lucky to find one 2 km beyond the bus stop there. Two brothers had built a five-room “resort” with bath-attached rooms (hot water is available on demand) and solar power supply. It was scorching at Kund, but two hours away in Chopta, we had to put on warm clothes. It was really cold at night, but we decided to stay there for the next two days and enjoy the mild mid-afternoon sun over beer. We switched off the phones to forget the worries of deadlines and other existential dilemmas.

We had with us a few outdoor folding chairs which came in handy. Next time I would take a few hammocks.

The next day at 7 am, we started our trek to Tunganath; we left our luggage and vehicle at the “resort”. Of the five, two of my friends decided to hire mules to take them up the 5 km journey. It was tough, but we managed to reach there in two hours.

I am still wooed by the charm of the serene, green hills. In winter, they say, the place looks almost like parts of Switzerland, capped fully with snow!

What is remarkable is that unlike other places of wor-ship in the hills, Tungnath is not crowded and by 5 in the evening, the place is almost deserted. But be warned that this place is not meant for the forever-luxury-conscious, because there is no power supply here, except inside the temple complex, and the only light you have there at night is of candles and kerosene-lit lanterns; by 8 at night, it is pitch dark and people retire early to bed because their day starts as early as 4 am.

Early next morning, around 4 am, we were on to our final destination of the tour: Chandrashila, a rock face behind the temple; the trek was short, but rigorous. We were at the summit by 5 am; this place, where Lord Ram used to mediate, offers a fabu-lous view of the Nandadevi, Trishul, Kedar and Chaukham-ba peaks. We did pranayama which helped regulate our breathing. The mountains and hills on display had taken our breath away!

The temple of Tungnath is the highest shrine on the inner Himalayan range. It lies just below the Chandrashila peak.

56 C F O A P R I L 2 0 1 056

books

NIALL FERGUSON HAD the guts to hammer out at Nobel laureate Paul Krug-man in a public debate on macro-economics last year. And like in most arguments, there was no clear winner. Not losing was victory, said his supporters. Ferguson shouldn’t have got into a technical argument with an expert of Krugman’s repute, said some others.

Well, nobody ever disputes that Ferguson is one of the finest living financial historians in the world. The

Ascent of Money: A Financial History of the World proves just that, yet again. His stellar work traces the rise of money and credit from ancient Mesopotamia to modern times. It delves into the growth of bond markets from the 13th century and the role of some of the biggest market manipulators such as Nathan Rothschild. The rest of the book focuses on the emergence of stock markets, growth of sectors such as insurance, real estate and international finance. Starting off by taking a dig at the Marxian forecast that “money will dis-appear” it concludes by saying that if financial markets are the mirror of mankind, “it is not the fault of the mirror if it reflects our blemishes as clearly as our beauty”. It is timely, and as readable as it is informative because in writing his-tory as entertainment, Ferguson is a master.

—ULLEKH NP

MARUTI UDYOG LTD. It is simply a burnished showpiece of Indian enterprise, having revolutionised the domestic car industry over the past three decades. The creation of this company in 1981, in tie-up with a foreign partner, following the nation-alisation of the late Sanjay Gandhi’s Maruti Motors Ltd, was perhaps

one of the first steps towards economic liberalisation in the country. R.C. Bhargava was part of the growth of MUL. As its managing director from 1985 and later its chairman, he has seen it all: the birth and growth of Maruti, the ultimate “People’s Car” in India. Teaming up with business writer Seetha, he offers rare insights into how a group of people navigated through odds to make possible what was thought then as an impossible task.

WITH EXPECTED TITLES such as “hitting rock bottom to reach the top”, The Flipside: Finding the Hidden Opportunities in Life is a collection of reports/stories of people, both famous and not-so-famous, who have turned

adversities including debilitating ailments into opportunity. In a world where inspiration is constantly in short supply this one offers a good read, along with many pieces of price-less advice.

FOR SKEPTICS, THIS book may appear to be propaganda material, with all that showering of praise on Israel for being a country with impressive entrepreneurship model. But it is more of infoganda, information plus a bit of propaganda, and Start-Up Nation: The Story

of Israel’s Economic Miracle explains how it is possible for a country to forge ahead economically thanks to remarkable innovations, all in the midst of chaos.

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Optimism the Best Option

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People’s Car Named Maruti

The Ascent of Money is as entertaining as it is informative

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