6202015, Sebi's Band of Barkers Publication: The Economic Times Mumbai;Date: Apr 4, 2012;Section: Money & Banking;Page: 17, Sobti’s Band of Bankers Four years ago, Indusind Bank was nowhere on the map. Now, it is one of the top-rated banks in India. And, the credit, if any, should be given to one man: Romesh Sobti, MD & CEO of the bank. Anita Bhoir and MC Govardhana Rangan find out more about Sobti’s army and how they changed the bank’s fortunes and helped bury the Bofors ghost ‘When Romesh Sobti signed up to lead Hindujas’ Indusind Bank in 2008, not a single stock analyst thought it worth covering. Four years hence, more than 150 do. Goldman Sachs Group and JP Morgan have top ratings on it. ‘Templeton, Vanguard and Blackstone are among stake owners. It was not just investors who had a dim view of the bank run by a family embroiled in the Bofors arms procurement scandal of the 80s, but even the regulator had given up hope terming it an ‘outlier’, Turing around the fortunes of a bank with four-month average liabilities versus four-year assets was, of course, a Herculean task for Sobli ‘Sobti, the son of an army officer, had done no extraordinary banking in his 33-year career. It didn't include billion-dollar deals or trading exotic derivatives. It was boring: lend to businesses that grows real economy. ‘When the MNC fatigue set in after more than two decades at ANZ Grindlays and ABN Amro, Sobti’s lack of fancied deal-making career left him with little to choose from. But something unusual happened when discussions began with the Hindujas. Sobti did the due diligence for nine months on his prospective employer, rather than the other way round, For someone who headed an elite European bank for more than a decade, a move to a bank that suffered investor apathy and regulatory glare was audacious. It was more an intrigue than interest for many,” says Sobti, MD and CEO, Indusind Bank. “It was not about salaries or bonuses. It was about governance. We said it can't be treated as another company in the group. Whatever we asked for, it was shown to us.” Indus ind Bank, launched by the then Finance Minister Manmohan Singh in 1994, ran into trouble when the tide tumed at the tum of the century. It piled up bad loans with an asset-liability mismatch. Employee morale collapsed, customers were leaving in droves and investors turned their backs. It muddled along for years with some bandages like the merger of Ashok Leyland Finance in June 2004 that brought it the much-needed capital and some branch network. But piecemeal solutions were not enough when ICIC! Bank and HDFC Bank bom at the same time were taking giant strides. “This bank had people who were tired of bad performance,” sald Paul Abraham, chief operating officer, who moved to Indusind along with Sobti. “Where ever things were working well, we did not touch — like vehicle financing and technology. The move was a huge gamble.” There was an urgent need to show that the new team of five meant business with ‘thrift’ as their focus area. Executive salaries were frozen at 2006 levels for three years, including Sobti’s, An employee stock option was introduced for scores of staff, and first class air-travel was banned, Sobti still travelled top class but he paid the difference from his pocket. And, no more expensive offsite meetings. But even before Sobti could start, he needed capital. The bank's stock languished at its IPO levels of 40, a decade after listing, “Initially it was a hard-sell because of the tiny size and legacy issues,” says Abhijit Raha, CEO, BNP Paribas Securities India. “We did not sell the institution but sold the management,” says Raha, a former colleague of ‘Sobti’s. Thanks to Raha and his former employer CLSA, Indusind managed to raise 222.2 crore by listing at the Luxembourg Stock Exchange in June 2008. Thereafter, it was a scramble for mandate among investment bankers with the bank raising 1,653 crore in two tranches with the last sale to institutions at 234.55 apiece which was managed by BNP Paribas, Morgan Stanley and UBS, The bank is valued at $3 billion now, up from $200 million when Sobti’s army including Paul Abraham, Sumant Kathpalia, Suhail Chander and KS Sridhar joined ‘Sobti has succeeded in tuning the business around well, says Bhaskar Ghose, predecessor to Sobti and now head of Fina Bank in Kenya, But unknowingly he may have built a human resources risk by piling up 160 people from ABN. Inpslepaper mesoinda.com/Repositoryigotles.aspSile=OllveXLibLowLovelErtlyToPrint_PASTISSUES28Type=tedtumléLocale-engish-skin-cu.. 1M6202015, Sebi's Band of Barkers “There is a huge concentration risk on the human resource side as the top management comes from the erstwhile ABN,” says Ghose. I the key people were to leave following Sobti’s retirement or for any other reason, there would be a vacuum. The bold step to acquire Deutsche Bank's credit card portfolio could also backfire as these are unsecured loans.” But the top management counters the charge. “This is not a single group of chamchas who moved together,” says Abraham. “It is a bitter fight among ourselves over strategy. No one has a free way. Sobt’s taste for expensive wine and collection of high-priced paintings may be in tune with the lifestyles of top bankers, but lending for agricultural pump sets and tractors in Champaran, Bihar, the district that sowed the seeds for Mahatma Gandhi's independence movement, is the impression that he carries of banking. "He was a very bright young man with a lot of energy, commitment and understanding,” says MS Verma, former chairman, State Bank of India who had seen Sobti at work during his officer days. ‘An electric engineer by training, Sobti did not think of wearing the uniform that his father wore in the name of patriotism, but aspired for good things in life. He began his career with the Stale Bank of India, which in the 70s was a springboard to affluence, as a trainee officer and worked alongside Verma and Pratip Chaudhuri, now the chairman. It was his father-in-law who transformed his career by bringing him a recruitment advertisement atANZ Grindlays Bank for officers which he had spotted in a newspaper. Sobti, who was happy not to retum to Patna, grabbed the opportunity and grew under Raj Goyal who would become his life-long guru. One lesson Sobti leamt from Goyal: recovering what you have given away is more important than sanctioning new loans. eis the best relationship manager | have met,” says Goyal, the then chief manager at ANZ Grindlays. "He is good at building relationships with corporate clients like Escorts, Ranbaxy and Bilas. Now, he is a big boy.” ‘The breakthrough for Sobti at ANZ was when a -crore loan to Hindustan Thermo Print tured bad, Pouring midnight oil on the company's accounts and other documents he concluded that the company can't incur losses. He argued his case and made the company pay up. The eye for detail and perseverance made him the blue-eyed boy of Ashok Kapur who hired him at ABN and gave his banking commandment: “Whenever a part of the bank makes unusual money, investigate.” Under Sobti, ABN Amro hardly had a blot, at least publicly, either from the regulators or from customers unlike some multinational rivals. But how did a man who was particular in compliance and not taking giant risks to grow, end up with an institution promoted by the Hindujas who were accused of being involved in the Bofors scam? It is a perception and nothing can be done to change it,” says Sobti. “It was a concem for a long while, In the four years, | haven't come across anything to substantiate that.” The Hindujas don't interfere with the management, says Sobti, The board has professionals at the top. R Seshasayee, a successful executive at another Hinduja Group company, Ashok Leyland, is now the chairman of the bank. SC Tripathi, a former bureaucrat, TT Ram Mohan, a finance professor at the IIM, Ahmedabad and YM Kale, former head of the accountants’ body, are aiso on the board. “They did their homework,” says Ashok Hinduja, one of the four brothers who run mutt-illion businesses across continents. “The Bofors scam was in the news up to early 2000 and they came aboard in 2008, The issue is irelevant, They would have noticed that the promoters don't interfere.” Sobti, an avid golfer who brought with him the team that worked together for years, expects everyone to work selflessly for the organisation as a team. But the same philosophy did not prevail when, at ABN Amro, he was tested with a vertical structure imposed from Amsterdam that reduced his clout in local operations. When his authority over the Indian empire reduced, he quit, only to reverse it. ‘He gets very lvid at the lack of collaboration,” says Abraham. “He walked out of a meeting in disgust when two departments were fighting over who should be given credit for some revenue. | don't like his intolerance for imperfection. But is it a close group that's running the bank now with little scope for any old-timers to have any say in the way the bank is run? The answer is no. ‘Some old-timers at Indusind believe that Sobti has been fair and gives everyone his due irrespective of the fact that the lender is populated with former ABN staff. ‘obti has a very strong gut-feeling and is a great decision-maker,” says S V Zaregaonkar, executive vice-president ‘and CFO who has been with the bank for 15 years and worked with five managing directors He keeps enormous trust in his employees and stands by them.” ‘There are new initiatives such as the cards business and hiring in the markets division which are seen as anew gamble by Sobti Will they too succeed as the previous one? No one is sure as yet. Inipslepaper tmesoinda.com/Repositoryigotles.aspSile=OllveXLib:LowLovelErtlyToPrint_PASTISSUES28Type=tedrumlaLocale-engish-skin-cu.. 26202015, Sebi's Band of Barkers ROMESH SOBTI Managing Director & CEO, Indusind Bank Total Experience: 33 years in banking Earlier Jobs: Worked with ANZ Grindlays Bank (now Standard Chartered Bank) and State Bank of India. Other positions held include executive VP, country executive, India; head, UAE and sub-continent, ABN Amo Bank. He joined ABN in November 1990 Education: Bachelor's Degree (Hon.) in Electrical Engineering, Diploma in Corporate Laws and Secretarial Practice 7 PAUL ABRAHAM. nie Op rane ip ‘omcer— Newisume Baking Oe Total Experience 30 years 20 years in Over 14 years Over 29 yrs banking fin banking) (banking) Earlier Jobs MD.ABNAmro Head, consumer Held various Handled Central Enter- banking busi- Positions in bank-wide risk prise Services ness, ABNAmro. ABN Amro & management at Began career Also worked ANZ Grindlays —— ABNAmro with ANZ Grind- with Citibank lays Bank in NA. and Bank 1982 of America Education PG Degree Chartered Chartered MBA, Jamnalal in Business. Accountant Accountant, Bajaj institute Management of Mgnt (Finance) from Studies, UIM Ahmedabad Mumbai Net interest income «cn Net Profit «cx os Net Non Performing Assets «eco DREAM TEAM rors LU Net Non-Performing Assets Inipslepaper tmesefinda.com/Repositeryigat les. aspSyle=OliveXLi:LowLoveltlyToPrit_PASTISSUES28ype=textrumn|&Locale=engish skin-cu. a6202015, Sebi's Band of Barkers toNet Advances o, noe M2000 mano 2011 Bank Shares on BSE since 2008 ‘Avg. Market Cap “77? of IndusindBank (ea Windusind Bank WHDFC Banke HlaxisBank — MICICIBank 0 san 2008 ae ice MovenenT BRTTO TO apnea Inipslepaper tmeseinda.com/Reposterygeles.aspSyle=OliveXLib:LowLevelEntlyToPrit_PASTISSUES28T ype=tenthumlaLocale=englsh-skin-c. a6