MID TERM EXAMINATIONS QUESTION PAPER

Course Name : Business Transformation and Organizational Credits 2

Turnaround
Course Code : 0212410402 Semester : IV Batch : 2020-2022
Date of Exam: 10.03.2022 Day: Thursday Duration : 90 minutes
Time : 10:00 AM - 11:30 AM Maximum Marks: 40
Section – A
Course
Q. (Attempt any 4 questions from 5 questions of Section A)
Marks Outcomes
No. (Compulsory) Mapped
4 Questions * 5 Marks = 20 Marks
Q1 What are the warning signs of a business heading towards trouble? 5 marks CO2

Q2 Often business failure is attributed to ‘mismanagement’. Critically discuss 5 marks CO2

Q3 Enlists six paths of transforming a business. Explain any one with example. 5 marks CO1

Q4 How organizations can break the value – cost tradeoff? 5 marks CO1

Q5 Enlist various tools to predict failure. Discuss any one in detail. 5 marks CO2

Section – B (Case Study) (Compulsory) 20 Marks

Q6 In March 2015, CSB Bank (formerly Catholic Syrian Bank), had filed for an IPO CO3 &
to raise Rs 400 crore, but the plan was shelved for lack of interest. CSB was set CO4
up in 1920 to serve the Syrian Christian community in Kerala.
In 2017, CSB again tried — and failed — to raise money from various investors,
including private equity.
Today, after a year since it listed on December 4, 2019, its market cap is more
than the combined valuation of its southern private banking peers.
Let us go back to history
To start with, CSB did not conform to the Reserve Bank of India (RBI) guidelines
on foreign shareholding.
It was only in 2010 that the bank started reducing the stake of its largest
shareholder, Bangkok-based entrepreneur Sura Chansrichawla, from 34 per cent
to less than 10 per cent (as of 2016-17).
Though the RBI mandated one year, it took Chansrichawla three or four years to
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comply.
The years 2010 to 2017 saw internal board struggles that caused the management
to take its eye off the ball.
During those days, CSB set itself the target of doubling its balance sheet by
expanding its corporate lending business.
Lacking experience, it joined bank lending consortia.
But once the economic slowdown began, CSB started feeling the heat with many
corporate accounts turning into non-performing assets (NPA). This was true for
the banking sector as a whole but CSB’s case was extreme since corporate lending
accounted for a quarter of its loans.
In 2015-16, the bank recorded the losses of Rs 149 crore.
“It was a small, extreme adventure. We accepted the failure and we were open
about it to all the stakeholders, including new investors,” said T S Anantharaman,
who was chairman of CSB between 2017 and 2018.
The losses were mounting. A capital infusion was the immediate need but three
rights issues is the past ruled out accessing existing shareholders.

What led to its Growth?

Luckily, in May 2017, the RBI tweaked ownership norms and allowed foreign
non-banking financial entities to acquire majority stakes in banks, on condition
that they lowered it to 40 per cent in five years, 30 per cent in 10 years and 15 per
cent in 15 years.
In 2018, CSB got a nod from RBI to rope in Canadian billionaire Prem Watsa’s
Fairfax, which agreed to infuse Rs 1,200 crore for a 51 per cent stake. C V R
Rajendran MD & CEO of CSB was instrumental in Faifax deal.
In December 2016, Former Andhra Bank CMD C V R Rajendran joined CSB as
MD & CEO. He came travelled to West Asia, Singapore and India to meet
shareholders, an influential Bishop from the Syrian Christian church, union
members and employees to convince them to allow Fairfax on board.
Having addressed the capital issue, Rajendran turned to the nuts and bolts.
The bank had not hired for nearly a decade and existing employees, who were
largely untrained causing low branch-level productivity.
Labour cost was 23.5 % against an industry average of 10.5 % of income.
Despite opposition from local trade unions, Rajendran sacked around 200 people
for under-performance, offered another 1,000 VRS, reduced the retirement age
by two years and recruited afresh.
Today, the original staff accounts for about 45 per cent of CSB’s workforce and
the average age of employees fell from 50 years to 36.
The lending portfolio was also rejigged to focus on gold loans and small and
medium enterprises (SMEs).
“We cannot fight the State Bank of India in market share. We have to compete
against small banks and NBFCs, which is what we will do. We will play in niche
markets and products. Being small, our decision-taking is much faster than the
bureaucratic bigger banks, so we have a natural advantage in taking over the
NBFC space immediately,” Rajendran explained.
To this end, he recruited people from NBFCs in Kerala, the state that houses the
largest number of gold lending NBFCs. Soon, CSB’s gold loans grew by Rs 1,100
crore, or 47 per cent, year-on-year from September 2019 to touch around Rs 5,000
crore in Q2 of FY21.
CSB also strengthened its digital capabilities to cut costs.
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During the first half of FY20, 57.33 per cent of transactions were digital; a year
later the proportion rose to 71.25 per cent.
This enabled the bank to deploy branch employees for acquiring new business
and customers.
Labour cost came down to 16-17 per cent in a year-and-a-half, and the target is
to bring it down below 10 per cent of total income.
Of the 400 branches, 300 were loss-making, a number that is down to 60.

Circa 2020 - 2022

CSB Bank has listed its shares mainly to comply with the promoter holding
regulatory norms in December 2019. CSB Bank, one of India’s oldest private
banks, now has four core business areas: SME banking, retail banking, wholesale
banking, and treasury operations.
Recently CSB Bank have partnered Financial Software and Systems (FSS), a
leading provider of integrated payment products and a payments processor) and
to deliver hyperlocal banking services to financially underserved segments.
Under the aegis of this partnership, CSB Bank and FSS plan to open 1,000 Smart
Cash franchisees in semi-urban and rural areas across India to expand financial
services adoption among underserved segments. Modelled on a Branch-in-a-Box
service concept, Smart Cash franchisees, equipped with a kiosk or micro-ATM
device, would offer affordable banking, investment, credit, and insurance
products to target segments and would also offer products of CSB Bank as well
as third party partner products – utility payments and domestic money transfers,
and will also extend interoperable banking services to customers of any bank.
a) Analyze the case to identify (10 Marks)
1. The reasons behind the poor performance
2. Immediate Response by the company
3. Creative and strategic efforts taken to revitalize, transform business.
b) Explain the challenges faced by turnaround leader (5 Marks)
c) Suggest strategies for Phase II transformation (5 marks)

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