The Deveshwar legacy

He redefined ITC and Indian professional management

Yogesh Chander Deveshwar, who died in Gurugram on Saturday at the age of 72, was the epitome of a company man. Educated at the Indian Institute of Technology and Harvard Business School, he joined ITC in 1968 and was still serving the organisation, as non-executive chairman, when he passed away, although he had stepped down from being chief executive in 2017 — a job he first took on more than two decades earlier. The only time he left the company briefly was in the 1990s, when he served as chairman of Air India. He rose meteorically through the ranks at ITC — running a factory before he was 30 and a division at 31, before becoming a director before he was 40. He became chairman when the company was in crisis and under siege, with his two immediate predecessors in jail and the management embroiled in a nasty tax dispute. From there he multiplied shareholder wealth manifold.

Deveshwar will be remembered for two things above all: That he successfully managed the diversification of the tobacco major into multiple different sectors, and his defence of that diversification against ITC’s largest shareholder, British American Tobacco or BAT. If ITC is known today as being almost the hallmark of a professionally managed Indian organisation, that reputation is owed in no small part to Deveshwar and the battles that he fought in the 1990s. The board and management had decided to diversify the company; the largest shareholder was unhappy. In many cases, the diversification would have been quietly rolled back, especially after a few bad years. But Deveshwar used the power of the state and that of domestic finance to keep BAT at bay, and to keep the diversification going. But that process was unsentimental — ITC under Deveshwar exited many sectors if it appeared that they were not, in the end, the right fit. Deveshwar’s insight was that the ITC brand was widely respected, and could earn money well beyond the cigarette sector — and could be parlayed into a creditable market share in such sectors as fast-moving consumer goods and apparel. This process could be kept going thanks to the victory over the largest shareholder, ensuring ITC remained widely held and ownership was carefully separated from management. 

Deveshwar’s focus on growth is visible in the numbers: Its revenue grew at a compound annual growth rate (CAGR) of 14 per cent while he was chief executive. Profits grew at 19 per cent year and shareholder capital appreciated 20 per cent as long as he was executive chairman. During his executive chairmanship till 2017-18, ITC’s non-cigarette business grew 19-fold, constituting 59 per cent of the net segment revenue of the company. This is an excellent record to be sustained over decades, and is part of the reason why he was one of the most admired corporate leaders in India. That said, growth has slowed in recent years. Its share price has gone up 7.6 per cent since February 2017, whereas the Sensex has gone up 32 per cent in the same period. One of the great problems of Indian corporate life is even the best leaders stay too long and their companies struggle to move on after they leave. Perhaps ITC is no exception.