 "Rajiv Kaul, CEO, CMS Info Systems")
House of Ming at the Taj Mahal Hotel (better known as Taj Man Singh), Delhi, is still getting ready to service its guests, as we arrive a few minutes before our luncheon appointment at 12.30 pm. But the noisy lobby is hardly a distraction for my guest, Rajiv Kaul, to hold forth on subjects as varied as net neutrality and Delhi’s pollution issues. Though a resident of Mumbai now, Kaul, a Kashmiri, is a regular visitor to the national capital for work and also because his parents live here — reasons why his friends in other parts of the country keep asking him, “politics mein kya ho raha hai? (what’s happening in politics?)”.
“They perhaps think my roots in Delhi make me qualified to have some deep inside knowledge of what’s happening in the political corridors,” Kaul says with a laugh, enquiring whether I, a recent export from Mumbai, is facing the same predicament.
Once the youngest managing director of Microsoft India — he had moved into the corner office at the age of 33 in 2001 — Kaul is now the executive vice-chairman and chief executive officer of CMS Info Systems, India’s largest cash management services company and the sixth-largest globally in terms of units transacted. Our meeting is timely as Baring Private Equity has just acquired 100 per cent of CMS — 53 per cent from Blackstone, 37 per cent from the former owners of CMS and 10 per cent from the management team led by Kaul — at an estimated valuation of Rs 2,000 crore. After cashing out, Kaul and the management team decided to reinvest in the company and stay on. The transaction marks Blackstone’s highest return since setting up its India office in 2005.
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Kaul, 47, is cagey about giving out numbers and stonewalls queries about his financial comfort zone, but says he is happy that the stakeholders have managed to get decent returns on their hard-earned money. Does he intend to continue at CMS? “Well, it’s now a rock-solid company and as of now, I intend to continue with my ‘hands-off, but eyes on’ leadership style. But I do intend to spend a little more time on some of my other interests,” Kaul says, as we settle down at one of the corner tables with a lush green view.
One of his “other interests” is The Art 1st Foundation that he has set up with his wife, an IIM graduate, for collaborating with young thinkers, artists and local community leaders to incorporate fresh pedagogy in education and to underscore the role of art in cognitive processes and creative competencies.
Kaul asks for spicy lung fung soup with lamb dumplings. For the main course, it’s Peking Duck and fine rotis. Being early birds at the restaurant surely helped, as the soup and the dumplings come in no time and I steer the conversation towards CMS. What follows is an interesting account of the turnaround of this little-known outsourced businesses company into India’s largest cash and payments solutions provider. Within six years of leading the Blackstone-backed buyout of CMS Computers into a new company, CMS Info Systems, in 2009, Kaul led a radical restructuring and transformation that saw revenues almost tripling to around Rs 1,500 crore. CMS today handles almost 53 per cent of all cash in circulation in the country, manages more than 55,000 ATMs and covers 35,000 retail outlets for their cash management and processing functions. CMS has also aggressively built the network across 2,200-plus towns.
An MBA from XLRI, Jamshedpur, and a computer science engineer from the Birla Institute of Technology, Mesra, Kaul says the the focal point of CMS’ business today is other people’s risk. The cycle of cash starts from the Reserve Bank of India’s (RBI) mints and vaults and moves through bank currency chests and branches, ATMs, post offices, businesses big to tiny and individuals, with innumerable stops in between. CMS covers all that — it feeds ATM machines, delivers and picks up cash from retail and other outlets, moves cash between currency chests and bank branches, runs dedicated cash vans, processes and sorts cash and offers cashiering services.
After consumers take the money out, they spend it and it eventually flows back to banks and then to the RBI. The whole cycle, Kaul says, making a neat roll of rotis with Peking Duck, is not only about the movement, which is a big part of it, but also about the processing. The currency notes are checked for counterfeits and dirty torn notes and balances are reconciled for customers and banks — a lot of software comes into play there. This focus on technology, Kaul says, ensures the lowest rate of cash-outs and maximum ATM uptime.
I ask whether the government plan to reduce cash transactions is a threat to the scalability of CMS’ core business model and Kaul says the cash market will remain very large in the foreseeable future. For example, among the 10 million-plus organised retailers in India, only a minuscule 600,000 accept payments via non-cash modes now.
Does he miss the action at Microsoft where he spent 10 long years (1996-2006), his stint coinciding with an industry-defining period for Indian information technology? Kaul looks nostalgic and says he “has fallen in love with Microsoft all over again” for the fantastic work the company is doing under Satya Nadella. He recollects how way back in 2000, he successfully championed the case within Microsoft (internationally) for the future emergence of large Indian software companies as global players that led to many alliances. He also created and led the company’s biggest philanthropic effort in India, Project Shiksha, which invested Rs 100 crore for capacity building in thousands of schools across India in partnership with state governments. With Project Bhasha, he stimulated local language computing by localising Microsoft’s flagship products, Windows and Office.
He also talks fondly of his experience of working with Bill Gates. Once on a flight to India for work concerning his foundation, Gates asked him what Bihar’s population was. Kaul couldn’t give the answer off-hand but Gates knew it. “I learnt the importance of homework and the need to give importance to little details, from him,” Kaul says, adding that while working for Microsoft was an out-of-the-world experience, he wanted to get out of the ultra-comfort zone he was getting used to. That took him first to the Redmond headquarters of Microsoft as senior director, Emerging Markets (2005–06), and then to London as partner of Actis Capital, where he was responsible for supporting deal origination from India. That is where he learnt the art of calculated risk-taking — so important for a debut in entrepreneurship.
We order green tea, and Kaul says CMS has a big play in every part of the chain except in printing money and storing it. So the next move is convincing the central bank to outsource the management of currency chests. At present, the RBI has to make sure there is enough money floating around and it spends almost Rs 4,500 crore a year printing the currency, because there are notes that get destroyed and new notes have to be printed. If firms like CMS could save 10 to 20 per cent of the cash in circulation every year by making the process more efficient, it could hypothetically save the RBI a lot of money. Today, banks set up these chests by themselves. They put in the money behind the infrastructure, the machinery and the people. What CMS proposes is something like the ATM story — a partner puts up the infrastructure, and charges banks for every transaction. This puts the accountability on the partner and while this will be a big boon for banks, this will also change the business for CMS in the long run, Kaul says.
What has been the central bank’s response to the proposal? Kaul says the RBI seems to like the idea in principle but will perhaps need more time to warm to it. Doesn’t he feel impatient with the long wait? Kaul ducks the question deftly before rushing for his next meeting: His entrepreneurial journey, he says, has made him far more patient than he has ever been in life.
