L&T group’s Mr Finance on life beyond work and his banking game plan.
Yeshwant Moreshwar Deosthalee says he wishes he had devoted himself full time to Larsen & Toubro’s (L&T’s) financial services business at least 10 years earlier. “It’s a young man’s business and hugely exciting. I should have crossed over long back,” adds the 65-year-old finance czar, who took over as chairman and managing director of L&T Finance Holdings last month after retiring as L&T’s chief financial officer, write Shyamal Majumdar and Malvika Joshi.
His lean physique – the result of at least 45 minutes of daily breathing exercises and brisk walking – suggests he can still give many “young men” a run for their money. We tell him that as we settle down at the San-Qi restaurant in Mumbai’s Four Seasons Hotel, and Deosthalee grins from ear to ear.
We notice, however, the slight hint of irritation in his response to our first set of questions: Is his current job more exciting than becoming chairman of L&T, the company he joined in 1974 and on the board of which he spent 16 years? Wasn’t that a natural progression in his 37-year-long career in L&T considering that the current incumbent, A M Naik, is due to retire in September next year?
The answer is prompt: “You should address that question to Mr Naik, not me. I am here to talk about the hugely exciting journey that I have just embarked on.” The chilled fresh lime soda couldn’t have been served at a more opportune time.
Deosthalee is quite unlike a conventional workaholic CEO. He goes home by 6.30 p m; does not work on Sundays; believes one shouldn’t stick to the chair thinking he is irreplaceable (he started grooming his successor in L&T at least two years before he retired); and likes to give the CEOs of individual businesses enough elbow room to operate. He hasn’t been to a business school either, preferring to do chartered accountancy and law — the latter helped “clear thinking and sharpened his ability to articulate”.
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Most importantly, he believes there is life beyond work. That has even meant walking the ramp and jointly cutting a music album, of course for a cause. Approached by the Joy of Giving Week, an organisation that wants to inspire Indians to do their bit for the underprivileged, Deosthalee readily agreed to sing and selected one of his favourites: Puccho Na Kaise Maine Rain Beetai from the 1963 movie Meri Surat Teri Aankhen. “It was a tough job because the song has a classical music base. On the recording day, I was a little nervous,” he now says, promising to send a copy of the album. “It’s worth listening to at least once,” he quips.
Music has been an abiding passion. He learnt Hindustani classical music for three years and even found time to jam with Shankar Mahadevan at the launch of an academy to train L&Tites. “I have two hobbies. First is music and second is talking to people. My wife says I don’t talk much, but people in office think otherwise,” Deosthalee says, as the starters – dim sums (vegetable for him and chicken for us) – disappear in no time.
Deosthalee orders rice and Thai vegetable green curry, while we settle for the chicken version of the same. The food is good but San-Qi would perhaps do better to pay more attention to reduce the time it takes to serve.
We steer the discussion towards L&T Finance’s ambition to set up a bank, and ask him whether he agrees with the growing opinion that L&T, with its diversified ownership and compliance with most of the parameters set out in the draft guidelines, has a very bright chance of getting a bank licence. “Everyone is saying that, but the entity that matters – the RBI [Reserve Bank of India] – should say it first,” he jokes, before choosing his words carefully about his banking aspirations.
Pointing out that a bank is a “natural extension” of L&T’s financial services business, Deosthalee says while the broad guidelines are in line with his expectations, there should be some clarification in a few areas. For example, there is a need to understand the rationale for the differentiated capital adequacy for new banks, and on points such as new banks not setting up any other business in financial services for three years, and listing within two years. Also, the rule of having 25 per cent branches in rural areas needs more clarity.
Deosthalee says it’s still too early to spell out specifics of his plans, but emphasises that L&T Finance is well-positioned because the business is well diversified into retail, wholesale infrastructure and rural. Also, there is already a holding company in place with a substantial number of independent directors and with minority directors from the parent company. Besides, he thinks consistent performance rather than giving one superlative performance in a year is in L&T’s DNA and that’s what is required to succeed in the banking business.
His food is getting cold, but Deosthalee is clearly above noticing such mundane things when he’s on his favourite subject. “At L&T Finance, we believe in the Triple S model — simple, sustainable and service. You should be able to do business for a long period of time and face all the cycles. Similarly, banking products have to be really simple but offered through innovative models in service,” he says. That should be music to RBI’s ears, we thought.
So, like the ADAG Group, has he also decided on the name for the bank he is supposed to head? After all, Anil Ambani named his banking project Reliance Bank at the Reliance Capital AGM. “I am an old man and you should understand there is a difference between the old and the new generation. We have not gone as far as them,” he says with a chuckle.
He prefers to talk in detail about the companies under L&T Finance Holdings. The holding company has four operating subsidiaries through which the different businesses are managed. These are: L&T Finance, L&T Infrastructure Finance, India Infrastructure Developers, which proposes to focus on working capital financing for corporate borrowers, and L&T Investment Management, which operates mutual fund business and acquired DBS Chola in 2010.
The loan book between L&T Finance, which is largely a retail financing company, and L&T Infrastructure Finance is Rs 18,000 crore. The company launched its insurance business last year. L&T Finance has 125 branches and operates in 800 locations, out of which 500 are in rural areas.
It’s time for dessert and Deosthalee, after admitting his weakness for “anything sweet”, opts for kulfi. He is in a mood to talk about his past chairmen in L&T (he has worked under three of them), all of whom played a crucial role in shaping his career. “Mr Naik, for example, was extraordinary in risk-taking capabilities and making all of us think like entrepreneurs. For a conservative company like L&T, that was like a whiff of fresh air,” Deosthalee says.
Disappointments like failure to acquire Satyam have been hard to digest, but Deosthalee prefers to remember the sunnier side of things. So what was the secret of him winning the Best CFO of the Year awards with almost unfailing regularity? Deosthalee says he always stressed the importance of managing cash flow, which, though people may think inefficient, is important for a project company. Development project companies can borrow through special purpose vehicles, but the parent company, which is the engineering, procurement and construction company, should always manage its cash, he says.
Eliminating risk to maximise profits has been his theme song. “That may sound boring, but helped us maintain our profit margins,” he says, adding how he involved treasury right from bidding to completion, making sure that risks arising from currency movements and commodity price fluctuations were minimised.
His financial acumen has been noticed by the government as well. In 2008, at the height of the global financial crisis, when the government constituted a committee to address the liquidity issue, Deosthalee was the only CFO to be nominated to represent industry. He was also chosen as a member of the Securities and Exchange Board of India committee that recommended a total overhaul of the takeover rules.
As we walk out of the restaurant, Deosthalee says he wants to listen to the markets more and more because that’s the best learning ground. That explains his frequent trips to meet potential customers in some of the remotest parts of the country. Life for some certainly begins at 65.
