Mar 20 2024, 07:48
Payments banks a flawed business model, needs relook: former SBI chairman Rajnish Kumar:
The veteran banker who is on the boards of nearly a dozen companies talks about the role of independent directors and advisors in emerging companies, the future of payments banks, and more.
Former State Bank of India (SBI) chairman Rajnish Kumar seems to have traded in his retirement chair for a whirlwind tour of corporate boardrooms. From advising banking behemoths to mentoring startups such as BharatPe and Byju's, Kumar's post-career journey has been quite eventful.
When you retire as the chairman of SBI, there's demand (from companies to join their boards]. I joined the HSBC board first in August 2021, and subsequently got appointed on th L&T board. Hero and Brookfield happened later. I was also approached by Bharat Pe, and I accepted it because it was an upcoming fin-tech startup. At the time, there was nothing to indicate that things were not alright in the company. So, I would say all of this happened by chance, not design.
Aggression is alright. Because when you start up, you come up with a new idea. But forgetting the basics can be dangerous. Managing a company when it grows beyond a certain size becomes an issue. In all these companies, governance and compliance were not up to the mark.
For instance, Bharat Pe did not have a permanent chief financial officer (CFO). I don't think even Byju's had a CFO of the required stature. When a company is starting from a garage, it is different. But when it is growing, a governing architecture needs to be put in place.
For private limited companies, there's no legal requirement to have independent directors or an audit committee. But in BharatPe, we decided to do it appoint independent directors, formulate an audit committee, and bring in a permanent CFO and other professionals. The governance structure must grow in tandem with the company's size.
What is the size you're talking about?
There is no definition per se, but there are certain benchmarks as per the labour laws. However, there's no benchmark which says that if your company's size is so and so, then you must have a CFO. I believe that every company should have a strong head of finance. That takes care of at least one part, which is financial integrity. The rest is all about business growth and strategy. If you're working in a regulated environment, like say in financial services, then you need to comply with regulations.
How has been your experience working with Byju Ravindran? The industry knows him as a charismatic teacher and a founder who built a USD21 billion-dollar ed-tech firm- the second largest startup in India. But clearly, something has gone wrong. In hindsight, I would say that the aggressive expansion by acquiring several companies
without having the management bandwidth was avoidable. But that's in hindsight. Otherwise, he is brilliant in terms of what he does.
People say he is one of the best teachers in the country but may not be a great businessman. Can you help us understand why? What went wrong at Byju's?
When you are growing, it's not a bad idea to have people who have experience of running a corporation of a large size. The entrepreneurs are experienced in a certain way. But when the size of the corporation grows, it becomes a very different model. Now, if you're acquiring say eight companies in a short period of time, the experienced people will sound cautious. You can probably acquire one or two companies, but not seven.
How is that wrong from a business standpoint? You have billions of dollars, and you are
using that money to grow inorganically.
You don't have to raise billions of dollars. If you have money, that is the biggest danger.
Startups shouldn't raise money?
I am not saying that they should not. They should raise money to meet their business requirements. Even if acquisition is a part of the strategy, you bite off only as much as you can chew. Acquisition and mergers require a lot of planning, due diligence, and bandwidth.
Having money doesn't mean that you just go and buy everything.
At what point should a founder make way for a professional CEO?
Whether you run it yourself as a founder or get a professional - I don't have an issue with that. But having some key managerial personnel is important. Whether it is an advisory board or a normal board, having some people who have seen the corporate world can be helpful. Not only retired bankers but anybody who has been in the corporate world for 20 years.
source: et
Mar 20 2024, 07:55
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