Image does matter

Let's emphasise once again: Kamath doesn't have an axe to grind with Parekh (or the other way round), although sometimes it may seem that way, given that HDFC was actually founded by ICICI (at one time both operated from the same building), and today HDFC is in a business that is growing faster than ICICI's. It's just that the two CEOs have their own very good reasons for diversifying-often into the same areas. HDFC is frenetically seeking to shrug off the image of being a one-product company (home loans), by using synergies that exist with its bank to foray into areas like e-broking, mutual funds, and insurance. For ICICI, it is imperative that it moves away from the high-risk, low-return business of project finance. Kamath has identified retail as the thrust, and two years ago he fired the first salvo in HDFC's direction by pinching a few of Parekh's men and flagging off the home loans business. Thereafter, followed auto loans, personal loans, credit cards, mutual funds, e-broking, and insurance. As Bhojani puts it: ''It's not the personalities that drive the competition. Competition could rub off the personalities. They are both dynamic leaders, and they are bound to take it as a challenge,'' explains Bhojani.

Kamath kicked off that challenge with the home loans business. ICICI is still puny when compared to HDFC but the objective was clear: grow the business, even if it has come at HDFC's cost. Kalpana Morparia, Executive Director, ICICI, maintains that they got into home loans simply because it's one of the safest businesses to be in, given the low default rates here. ''Besides, the market is growing and there's space for all,'' she adds. But the fire in Kamath's belly was in ample evidence when ICICI brought down rates a notch, by 0.25 per cent, on a 20-year loan, from 13 per cent to 12.75 per cent. What happened? Scores of consumers who had over the years bought homes with HDFC money decided to switch. Today, there's little to distinguish between the offerings of the two behemoths.

There's another way of looking at the battle between the two institutions. When Kamath took over, he knew that the only way to make ICICI a growing, shareholder-friendly company was to start moving away from the corporate lending business towards retail. So no more were IDBI or IFCI benchmarks for ICICI. ''He had to raise the bar, and that's how HDFC became the new benchmark,'' says a former ICICI manager.

If HDFC is the new benchmark, can leadership ambitions be far behind? For Chanda Kochhar, Executive Director at ICICI Bank, being No. 1 matters because of the clout one can command. ''The earlier we reach leadership status, the more wherewithal it gives us to move the industry. You need a critical mass that allows you to dictate the market,'' she says, citing the example of the auto loans business, which is today worth Rs 1,000 crore.

Clearly, Kamath has realised that the only way to wash away the sins of yesteryear-in the guise of huge non-performing loans on the ICICI balance sheet-is to diversify at lightening speed. Over the past two years, he's pitchforked the hitherto corporate finance-oriented ICICI into bonds, loans, FDs, retail, and Internet banking, e-broking and private equity. He also ventured into credit cards-where HDFC has feared to tread, so far-in January 2000, and 11 months later hit the 1-lakh mark. As of today, ICICI Bank has 3 lakh credit card holders (and 70,000 debit card holders), is roping in 20,000 users every month, and snapping at the heels of the foreign banks. And Kamath is already paving the way for a merger of ICICI and ICICI Bank, regulations permitting, in a bid to ride on the synergies that exist between the two.

All those efforts may not manifest in a major way on the balance sheet, but they're beginning to show. ICICI has an asset base of Rs 60,000 crore, of which only around Rs 2,000 crore is retail assets (HDFC has an asset base of Rs 40,000 crore, which is largely retail). ''He may not have been able to reduce the non-performing assets by a lot, but the fact is that he's been able to reduce its total proportion on the balancesheet by expanding into consumer-oriented businesses,'' says P. Chandrasekar, a former ICICI hand, and now CEO of corporate finance portal, fund4idea.com. Over the past two years, the net non-performing liability ratio has dropped from a high of 8.1 in 1999 to 5.2 last year. Kamath is aiming to bring it under 5 per cent this year, and Morparia predicts that the retail segment will make up 25-30 per cent of ICICI's portfolio in four to five years.

If ICICI is nimble, HDFC is perceived to be languorous, where decisions take their time to happen, and sometimes never happen. Which is reflected in some of Parekh's forays-he got into mutual funds only last year, ICICI tied up with Prudential of the UK for these activities four years ago; he took the plunge into e-broking sometime after Kamath did; the ads offering too followed a year after ICICI's; and HDFC Bank hasn't yet got into the credit cards business. But don't mistake the lack of haste for lethargy, warns a former HDFC hand. ''The HDFC philosophy is not necessarily to be the first, but to build a class act,'' points out Luis Miranda, Treasurer at HDFC Bank for six years, now Managing Director at Chrysalis Capital. But Parekh took everyone-ICICI for sure-by surprise with an uncharacteristic onslaught when he sealed the Times Bank merger into HDFC Bank within a matter of days, thereby creating one of the largest private banks by way of market capitalisation. Kamath did retaliate with the acquisition of The Bank of Madura, but clearly few at ICICI Towers expected Parekh to strike with such speed and effect.

Growth may be the driver at both institutions, but each chairman has his own way of going about it. Parekh is the classical hands-off chairman, preferring to delegate day-to-day affairs to the strong team he's built around him. So even as Parekh hobnobs with politicians, promoters and bureaucrats of all hues, and keeps hitting the headlines either for chairing a committee to revive us 64 (not this time but the first time it threatened to go bust a few years ago) or for throwing in his lot behind the Sheths of Great Eastern when they were attacked by a hostile raider, his A team is at the helm of the different HDFC ships. ''What do we try and do is put in our best people, and support them with capital and branding. It's up to them to leverage the brand name and the confidence of the customers to build new businesses,'' explains Parekh. Adds Aditya Puri, CEO, HDFC Bank: ''He's a great leader who can make other people buy INO his strategy and execute them. He's a man of clarity and vision, and knows how to motivate his people.''

It's all about style

If Parekh's style is informal, Kamath is the nitty-gritty guy. It's not as if he doesn't delegate, but if he throws a challenge at a senior manager, he or she had better come up with the goods. And he's there to review every major decision, sometimes rejecting proposals at the eleventh hour. An investment banker points out how Kamath once had him tearing his hair out in frustration when he decided to veto a Rs 10-crore deal for a finance firm that had been passed by an ICICI team. ''I was angry, but perhaps Kamath was right as he realised that the NBFC sector was headed for a shakeout,'' adds the investment banker.

Unlike Parekh, Kamath is known to ruffle feathers, be they at IDBI or at companies run by unprofessional promoters. ''He is ruthless when it comes to being independent of other institutions, and in the bargain he treads on too many toes. Actually, having Parekh as a chairman and Kamath as his managing director would be a perfect combination,'' suggests a former ICICI hand.

The battle between ICICI and HDFC is indeed unique. In one corner you have a financial institution that's rapidly trying to transform itself into a retail giant. In the other, you have a retail behemoth that's being forced to shed its conservatism because of the rapid moves being made by the retail wannabe. When the dust settles (if at all it does), it would be stupid to predict who will emerge trumps, but there will for sure be one king: The consumer.

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