Bharat Doshi Executive Director (Finance & Corporate Affairs) Mahindra & Mahindra

DOSHI'S WINNING MOVES

» Key role in M&M's profits trebling in two years » Improved labour productivity » Sold off non-core businesses at the right price » Created value for shareholders

Between 2001 and 2003, on at least three occasions, the lights at Mahindra & Mahindra's (M&M's) Kandivili unit, deep in suburban Mumbai, would go out only a few hours before the sun showed up on the metropolis' horizon. On these nights, the top management of M&M would get into a huddle by 8 p.m., and begin brainstorming strategies to improve productivity and reduce cost. Dubbed "The Midnight Meetings", they would go on till well beyond the witching hour, with workers also being called in to put forth their points of view. The Midnight Meetings was just one piece of the larger game plan christened "Operation Blue Chip", an exercise aimed at arresting the trend of declining profits at M&M and assuming leadership positions in each of its businesses, via innovation, globalisation and efficient financial management. Whilst it was the top management that collectively blueprinted that strategy, the onus of implementation rested squarely on the shoulders of one individual: Bharat Doshi, Executive Director (Finance & Corporate Affairs).

Doshi delivered. He pulled off a retirement scheme at the Kandivili plant at a cost of Rs 200 crore, with a third of the 6,600 workers accepting it. Doshi also succeeded in improving labour productivity-that is, an increase in production without adding more workers. Result? Personnel cost as a percentage of sales came down from 9.47 per cent in 2002 to 7.05 per cent last year. Get Doshi talking about those days, and he vividly recollects the midnight meetings, putting a different spin on it. "It was also an attention drawing device. This helped to spread the news regarding the seriousness of reducing the cost and improving efficiency down the line," he explains.

Doshi, as you might have gathered by now, is M&M's Chief Financial Officer (CFO). And, as you might have also gathered from the goings-on in Kandivili between 2002 and 2003, the role of the automobile company's CFO extends much beyond accounting, auditing and tallying esoteric numbers and ratios. As Anand Mahindra, Vice Chairman & Managing Director, M&M, himself points out: "Bharat Doshi's contribution to the Mahindra group goes well beyond the conventional role of a CFO. Through the experience and skills he brings to the job, he functions in effect as an Assistant Chief Executive."

To be sure, the Scorpio may be the most visible manifestation of the reversal of fortunes at M&M. But if the company's profits have more than trebled in two years-from Rs 97 crore in 2002 to Rs 349 crore last year (and Rs 360 crore for the first nine months of the year ended 31 March 2005)-and if the share price amply reflects that smart performance (see Creating Shareholder Value), the relentless efforts of Mahindra's right hand man can't be ignored. Consider a few of the details of Doshi's micro-financial management:

"Bharat Doshi's contribution to the Mahindra group goes well beyond the conventional role of a CFO. Through the experience and skills he brings to the job, he functions, in effect, as an assistant chief executive" Anand Mahindra Vice Chairman & Managing Director/ Mahindra & Mahindra

Let's begin with working capital. An overall improvement in supply chain management helped bring down inventory levels. Then, dealer credit has been transferred to banks via a tripartite arrangement with the bankers. "The bankers wanted good customers. They also have the additional comfort that we are there in the middle (even though the entire risk is borne by the banks)," says Doshi. This technique has worked well on the supplier side as well. "Since we are in the middle, our suppliers got loans at lower rates from the banks and they in turn passed on a part of that by reducing the price of the products." Such efforts have resulted in the net working capital cycle collapsing from 28.49 days in 2001 to a negative 4.15 days by 2004. Doshi predictably isn't satisfied. "There is still scope for improvement," he says.

Cost control is a common mantra these days, but cost control in times of highly volatile commodity prices-steel prices for instance have almost doubled over the past year-is an art in itself. Doshi for his part believes in "navigating with zero trauma". Simple translation? Minimise the impact of the gyrations by entering into long-term contracts with steel companies. "This has helped us cushion the increase in prices," says Doshi.

In a similar vein, the M&M CFO has also carefully timed his money-raising market visits. Doshi hit the foreign markets with a foreign currency convertible bond (DCCB) issue 20 days before the election (after which share prices as well as the rupee fell against the dollar), that too with a yield to maturity of just 3.25 per cent (as against the prevailing rate of around 4 per cent). End result: The FCCB got a conversion premium of 37 per cent to the then market price. Doshi has made similar moves in the past as well. "We had incentivised the early conversion for a one month period (in September 1999) by offering a slightly lower conversion price, anticipating a sharp fall in the rupee."

THE TEAM DOSHI BUILT

M&M's Phadke: Part of Doshi's A-team I have an able finance team that supports me," says bharat doshi. If you think that's an understatement, hear out the senior-most of his colleagues, the 54-year-old Uday Y. Phadke, Executive VP (Finance, Accounts and Legal Affairs), who joined M&M roughly the same time Doshi did. "I have a nice and long working experience with Doshi," he says. Clearly, understatements coupled with longish designations-Phadke is also responsible for the tax and investor relation functions-are pretty common at M&M's finance hotshop. Others in the team include S. Venkatraman, 53, Controller of Accounts, who is responsible for the normal accounting functions like budgeting, MIS, Sebi reporting, preparation of annual reports and quarterly results. Prabal Banerji, 48, Treasurer, takes care of all the treasury operations like banking, investments and forex transactions. S. Durgashankar, Vice President (Corporate Strategy), is in charge of M&A activities. V.S. Parthasarathy, 42, Vice President (farm equipment sector) and Ajay M. Choksey, 52, VP (automotive sector) are the secondary CFOs for their respective sectors.

Indeed, after watching Doshi in action, you're tempted to conclude that nothing is as important to the CFO as timing. It applies for divestments too. Over the years, M&M has sold a number of its non-core businesses and holdings, including a stake in Otis and oil drilling activities. "It's not just getting out; what's important is getting out at the right price. And the right time," says Doshi. Last fortnight M&M divested its stake from its Ford JV, once a strategic investment, which later became a portfolio holding. The original call to scale back on the JV was taken when the Scorpio project needed funds. Doshi should be happy because he's succeeded in recovered his original investment of Rs 135 crore. Here too, the timing couldn't be better: Exit Ford, enter Renault.

"THE CFO SHOULD NEVER BE A NO-MAN"

BEST CAREER MOVE:: "Based on my father's analysis, I decided to join M&M. So I settled for the Rs 1,000 offer, letting go of another offer for Rs 1,200" UNLIKELY TO FORGET: Operation Blue Chip, involving major restructuring and cost-cutting. "Out of the 6,600 workers there, 2,200 availed of the VRS at that time" UPBEAT ON: M&M Finance. "It will be playing a strategic role in our growth strategy" WISDOM, DOSHI-STYLE: "It's not just about getting out (of non-core businesses), but at the right price and at the right time" MOST LIKELY TO BE HEARD SAYING: "There is still scope for improvement"

The acid test for the CFO of a conglomerate-don't forget M&M has interests in automobiles, tractor, auto components, rural financing, real estate development and information technology-is when he has to allocate funds between competing businesses. "We usually provide the seed capital and let them generate the additional capital," says Doshi. But that doesn't mean he's liberally doling out the dough. As a thumb rule, he insists that the maximum break-even level should be 50 per cent of the capacity planned. That way it will have a high margin of safety and will be able to make money even if the actual volume is below target (which typically happens when the industry cycle turns bad). In other words, cost competitiveness should be such that there is enough room even at the lower end of the cycle. Each business is accountable for its strategy and bottom line, even as it operates within the directions and disciplines set by the corporate centre. "The unenviable task of maintaining an effective balance between control and autonomy rests with the CFO. Bharat is outstanding in this role," says Mahindra.

What often goes unnoticed is the progress made by subsidiary M&M Finance, which has quietly grown from 30 to 250 branches in the past five years, and which boasts a balance sheet size of Rs 3,300 crore. "It will be playing a strategic role in our growth strategy," says Doshi, who catches up on chess, swimming, teaching and reading when he's not dictating strategy or making critical decisions. He avers that "a CFO should never be a 'no' man and must act as a partner with the operating management-both supportive and productive". The finance chief swears by team spirit, and his team members swear by him. Doshi leads a "fun forum", an informal quarterly meeting of the finance honchos, where they discuss anything but finance. That should be easy for Doshi. He's the assistant chief executive after all.