| THE FINALISTS |
SANJIV BAJAJ
Executive Director (Finance), Bajaj Auto
ROBIN BANERJEE
Executive Director (Finance), Thomas Cook (India)
KOUSHIK CHATTERJEE
Vice President (Finance), Tata Steel
BHARAT DOSHI
Executive Director (Finance & Corporate Affairs),
Mahindra & Mahindra
H.G. GELIS
Executive Director (Finance), Siemens
S.G. JOGLEKAR
Vice President (Finance), Bharat Forge
PRAVEEN P. KADLE
Executive Director (Finance & Corporate Affairs),
Tata Motors
MEHERNOSH B. KAPADIA
Senior Executive Director, GlaxoSmithKline Pharmaceuticals
P.K. MUKHERJEE,
Director (Finance), Sesa Goa
T.V. MOHANDAS PAI
Director (Finance & Administration) and CFO,
Infosys Technologies
S. RAJAGOPALAN
CFO, Monsanto India
D.D. RATHI
Whole Time Director & CFO, Grasim Industries
RAVI SUD
Vice President (Finance), Hero Honda Motors
K. VAIDYANATH
Executive Director, ITC
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500 companies; three stages; 14 finalists
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In late 2004, when business today decided
to undertake a study to identify India's best Chief Financial Officers
(CFOs) and then, the best Chief Financial Officer, it faced the
challenge of marrying the objective and the subjective, the tangible
and the intangible, and the purely numerical with the largely perceptual.
That is because only a part of a CFO's job is about numbers; the
ultimate responsibility for issues such as governance, transparency,
and adherence to accounting standards may lie with the board, but
the buck invariably stops with the CFO. Then, there is the role
the CFO plays in structuring complex acquisitions. To address all
these issues, Business Today decided to follow a three-stage process
to identify India's best CFOs.
Sample and time period
We started with companies common to BSE 500 and NSE 500. To
ensure that some CFOs, and companies, did not gain entry into
subsequent stages of the survey on the strength of a recent turnaround
in their industry, we decided to consider long-term (three-year
trends) financial performance. That meant that we could only evaluate
companies for which data for the four most recent years was available.
And because it is difficult to separate the role of the CEO from
that of the CFO in the financial sector, we decided to exclude
all banking and financial services firms from the exercise. The
corrected universe numbered 339 companies.
Stage I. Data Analysis
To ensure that CFOs across sectors can be compared, we decided
to focus on four significant areas.
Long Term Capital Management
A CFO's main responsibility is to generate return on capital
(measured by Return on Capital Employed, ROCE, and Return on Net
Worth, RONW). He or she should also be able to show consistent
improvements on both parameters. The survey considered the latest
year's ROCE and RONW as well as improvements on each over the
past three years.
Working Capital Management
A CFO should be able to keep inventories under check and extract
more from creditors than he or she concedes to debtors. The net
working capital cycle effectively captures this. Again, the survey
considered the latest year's net working capital cycle as well
as improvements over the past three years. In cases where this
parameter is not relevant (it isn't, for instance, for software
firms), it was not considered, and weightages of the other parameters
were increased.
Cost Reduction
CFOs also advise the top management on efforts that could reduce
overall cost, thereby improving the margins (especially at the
operating profit level). The survey considers the latest operating
profit margin and improvements over the past three years.
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| The panel for the Best CFOs study:
(Left to right) Motilal Oswal, Chairman and Managing Director,
Motilal Oswal Securities; Nilesh Shah, CIO, ICICI Prudential;
and Shitin Desai, Executive Vice Chairman, DSP Merrill Lynch |
Accounting Efficiency and Transparency
This is an important role of the CFO and one proxy for this
is the speed at which companies finalise their accounts and conduct
the annual general meeting. Again, the survey considers the past
three years.
To ensure that the 50 CFOs shortlisted for Stage II are worthy
of promotion to that stage, we imposed two sanity checks. First,
all 50 must work for companies that have a positive bottom line.
Second, the companies must have posted an increase, in both top
line and bottom line, over the past three years. CFOs working
for companies that did not satisfy either criteria were dropped
(due exception was made for cases relating to de-mergers, or sales
of divisions).
Stage II. Market Survey
In stage II, Business Today appointed research firm Synovate
to survey three classes of investors across the country on issues
related to the companies the 50 CFOs work for. The three were:
fund managers, brokers and retail investors. Questionnaires for
each target group were different and issues such as investor friendliness,
transparency, speed of addressing grievances and quality of management
were covered.
Companies were assigned an indexed score between 1 and 5 depending
on their performance (5 is the maximum score possible). The average
scores on each parameter were assigned weightages while calculating
the overall score under each target group.
As the very purpose of this survey is to identify excellence,
we eliminated companies that scored below the average in any one
of the three categories. 14 companies, and 14 CFOs made the cut.
Stage III. Panel Discussion
A panel comprising Shitin Desai, Executive Vice Chairman, DSP
Merrill Lynch, Motilal Oswal, Chairman & Managing Director,
Motilal Oswal Securities, and Nilesh Shah, CIO, ICICI Prudential,
met in Mumbai to go through the merits of the 14 CFOs who had
made it to the final stage and identify a winner. The panel considered
both objective and subjective criteria before identifying M&M's
Bharat Doshi as India's Best CFO.
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