On October 24, a week before its joint Managing Director Lalita Gupte retired this year, ICICI Bank put out a matter-of-fact press release announcing some key reshuffles in the top management team. Chanda Kochhar, deputy Managing Director, who led the bank's retail business, was given Gupte's portfolio of international banking; V. Vaidyanathan, a senior General Manager who had built ICICI's retail business alongside Kochhar, was elevated to the level of Executive Director, while Nachiket Mor, another deputy Managing Director, retained his oversight of the rural banking initiative and global principal investments and trading. At ICICI Prudential, the bank's life insurance joint venture led by Shikha Sharma, another senior General Manager, Bhargav Dasgupta, was moved into the Executive Director's position, possibly as part of a plan to free up Sharma for a call of duty at the parent company-when the time comes.

No doubt, Gupte's retirement was the trigger for the changes, but was ICICI trying to realign the management structure with an eye on succession planning? After all, the giant universal bank's Managing Director and Chief Executive Officer, Kundapur Vaman Kamath, is pushing 58, and has just two years to go before he hits the retirement age of 60. While an extension for Kamath can't be ruled out, he seems to have made it clear who he considers as potential candidates for the bank's top job. Ask Kamath if that is indeed the case, and he laughs it off, saying, "It would be wrong for the head of any institution to say that he is grooming one person. He has to groom multiple aspirants."

THE COMING CHANGE OF GUARDS At several blue chips, the old guard is close to retirement. While extensions are a possibility, here's a look at the possible successors from within.

K.V. Kamath 58, MD & CEO, ICICI Group Joined ICICI in 1971 as Project Officer, succeeded N. Vaghul in 1996 CEO/Chairman Contenders Chanda Kochhar, 45, Deputy MD, built the retail business, and now heads the bank's international foray Nachiket Mor, 42, Deputy MD, looks after ICICI's rural initiatives and principal global investments and trading Wild Card Entrants V. Vaidyanathan, 38, Executive Director, earlier part of Kochhar's retail team, now becomes the youngest board member Shikha Sharma, 47, built the life insurance joint venture from scratch into the #1 player Deepak Parekh 62, Chairman, HDFC Group Roped in by uncle and HDFC founder H.T. Parekh back in 1978, Parekh became Chairman in 1993 CEO/Chairman Contenders Keki Mistry, 52, Managing Director, has been with HDFC for 25 years Renu Karnad, 54, Executive Director, is the only woman director at HDFC Wild Card Entrants Aditya Puri, 56, MD & CEO, HDFC Bank, has been responsible for turning the bank into India's second-largest private sector player Deepak Satwalekar, 58, heads HDFC Life Insurance Company, doesn't have age on his side Azim Premji, 61, Chairman, Wipro Took over after father's death in 1966, and turned Wipro into an IT giant, and himself into one of India's richest men CEO/Chairman Contenders Girish Paranjpe (left), 48, heads Finance Solutions, has established client relations with leading Fortune 500 companies Sudip Banerjee (centre), 46, is in charge of enterprise solutions and built the company's global operations Ramesh Emani, 49, looks after project engineering solutions division and has a distinction of moving across the technology and enterprise spaces of the organisation Suresh Vaswani (right), 46, is head of IT practices and has grown new markets in West Asia and Australia Wild Card Entrants Rishad Premji, 29, Premji's elder son has worked with Bain & Co., and could be the eventual inheritor Shiv Nadar 61, Chairman & CEO, HCL Technologies Along with five other co-founders, built a PC company and then turned it into an IT services company CEO/Chairman Contenders Vineet Nayar, 44, was moved from HCL Infosystems last year to take over as President at HCL Tech Ranjit Narasimhan, 50, Sr VP (BPO division), HCL Tech, is Nadar's nephew and may end up running the company

But as Kamath surely knows, succession planning is nothing to laugh about. In fact, it may be the single most important challenge facing an entire generation of CEOs and Chairmen in India Inc. Take a look around and you'll find dozens of companies and business groups where the old guard is nearing the age when it needs to hang up its boots. At HDFC, the home loans giant, Chairman of 13 years, Deepak Parekh is 62, and although the company says there is no mandatory retirement age, it's reasonable to assume that Parekh must be grappling with the issue of identifying a successor. At the Tata group, the challenge is even more daunting. Not only does the board need to find and groom a successor to Chairman Ratan Tata, who retires in 2012, but also the CEOs of Tata Steel and Tata Motors, the two biggest group companies by revenues, B. Muthuraman and Ravi Kant are 62 years old and due for retirement in another three years (see Bombay House Blues). At HCL Technologies, Shiv Nadar said recently in a media interview that he wants to call it a day by 2010-11, and at Wipro, Chairman Azim Premji, 61, needs to get a successor in place too (see The Coming Change of Guards), although like HDFC, Wipro has no retirement age for the chairman. Even in south India, TVS Group companies such as Sundram Fasteners and Sundaram Brake Linings have Chairmen-MDS (brothers Suresh Krishna and K. Mahesh, respectively) well into their 60s. Says Shailesh Haribhakti, an independent director on the boards of several companies: "There is now talk in boardrooms of sustainability and how to keep the companies going." Admits Chairman & Managing Director of Larsen & Toubro, A.M. Naik: "The immediate big issue before me is succession planning."

The Big Gap

Naik isn't exaggerating. Unable to find a good replacement for Naik, L&T's board recently gave the 64-year-old Chairman extension till he is 70. For similar reasons, Ratan Tata's departure from Bombay House was also put off until 2012, although he was due to retire next year. Therefore, don't be surprised if leaders such as hdfc's Parekh are asked by their boards to stay on as well. It's easy to see why shareholders are reluctant to risk a change in leadership at this juncture. Most of the large companies are in a phase of profound transition; from being largely India-focussed businesses, they are learning to think and act global. Suddenly, therefore, the stakes are vastly higher. Could a new leader at the Tata group have made big-ticket bets like pitching for steel maker Corus or enhanced water brand Glaceau with as much ease as Tata has? Indeed, would Corus have wooed Tata Steel in the first place, but for the values embodied in the man who carries the family name? Perhaps not. Could a new leader at L&T have pursued the globalisation vision with as much conviction as Naik has? Again, the answer will likely be a no.

If India Inc. ever needed leadership stability, it is now. Across sectors and companies, the realisation has sunk in that markets have changed forever. Globalisation may be hobbled by xenophobia, but it is inevitable. Drug makers like Ranbaxy and Dr Reddy's will continue to acquire companies abroad to get a toehold in new markets and new product segments; the Bharat Forges and Amteks of India will also not hesitate to snap up distressed assets abroad in a bid to get access to key customers. And while it companies will primarily depend on low-cost development centres like India, they will need to stay with their 'global delivery model' to reassure international customers.

The problem: There isn't sufficient management bandwidth within these companies. "For the first time, L&T has had to heavily depend on lateral recruitment at the very top level," admits Naik, who does not have anyone to step into his shoes. Senior directors such as J.P. Nayak, K. Venkataramanan, and Y.M. Deosthalee are 63, 61 and 60, respectively (the retirement age has been extended from 65 to 67 years for senior management). Like him, ITC's Yogi Deveshwar may have to look outside before he retires in 2012, simply because although ITC has an excellent crop of business heads at present, they will be too old by then. For example, the three executive directors-S.S.H. Rehman, Anup Singh and K. Vaidyanath-will be 68, 67 and 62 by 2012.

NEW LEASE Chairmen whose tenures have been extended by their boards.

Ratan Tata, 68 Non-executive Chairman, Tata Sons In 2002, retirement age for group executives was increased to 65 from 60. At Tata Sons to 75 for non-executive chairman in 2005. Tata will retain his job till 2012 Y.C. Deveshwar, 59 Chairman, ITC Has been given a five-year extension starting Feb. 5, 2007 A.M. Naik, 64 CMD, Larsen & Toubro Got an extension in April 2004 and also became the Chairman, allowing his stay till 70

Similarly, HDFC's Deepak Parekh, who did not wish to comment on the issue, doesn't have too many options. Keki M. Mistry, who has been HDFC's Managing Director since 2000, is already 52 and Renu S. Karnad, Executive Director, is 54. Nasser Munjee, 54, who joined HDFC in 1978 and became an Executive Director in 1993, could have been a potential successor, but he quit idfc, an infrastructure fund that he set up at Parekh's behest, in 2004. Parekh, whose (insignificant) shareholdings in HDFC is only due to ESOPs, has two sons, Aditya and Siddharth, but neither of them works in the HDFC Group companies. Aditya Puri, 55, who in 10 years has turned HDFC Bank into the country's second largest private bank, could be another candidate.

If the professional-run companies across India seem to have been caught off guard on the succession front, it is indeed the case. Says Gautam Kumra, Director, McKinsey & Co.: "It's a new reality for India. Historically, companies or groups have been founder-led and, therefore, there hasn't been much focus on succession planning." As a result, few of them have any sort of institutionalised grooming or succession planning system that companies abroad have. General Electric (GE), for instance, has one of the best leadership development practices, where high-potential managers are given challenging task for a given period to prove their leadership skills. In fact, GE's erstwhile Chairman, Jack Welch, began the process of identifying a successor four years before he was to retire. At the end of the exercise, he had three equally competent candidates to choose from and zeroing in on the one most suited to lead GE from thereon, Welch wrote in his autobiography Straight from the Gut, "was the most difficult and agonizing (decision) I ever had to make". He was right about all the three men being equally good. Soon after, Jeffrey Immelt got the top job at GE, Bob Nardelli moved to Home Depot and Jim McNearny to 3M-both as CEOs.

Godrej is grooming his daughter, Tanya Dubash, 37, and son, Pirojsha, 25, who have been entrusted with different tasks: at Godrej Industries and Godrej Properties Adi Godrej, 64 Chairman/ Godrej Group

The Family Does it Better

Ironically, family-managed businesses seem better at handling the succession issue-partly because most of them follow a simple rule of primogeniture; the eldest son automatically becomes the leader. That, however, does not mean they aren't put through their paces or made to prove themselves in different roles. Reliance's Dhirubhai Ambani, for instance, set in motion the process of succession planning way back in the 80s by entrusting crucial responsibilities to his two sons, Mukesh and Anil. The former was assigned the task of setting up the PFY plant in Patalganga when he was just 24 and the latter was also bundled off to Reliance's textile unit at Naroda soon after he returned from the Wharton School of Business. Similarly, while Aditya Birla's demise was premature, his son Kumar Mangalam Birla wasn't unprepared for the task when he had to take over the reins at the age of 28. Says V.P. Singh, a Director at Deloitte Touche Tohmatsu India, who's also on the boards of a few companies: "Professionals are equally on the forefront in many family-run businesses. The owners sit on the board while the professionals run the company."

Other family-managed groups such as TVS and Murugappa have had a long tradition of 'apprenticeship', where family members start off as trainees, usually on the shop floor, and depending on their inclination and capabilities, are given increasingly more important roles. Even in families where the scions have returned after obtaining world class education, they've had to earn their spurs the hard way. Take the Bajajs, for instance. Chairman Rahul Bajaj brought his elder engineer son, Rajiv, on board as an officer on special duty way back in 1990 and let him work his way up through a series of roles (General Manager, Vice President, President, and joint Managing Director) before he made him the Managing Director in April last year. Rajiv was responsible for driving Bajaj Auto's late entry into the motorcycles business, where it's now giving market leader Hero Honda a run for its money. His younger brother Sanjiv, who is also a mechanical engineer but with an MBA from Harvard to boot, also joined as an OSD in 1994 and is currently an Executive Director in charge of Finance. Says Bharti Gupta Ramola, Executive Director, PricewaterhouseCoopers: "The grooming of leaders in family-run businesses has been a little more systematic of late."

BOMBAY HOUSE BLUES Key executives at Tata companies are due for retirement shortly.

Muthuraman (L) & Kant: Come 2009, who will step into their shoes? Bombay House, the Tata group headquarters, has never been short of talent. Even when stalwarts like Russi Mody, Darbari Seth and Ajit Kelkar were ousted from their powerful positions, there was always a second line of leadership to take over the mantle without affecting the businesses. But for the first time, the century-old industrial house is witnessing a different kind of challenge. Take for instance, the steel business where the Tatas are set to become the fifth largest steel major globally if the Corus bid sails through. Managing Director B. Muthuraman, who is 62, will have to retire in another three years, going by the mandated retirement age of 65. Problem: the two deputy Managing Directors, T. Mukerjee (steel) and A.N. Singh (corporate services), who were contenders too when Muthuraman succeeded J.J. Irani in 2001, are nearing retirement themselves: Mukerjee is 63 and Singh 60. No doubt, there are about a dozen Vice Presidents, but half of them are close to 60. Tata Motors is another company, where the Managing Director is into the 60s. Ravi Kant, who was Executive Director (commercial vehicles) before he took over as Managing Director in July 2005, has touched 62. Therefore, Kant's term also ends in June 2009. Had V. Sumantran, who was Executive Director (passenger cars), stayed on when Kant was elevated, he could have been a possible successor. He was only 47 when he left and had worked with General Motors in the US. But Kant is in a better situation than Muthuraman. Praveen Kadle, who is the only Executive Director at Tata Motors, is just 49 and could be a contender along with three Presidents-A.P. Arya (58), P.M.Telang (58) and Rajiv Dube (44). But could successors to Muthuraman and Kant come from outside of India? After all, Tata's hotel and telecom businesses have foreign-born CEOs at the helm. The argument for such a move is stronger in the case of Tata Steel and Tata Motors. After the Corus acquisition, Tata Steel will truly be a multinational player; Chairman Tata may well want a seasoned global executive to lead the company. Tata Motors, too, has made international acquisitions (Daewoo commercial vehicles, for instance) and has ambitions of becoming a global player. A tier-two executive from one of the auto giants abroad may fancy a challenge like running Tata Motors. No one knows for sure what will happen at these companies over the next three years. One thing's for sure, though. Whatever it is, it will be both interesting and instructive.

SUCCESSION PLANNING AT PSUs 'What's that?' you ask. And rightly so.

Some of India's biggest and most valuable companies aren't private, they are state-owned. Yet, there's virtually no succession planning at these corporations. Take the State Bank of India, for example. In October 2002, when A.K. Purwar took over as the Chairman, there were half a dozen contenders from within the bank. Yet, the government chose a much junior Purwar to lead the bank because he had age on his side; compared to the one-to-three years that most SBI chairmen get at the helm, Purwar had five years to retirement. Sometimes, finding a replacement can be harder still. After G.P. Gupta left IDBI in January 2001, it took almost a year to appoint a Chairman in the form of P.P. Vora, who came from National Housing Bank. And when Vora left, the government brought in M. Damodaran, but only to replace him within 14 months with V.P. Shetty, the current IDBI Chairman. "This not only leads to instability, but also sends a wrong signal to the cadre," says a former chairman of IDBI. "This is one of the reasons why PSUs lose competent people to the private sector," says V.P. Singh of Deloitte Touche. But there are exceptions, too. According to Ernst & Young, Indian Oil Corporation (IOC) has often been the hunting ground for Chairmen and MDs for other state-owned energy companies. Subir Raha, who led ONGC until recently, and Proshanto Banerjee, former head of GAIL, came from Indian Oil. In fact, the oil giant's immediate past CMD, M.S. Ramachandran, had been a lifer at the corporation. "A unique feature of IOC has been the pro-active role that HR has played for years in developing the leadership pipeline," says N. S. Rajan of E&Y.

At TVS Motors, Chairman Venu Srinivasan brought on board his daughter Lakshmi six months ago, but as a management trainee who is undergoing training in different departments of the company. "Lakshmi is also simultaneously pursuing studies," says a person close to the family. "I'm working on some new projects," says 26-year-old Rajvi Mariwala, daughter of Marico Chairman, Harsh Mariwala, whose 24-year-old son, Rishabh, has joined the company too. Rajvi refused to discuss the leadership issue and the new projects she is working on. Like other business family scions, Puneet Goenka has been given a responsible position, but is clear that it is his to make or break. "It's a question of performance," says Goenka, 31, Zee chieftain Subhash Chandra's son. "If I'm able to perform, then sure. At the end of the day, it's a question of creating shareholder wealth."

At Essar, Shashi's sons Prashant, 37, and Anshuman, 35, and Ravi's children, Rewant, 25, and Smiti, 22, are all directors Shashi, 62, & Ravi Ruia, 57 Chairman & Vice Chairman/ Essar Group

Puneet seems to be at the right place at the right time. After years of struggle, Zee is back in the TRP sweepstakes, especially with shows like Little Champs. "In the near term, I'll be focussed on the content business," says Goenka, who joined Zee in 1997. In the long term, Puneet plans to take Zee global. "Why cannot we get into mainline media globally?" asks Goenka. Zee already has a movie channel in Russia and a local language channel in Indonesia, and the international businesses account for 40 per cent of Zee's profits.

But where family businesses have multiple contenders, especially from different factions of the family, things can be vastly more complicated. A case in point, Patni Computers. Chairman Narendra Patni's son Anirudh Patni may be perceived as the successor, but he will need the support of Gajendra and Ashok, brothers of Narendra, who also own shares in the computer major. A similar situation exists in other groups such as Videocon, Essar, Asian Paints, S. Kumar's, and Cipla. At Videocon, for example, Chairman Venugopal Dhoot's son Anirudh is already in charge of Indian operations of Electrolux as Managing Director. Recently, his cousin (son of Venugopal's younger brother P.K. Dhoot) Saurabh was inducted into Videocon Industries to start learning the ropes. But ask Venugopal about succession and all that he would say is, "Anirudh will continue to do what he has been doing in the group."

The Governance Issue

Except for a handful of companies like Infosys, where the passing of baton from N.R. Narayana Murthy to Nandan Nilekani happened without a hitch, the issue of corporate governance isn't addressed with the seriousness it deserves. However, you may expect that to change. As Indian companies raise funds from foreign sources-including private equity investors, banks and financial investors-and acquire companies abroad, there will be pressure to create stronger boards. When boards become as powerful as the Chairman/CEO, they will demand that succession planning be done in a systematic manner not just for top leadership positions but across levels. Agrees N.S. Rajan, Partner (Human Capital), Ernst & Young: "Succession planning is the ongoing process of identifying, nurturing and preparing suitable employees to handle higher responsibilities and eventually replace key people as they retire, leave or when unexpected events are faced by the company."

The new breed of entrepreneurs already realise that ownership need not necessarily mean management. Says Tulsi Tanti, who runs the world's fifth largest wind energy company Suzlon: "There is a clear demarcation between the management and the advisory board. I am not part of the management, I sit on the advisory board as a guide and mentor." That said, Tanti, like Pantaloon Retail's Kishore Biyani, says that there should not be any retirement age for CEOs. "I believe a CEO should continue as long as he is fit." Perhaps, but it would be unfortunate if India's CEOs needed to stay on in their jobs not because they wanted to, but because they were forced to. At this point, that's the sort of leadership crisis India Inc. seems to be staring at.

-additional reporting by Mahesh Nayak in Mumbai and Rahul Sachitanand in Bangalore