Laughing all the way to its Bank

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Business ethics, social responsibility and customer friendliness comprise its philosophy

“I will rather opt for zero business than doing business worth millions which are based on unethical practices,” said the HDFC CEO at an internal organisational meeting a few months ago. Reminiscing about it, an ex-employee explains that this one sentence epitomises the business philosophy of a corporate, whose ethical mindset and environment is shaped by those at the top. As an organisation, HDFC encompasses the simple, but mostly forgotten, tenets of integrity, transparency and fairness in whatever it does. These fundamental and sound principles have increased its credibility and have made it one of India’s most admirable companies.

Here’s an example to establish this fact. Another former employee explains how he had cracked a lucrative deal with a large company to handle its gratuity and pension funds. Later, the client was unable to fulfil some compliance norms and present some of the documents. “We were in a position to still accept the statement from the client. But as an organisation governed by ethical principles and practices, we simply refunded the entire amount.” As he narrated the story, the admiration for his ex-company was clearly visible. Each and every relationship that HDFC strikes with borrowers, depositors, agents, shareholders, or other stakeholders is valued and that explains why most former and current employees proudly proclaim their relationship with HDFC.

In an era where success or failure of organisations is judged by respective toplines, bottomlines, market capitalisation, and market shares, HDFC seems to be an exception. “HDFC has followed the basics, and focused primarily on quality rather than quantity. Its approach has been customer-centric and this has certainly helped them achieve quality. They are not into customer acquisition, but believe in building long and cherished relationships built on trust with customers. It takes into consideration customer’s feedback and this has helped it to constantly innovate products based on the customer’s needs. The quality of service too is unparalleled,” exudes Sumit Taneja (who has invested in HDFC Mutual Fund). It has neither believed in the market share game, nor does it compete on price points. Its focus throughout has been on transparency, professionalism and customer services without comprising on quality. While HDFC agrees that market share is important, yet it does not want to engage itself in any practices that would hurt long-term profitability, or worse, the credibility and image of the company. Defying the commonly-held belief that numbers are critical, HDFC and its several subsidiaries have occupied coveted positions merely by focusing on “need-based selling strategy.” If customers require a certain product or service, HDFC will launch it.

This does not mean that the Bank is not gaining market share. In the housing finance segment, HDFC’s market share in the first quarter of current financial year has moved up from nearly 29% to about 35%. In comparison, most competitors have seen their housing finance business witness a downturn; for many, growth rates were down by 40%. HDFC has not only added value to shareholders wealth, but has also strived to add the much-needed value for the country. And its efforts towards betterment of the poor are no less than the efforts to make its business strong.


To cite an example, HDFC bank follows a four-tier pyramid structure to provide microfinance to poor farmers. At the first tier, it offers amounts ranging between Rs. 5,000 and Rs. 12,000 through self-help groups. At the second level, it helps those who need finance to take care of harvested crops. The Bank also offers pre-house and post-house warehouse receipts finance to help farmers get a better price for their produce. It has dedicated sales machines in more than 1,000 co-operative banks, which are involved in the microfinance business. Due to constant efforts, HDFC feels that it can quadruple its microfinance business from the existing Rs 500 crore to Rs 2,000 crore in next 24-30 months, and cover six million poor families.

But having social principles as a foundation is not enough. And HDFC understands this principle. While ensuring that the Bank has a strong footing in the market, it has chalked out clear financial objectives. These include increasing return on equity every year (by one percentage point), maintaining gross Non Performing Assets (NPAs) below industry norms (it was under1% on six months overdue basis), growing loan approvals by 25% per annum, and maintaining a cost-to-income ratio below industry norms (HDFC’s was under 14%). It earned a PAT of Rs 1,019.20 crore in the first half of 2007-08, which was higher than the Rs. 664.84 crore it earned in the same period in the previous fiscal. According to Keki Mistry, MD, HDFC, the Bank will be able to sustain a 25% growth over the next few years. HDFC has positioned itself as a bank that’s approachable and easier to deal with. No wonder, it proudly boasts of the Best Retail Bank in India award (conferred it to at the 6th Asian Banker Excellence in Retail Financial Services Award).

In other businesses, like life insurance, the HDFC brand is making inroads into rural areas, and stretching distribution networks at the grassroots level. In the general insurance business, HDFC has overcome niggling problems it faced initially, like the HDFC Chubb fiasco, and is racing ahead after striking a deal with ERGO. But, in sync with the underlying business philosophy, all businesses are loaded with tons of of ethics, social responsibility and customer friendliness. For HDFC, its customers are its deserving ambassadors.


Edit bureau: Gyanendra Kashyap with inputs from Niharika Patra

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Why Study Abroad When IIPM Gives You 3 global Advantages!

ADMIRATION UNLIMITED

Why Study Abroad When IIPM Gives You 3 global Advantages!

Why do we admire companies, brands, products, institutions, individuals and even so called failures?

“You always admire what you don’t really understand.” That was said by the French philosopher and mathematician Blaise Pascal. “Admiration is a very short-lived passion that immediately decays upon growing familiar with its object, unless it be still fed with fresh discoveries, and kept alive by a perpetual succession of miracles rising into view.” That was poet and politician Joseph Addison. Please keep these two homilies in mind when you next discuss an admired brand, product, organisation, individual or even disparage the same.

We all know we admire Dhirubhai Ambani despite tall tales of how he had managed the ‘environment and the system’. We all know we admire Maruti as a brand that has been around us even as India emerged from a deep slumber of isolation and obscurity and transformed into a rampaging elephant, or a tiger if you wish. We all know that we admire Nelson Mandela for the brilliant manner in which he led the process of transforming South Africa from a nation riven by racism and hatred into a modern democracy. We all seem to know what and who we admire.

But do we really know why we admire those we chose to admire? For instance, why and how is it that Dhirubhai Ambani has become one of the most admired icons of contemporary India Inc.? Do we even understand how Dhirubhai created the behemoth called Reliance and how it went on to become so big?

Or, take the example of the Tata Group. Do we admire J. R. D Tata for the innovative and brilliant entrepreneurial ideas that he generated or do we admire him because of his insistence on sticking to moral values and ethics at a time when India was descending into the worst form of crony socialism?

Go global and you will find the dilemma even more acute. Do we admire Henry Ford for creating the modern assembly line in manufacturing plants or do we chastise his legacy for his allegedly pro-Nazi leanings? Do we admire Bill Gates for the ‘windows’ that he gave to the world or do we hate him for his allegedly monopolistic tactics? Do we admire Sam Walton for helping American consumers buy as cheap as possible or do we chastise his legacy of paying as less as possible to American workers?

The problem with compiling a list of most admired companies is the element of subjectivity involved in the whole process. As Pascal pointed out about four centuries ago, we often admire those that we don’t understand. So we admire Dhirubhai Ambani probably because we really don’t understand how he operated and ended up creating such a gargantuan corporate empire. We admire V. Kurien, the man behind Amul, not just because he created the most successful cooperative in the world; but also because he worked the corridors of power in mystifying ways. There are many who admire and yet are sceptical about the success of Kurien because he was apparently ‘dictatorial’ and intolerant of critics. Similarly, talk of the most successful politicians and statesmen across the world and you will find the same mixture of intense admiration coupled with a tinge of scepticism.

Then again look at how Addison has talked about how admiration can be a phenomenon that can even transform into mistrust and dislike after a while. That’s because parameters on which we decide whom to admire keep changing with time. Look at it this way: in the era of intense socialism when Amitabh Bachhan was the angry young man who fought against greedy ‘businessmen’, Dhirubhai Ambani could possibly not have been as admired as he is today. Henry Ford is no longer as admired today as he was about 50 years ago because our attitudes towards labour, work and management have changed.


But some things remain constant across time and attitudes. No matter what parameter we decide, J. R. D Tata will always remain one of the most important ‘brands’ and institutions of India. And no matter what happens, Reliance Industries will be admired (as feared by rivals), at least for some time to come. Meanwhile, we hope you ‘admire’ this loving compilation of India’s most admired companies!

Meanwhile, about India...

The 4Ps B&M ranking of India’s most admired companies is based on the S&P CNX 500 list, which includes only those listed companies that have a minimum record of three years with a positive net worth (you will read more about our methodology on page 48 and the detailed explanatory tables on pages 50-51). But, going forward, you will find a few companies in our special ‘sector-wise admired companies’ package that do not belong to the original list of admired companies that were listed in Dalal Street. We have taken the editorial liberty of including some companies in the package that our core team believed had performed outstandingly & most inventively in the respective sector in the year 2007.

DLF, for example, does not find a place among our original ranking of most admired companies (the S&P CNX 500 takes into account listed companies as on March 30, 2007; DLF was listed on 5th July). But the year 2007 has been a watershed for DLF and so it finds a presence in our subsequent editorial package. Or take the IT sector, the most inventive strategy in 2007 has been adopted by MNC behemoth Hewlett-Packard, which again is not listed in India. So HP features prominently in our editorial pick for the IT sector. And in any case, the times... they are changing and who is admired can possibly even change as quickly as monsoon clouds race away across the horizon. Have a good read...

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Lagaan reaping dividends

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On beating Sholay and market forces...

A three hour plus package when it was released in the theatres, about cricket, tax and colonialism – and still evoking interest after six years when the DVDs hit the stalls – that’s the magic of Lagaan.

The package having Lagaan and Chale Chalo (the documentary on the making of Lagaan) combined, has crossed 2.5 lakh units, surpassing the DVD sales of Sholay. A lot of research has gone into the package that has a deftly-crafted wooden box with memorabilia inside like cards, a film strip and a whole lot for the connoisseur’s collection. This combined with contests for the consumers for that wee-bit of market push saw this feat achieved. The entire package is priced at Rs.1,999, the DVD and VCD separately costing Rs.399 and Rs.199, respectively.

Lagaan managing the DVD sales of this scale with these prices, brings us to the question of figures that can be reached after the (in)famous price-slash of Moser Baer. The prices slashed to 34 and 28 for DVD and VCD, respectively, has shaken the industry, let alone the competitors! With T-Series and Ultra following suit, the market is on the verge of a veritable purge!

All this taken, will the rentals of DVDs and VCDs surge? Who has truly felt the Indian consumer’s urge?

Edit Bureau: Srinivas Chetan

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
When IIPM comes to education, never compromise
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Why Study Abroad When IIPM Gives You 3 global Advantages!

Kingfisher Airlines

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The flamboyant Mallya has managed to build a branded castle in the air too...

It dared to be different and chose to tread along the high-quality, highprice corridor while the herd was fast galloping down the low-cost, low-prices alley. The result – Kingfisher Airlines! And the brand image – eminently sustainable. Its public perception hasn’t changed for over two years now (Kingfisher celebrated its second year of inception on May 9, 2007). With orders worth Rs.100 billion during 2005-06 alone and being the only Indian airline to place an order for 5 A380 superjumbos, the airline is also mulling an IPO to raise Rs.60 billion, which would help finance its future purchases. Perhaps the first airline ever to have received accolades even before completing a year, it was awarded with the ‘Best Airline of The Year’ award and also landed the Skytrax Award for ‘Service Excellence for a New Airline’. Mallya is also currently identified among those interested in the low-cost carrier Air Deccan. Being a liquor baron (where advertising is banned), Mallya is happily pumping capital into the airline so that it serves as an ad for even his liquor brand. No wonder, despite ‘not’ being a profit-making airline yet, Kingfisher is easily noticed. Binit Somaia, Regional Director, Centre for Asia-Pacific Aviation, says, “In a short span, Kingfisher has set new benchmarks for airline service, driven by innovation and investment.” Even the Panasonic Toyota For- mula One willfully accepted Kingfisher as its official sponsor in January this year. Sure, Indians can be proud of this truly indigenous brand!

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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S. GOPALAKRISHNAN...

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CEO & MD, Infosys Technologies Ltd.
That’s Infosys’ very own Kr(r)is(h)!

Replacing Nandan Nilekani as the CEO & MD of Infosys Technologies Ltd. was never easy, but this man actually made it look smooth! S. Gopalakrishnan (who was the President and JMD since August 2006) was amongst the founder members of the company. He was the prime force behind management of design, development, implementation (and other unheard tasks during those times in India) since the very beginning. He played a key role in aggressively pioneering areas like customer services, technology et al at Infosys. And being a weathered rock when it comes to M&As, he talks of his company’s future merger strategies as, “About 85% of acquisitions fail to deliver value. We are cautious and selective in acquisitions. We want to make sure it’s on our terms...” Proof enough why he’s a leader well-versed with business strategies to take total control of dynamic modern businesses.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist)