CFO's Cut

Emerging markets are today's equivalent of the Wild West – they provide companies with an irresistible opportunity for growth, but not without peril. To help students better understand the risks and rewards associated with emerging markets, SIMSREE hosted CFO's Cut on August 9, 2013, and invited three industry stalwarts to share their valuable insight with the students.

 Sunil Khandelwal (CFO, Alok Industries) kicked off the event with a candid discussion about Alok Industries. Facing the end of cotton export quotas in 2004, Alok Industries had a choice to make. At the time, only 15% of the textile industry was organized, while the remaining 85% was fragmented. Alok Industries dared to dream big and invested Rs.12000 crore into expanding their production line. Their focus was on pricing, services, delivery and self-sufficient infrastructure. Khandelwal stressed on the importance of taking calculated risks and seizing the first mover advantage. Khandelwal didn't pull any punches while describing their mistakes in areas like real estate and retail, and urged students to not be afraid of making mistakes. At the same time, he cautioned them not to get emotionally attached to their mistakes. When asked about why Alok Industries didn't diversify into the retail clothing market, he spoke about Alok Industries pulling away from non-core areas. As a parting thought, he said that hard times were an opportunity to learn. 

The next CFO to present his views was S. Ramesh (Lupin Ltd), who based his discussion on the premise that a company that couldn't survive in today's tough times had no hope of expanding into emerging markets. Talking about the VUCA (volatile, uncertain, complex, and ambiguous) world and the economic crises in the United States and the European Union, he proffered that India had three advantages that it could leverage towards future growth: democracy, demographics and diversity. Moving to the pharma industry, Ramesh revealed that a common myth about the pharma industry being recession-proof wasn't always true. While essential life-saving drugs were relatively immune to the recession, there was a 35% drop in non-essential medical expenditures by customers. Turning to survival in tough times, he touched upon the importance of managing sources of liquidity by planning ahead and prudential hedging with a medium-to-long term view. While discussing the need for cutting costs and capital expenditure, he added, it was important to not lose sight of long-term growth. Finally turning to the challenges of growing in emerging markets, he stated that disruptive skills, innovation quotient and execution skills were important prerequisites to success.

Brij Gopal Jaju (CFO, Welspun) spoke about growth and sustainability while drawing from his experience at Welspun and Crompton Greaves. He reiterated the importance of intangible assets, adding that engaged employees, continual technology upgradation, innovation and a focus on customers were prerequisites to a company’s growth. He felt that companies in the future would have to pursue differentiation on the basis of process models and not products. In conclusion, he urged the students to embrace good corporate governance, as it would pay dividends in the long run.