By the time you read this, the 15-member board of directors of ITC would have swiftly concluded its meeting scheduled for the morning of June 18. The mood inside the board room in Virginia House, the headquarters of India’s largest tobacco company, would have been understandably buoyant. This is ITC’s centenary year. And the main agenda for the board meeting — to discuss the proposal for a special 1:1 bonus share issue — would have been expeditiously cleared.
In Deveshwar’s era, however, ITC has clearly achieved more than a measure of progress. Today, about half of its net revenues of Rs. 18,000 crore comes from cigarettes, and the other half from hotels, paper boards, infotech, agri-business and now increasingly, foods and personal care. Of these, Deveshwar inherited hotels and paper board, the only two other businesses of any real scale, from his predecessors. In the early part of his era, he did discover and nurture e-Choupal, the concept of a rural trading platform using a digital technology backbone. It fired the imagination of the business community and academia, winning a plethora of awards and even providing material for a Harvard Business School case study. At one point, ITC was opening six e-Choupals a day across the rural hinterland. In the end, hobbled partly by tight regulations and its own inherent complexities, the business never quite grew into a sustainable growth engine and remained only a visible symbol of ITC’s corporate social responsibility. Photo: A N Haksar: The Times of India Group. © BCCL; J N Sapru and K L Chugh: Prashant Panjiar / indiatodayimages.com; Y C Deveshwar: Amit Verma
After the Enforcement Directorate fiasco, when incriminating documents had been found in the chairman’s office, Deveshwar completely sanitised it. So you’ll rarely find a piece of paper lying around in his room. Instead, his room is choc-a-bloc with ITC products! He also made a few quick calls on the portfolio and the structure of the company. The paper board business was bleeding, almost on the verge of bankruptcy. Not many folks inside the company were in the mood for another bout of adventurism. They wanted ITC to get rid of it, just like it had done with the financial services business. But Deveshwar stuck to his guns. He brought back the hotels and paper board business inside an integrated structure — so that they could receive adequate support from ITC’s cash flows. “The earlier diversifications did not receive full-blooded support in terms of investments to help them grow,” says the chairman. He also put in place a system of checks and balances to ensure that businesses did not take undue risks.
Somewhere along the line, in their quest for turnover, the top brass in the food division allowed the demand forecasting plan go haywire. And there was a huge pile-up of unsold stock at the distributor level. Finally, faced with an overstocking situation, the company was forced to write off nearly Rs. 25 crore worth of stocks over a period of two years. Ravi Naware, CEO of the foods division, was forced to take premature retirement after the setback. Despite this, Bingo finger snacks — Mad Angles — did reasonably well.
A larger-than-life chairman does ensure that decisions get pushed through quickly. But it also heightens the chances of failure, especially if there is heavy centralisation of decision-making. Technically, the businesses may be run by CEOs, who in turn report to a director. But in a lot of the cases, the chairman directly signs off on most key decisions. It ends up making the system somewhat dependent on him.
(This story appears in the 02 July, 2010 issue of Forbes India. To visit our Archives, click here.)
I really enjoyed this .......... after getting the preciuos knowledge about the ITCc ltd...
on Sep 21, 2011I have worked in the organisation for 20 years and having learnt busines the ITC way, under the leadership of Ahmedabad office, I thank them for the new look of our classic shop
on Aug 18, 2010Dear Editor... Having worked for the organisation for 13 (short) years (although, I am currently not with the organisation) and having lived / learned life the ITC way, under the leadership of Mr Deveshwar - I am in total disagreement with your supposedly revealing article..... With due regards to your knowledge and articulation. :-)
on Jul 15, 2010I fully agree with Mr.D.Nandakumar . YCD had given a different dimension to this organisation under his able leadership .
on Sep 22, 2011Very revealing article! Kudos to the author for letting out the inside story. I was thinking of buying ITC cum-bonus, but now I have serious second thoughts. I would rather buy some other company's shares!
on Jul 2, 2010Congratulations on a revealing story to the continuing puzzle of the Indian corporate firmament - ITC & Deveshwar. The Editor quotes someone as saying that Mr. Deveshwar's attempts at diversification are "illogical". The lady quoted could have added that the proof of the pudding lies in the fact that they simply make no money - even after billions of "tobacco dollars" have been invested & so many years of his being at the helm. Its a pity that some of the people, for some of the time, have been whitewashed into believing that his 25% returns to shareholders using the tobacco spigot, justifies his selling FMCG dreams of rosy tomorrows if only he were given enough time (meaning another extension as Chairman even after 15 non-stop years on the chair). To be sure he deserves some credit for managing the steady tobacco treasure by increasing cigarette prices & acknowledging that diversifications are an imperative for ITC. A good "maintenance manager" job done. Surely he couldn't have been luckier! With cash spewing out of addicted tobacco users pockets lubricating ever deeper investments into what was touted as a logical FMCG foray & an ornamental management overhaul with him as the so called "master strategist" who doesn't roll up his sleeves to get them messy with paper on his desk; it should have been easy. The fact of the matter, regrettably, is that it's been a failure no matter what the window dressing. It's plain to see that the only diversifications that make money are Paper & Hotels - the credit for building both of which lies with his predecessors (in much shorter tenures). And no amount of waffle about their not having been supported with investments washes; humility is the absent word here for sure! Amazingly even the much gloried e-Chou pals don't seem make money & its admitted in the story that they aren't being seriously pursued any longer; perhaps now that they have served their ostensibly real purpose of PR management in branding ITC & Mr. Deveshwar as a hero of the bottom of the pyramid. Worryingly (and amusingly) he also lets the cat out the bag to his true role in the management structure that puts clever distance on paper between him and executive decision making, when we learn that in fact he micro-manages candy flavours and garment segmentation! Sadly, the final piece of the puzzle to his motivations emerges with the total absence of succession planning & the blatant absolutism of not even having called a Nominations Committee for 2 years to appoint Mr. Grant as Director. "Chairman for life" perhaps; Hail Hitler! But what was the rest of the board doing?? With apologies to Cromwell, its time to go Mr. Deveshwar. Will someone please put the lights out, or he will take down ITC with him.
on Jul 1, 2010What an amazing write up by the intelligent editor himself. Kudos! Yogi's conviction in the allied businesses will absolutely pay off - Very soon, given the fact that ITC is a well known brand across pan India. Isn't that the case with most of the companies with strong & diverse brand values? I would have loved to see details on IT & Finance related businesses though. May be next edition, huh! :)
on Jun 29, 2010