Showing posts with label ICICI Bank. Show all posts
Showing posts with label ICICI Bank. Show all posts

Friday, August 24, 2012

THE MIDDLE PATH APPROACH

IT’S NEITHER AN EXTREME OF ADVENTURISM NOR AN EXTREME OF CONSERVATISM, THE APPROACH THAT INDIA’S LARGEST PRIVATE SECTOR BANK, ICICI BANK, NOW SEEMS TO FOLLOW IS THE MIDDLE PATH

It was on May 1, 2009, when Chanda D. Kochhar took the reins of ICICI Bank from her mentor Kundapur Vaman Kamath who had transformed ICICI – a crumbling development financial institution – to India’s most visible universal bank. For Kochhar, who was instrumental in establishing ICICI Bank during 1990’s, and who successfully built the nascent retail business with a strong focus on technology, innovation, process re-engineering and expansion of distribution and scale, the timing of her taking over as the Managing Director & CEO of India’s largest private sector bank was indeed challenging. The going was certainly not great, the global liquidity situation was tight, and it was absolutely a burgeoning task for her to steer the bank through the period of financial turbulence.

It was just a few months (September 2008 to be precise) before her appointment as the MD & CEO of ICICI Bank, that the bank had to confront baseless and malicious rumours regarding its financial strength, as well as news that some of the top management had been selling shares for the last few days. It was around the same time that Lehman Brothers collapsed and given the sparkling timing of the collapse, ICICI Bank faced an unprecedented crisis with speculation mounting that its exposure to Lehman held enough potential to wreck the whole bank. The edgy traders hammered the stock down and nervous depositors queued up outside the bank premises to withdraw their money.

In a short period of two weeks or so, many people had unanswered questions on their mind and withdrew their deposits from the bank. The deposits of Infosys Technologies Ltd. in ICICI bank came down to a mere Rs.100 million from Rs.10 billion over the nine month period (April 2008 to December 2008), citing reasons of “better interest rates and relative safety of deposits”.

But the bank, under the stewardship of Kochhar (who was then entrusted to manage the crisis) was quick to respond to the rumours of bankruptcy. As damage control measures, the top brass came out in the media assuring depositors that their money was safe. The Reserve Bank of India (RBI), too, on September 30, 2008, issued a statement to this effect. But what perhaps was more daunting was the bank coming under fire in the media for allegedly using strong arm tactics to collect credit card and loan outstanding amounts.


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Wednesday, July 25, 2012

Rupee EPS Guidance is a Concern

Besides The Upheaval at The Top, it has been a Defining year for Infosys, which saw some Welcome Growth in Revenue Terms. However, Rupee EPS Guidance is a Concern 

Going forward, while the company continues to seek opportunities in other emerging markets, the key is going to remain the US, since that is where it still gets around 65% of its revenues. As far as the US market is concerned, Forrester Research concludes in its report that the market for Information & Communication Technologies or ICT (which includes both products & services & involves both government & corporate spending) will grow by around 8% to touch $805 billion in 2011. Of this, IT outsourcing is expected to account for around $104 billion. Though slower than the growth of 8.9% in 2010, it is bullish from the standpoint of the larger base. Consumer spending, which is two thirds of the US GDP, has risen by 4% in Q4, 2010 and unemployment rate has fallen to below 9%, according to Forrester. If these trends continue, the economy should be on a strong growth path.

Besides the protectionist pressures that Indian firms like Infosys faced, there is one more important point to take care of – the fact that location centric advantages are becoming less relevant, thanks to multiple sourcing opportunities being explored by clients. So far, Indian software companies have been able to weather the storm and even gain market share. Dean Blackmore, senior research analyst at Gartner, comments, “In a market that grew 3.1% in 2010, India-based vendors collectively grew by 18.9% (in context of the global IT outsourcing market), increasing their market share from 4.8% in 2009 to 5.5% in 2010.” Yet, caution is advised.

Now the greatest criticism of Infosys has been more towards its conservative nature, particularly towards inorganic growth. Cash is indeed one area, where the company has been far more defensive, with its policy of keeping enough cash reserves for one year of employee salaries at all times. But when it comes to succession planning, Infosys has done a major shift in terms of getting K. V. Kamath in as the Chairman of the company. While promoting S. D. Shibulal to the CEO chair was anticipated, Kamath’s elevation is a first for the company that has traditionally been known to reserve higher positions for its own people. In a past interview to B&E, Kris remarked, “We very rarely select people in direct leadership positions from outside. I also believe that if a company wants a CEO from outside the company, that means the company is not doing well.” While the issue may not be with performance at the moment, recent developments indicate that the company wants to inject some new thinking into its DNA, particularly the kind that took ICICI Bank to new heights. Besides, it does silence quite a few voices that consistently point out how the company is still very founder driven.


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