Economic Times Asian Business Leaders Conclave - 2016

- The Economic Times

Mr. V Vaidyanathan, Chairman and Managing Director, Capital First awarded the ET Most Promising Business Leaders of Asia 2016 at the Economic Times Asian Business Leaders Conclave 2016. LEADERSHIP LEARNINGS Words to live by: “Think POSITIVE and take your CHANCES.” DNA OF A LEADER: I believe the first requirement for a leader is to be positive. This is not a motivation talk, it has real power. If a batsman is trying to hit ball for a six, at the moment he is swinging the bat he has to believe he will connect and it will go the distance. If he is tentative, he will only end up spooning a catch. We launch every business thinking it will work out. During the period when we were hunting for private equity for management buyout of the company, I met every PE thinking they are going to do it. This way there will be a natural spring in our step. Next there is no substitute for hard work and persistence. No one gets lucky. Even the luckiest people put an effort. When we hire people, people join us by sacrificing their jobs with existing institutions, so we don’t have the liberty of saying failure is fine and all such clichés. We have to play to win and work, 24 X 7, to make a success. Of course hard work is no substitute for strategy, and hope is not a strategy. To develop as a leader is a continuous lifelong effort. But in my opinion we grow as a leader when people around us grow learn and prosper as well. MY STORY SEED OF THE DREAM While heading the retail banking business at ICICI Bank, I started wondering if there was a way I could promote a new bank, I felt all I needed was backing of capital from someone. I later found that was too difficult, bank licenses were rare. But to get an NBFC license was easier. I felt there existed a great opportunity build an NBFC in the large, growing and underserved MSME and consumer financial services market in India and someday convert It to a bank. While I was exploring this idea with some PE players, I came across an existing NBFC which was largely into wholesale financing. We worked out a deal where I could acquire 10% of the equity of the company. The idea I had was that I could superimpose a retail financing NBFC on this lending platform and phase out other noncore businesses like Forex and broking. PIVOTAL MOMENT Between 2010 to 2012, we shut down most of the subsidiaries and legacy businesses and starting building retail lending in the company. We drew up a retail business blueprint, bought retail systems and technologies, hired a retail team, and launched many retail lines of businesses. Despite challenges of hiring employees, lack of debt funding and a failed QIP attempt, we grew the retail loan book from Rs. 94 crores to Rs. 3400 crores by 2012. We then demonstrated the proof of concept to a number of large private equity firms who had, in theory, the ability to sign big cheques, While most attempts fell off for one reason or the other (too early stage of business, India GDP growth stalling from 9% to 5% during the period, high NPA of company, too early stage), we finally succeeded in selling the concept to Warburg Pincus. FORMULA FOR SUCCESS Capital First is founded on the core idea that it should address the niche, less-served segment with contemporary technology solutions: and financing of MSMEs and consumers fits into this theme. The conventional financiers have found it difficult to finance small entrepreneurs and consumers as the ticket sizes are low, loan tenor are short, operating costs are high, collections costs are high. credit underwriting is expensive, and NPA have traditionally been high (5-6%) in this segment. Traditional channels were not keen on doing such products which were unviable, as well as too small for them to warrant their time. BIG TAKEAWAYS MY BIG INSPIRATION: I have been inspired by people who achieved success despite odds, across many fields like sports, innovators, business, and entrepreneurship. Among businesses, Mr. Kamath is a shining example of a person with great grace, visionary leadership and thinking through the big picture. MY BIG LEARNING: Be positive - it's a necessary condition, but not a sufficient condition. No matter what headwinds- slow economy, funding, unproven concept, balance sheet issues.. it works out in the end. Secondly, believe in serendipity not luck. Finally the goodwill of people around us is an invisible powerful force. RECENT SUCCESSES: The market cap of the bank grew from Rs. 7.90 billion (USS 120 million) before the Management Buyout on March 31, 2012 to Rs. 76.00 billion (USD 1.16 billion) on 31st March 2017.

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Economic Times Asian Business Leaders Conclave - 2016

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