S. RAMAKRISHNAN, CFO, TATA POWER
Interview by Tom Leander

During the 36 years that S. Ramakrishnan has worked for the Tata companies, business in India has changed profoundly. Decades of stultifying central planning—a system that favored the well-connected and the corrupt—gave way with the 1992 reforms, which unleashed a wave of creativity and entrepreneurial spirit. It was a great opportunity for talented managers like Ramakrishnan, who rose steadily through Tata’s ranks, serving in many capacities, including managing director of Tata Teleservices and now CFO of the company’s power business. In an interview conducted at CFO Asia’s recent conference in Delhi, he explained how he got his start and how his background in operations makes him a better CFO.

We often hear that the reforms in 1992 released a tremendous amount of energy in leadership within companies. Was that true in your experience?

It was very true. Between ‘72 and ’92 it was the era of the License Raj, the era of shortages and five-year plans. The business opportunities for the private sector—especially for those who believe in doing business in an ethical way—were limited. Post ’92, there were opportunities for people who had the ability and the strength. You have seen that in India with Infosys and Airtel. I could cite many other examples. Post ‘92 has been a great period for Indian managers, and even Indian entrepreneurs, who believe in a sense of value.

When you entered Tata you immediately went into positions of responsibility. What kind of infrastructure does Tata have for recognizing talent?

I belonged to a group in Tata called Tata Administrative Service. It is meant for brighter students coming out of college. They are centrally nurtured, their careers are tracked, and opportunities are given that fit in with their interests and strengths and weaknesses. At that time, Tata did not have that for all the managers [at the group level]. Though today, the group has put in an HR practice. All bright managers identified by the individual companies are centrally reviewed, and some of them are identified for the group, monitored, and given development opportunities. I was one of those fortunate few.

Did you ever have a mentor or someone who guided you in your career?

Not particularly, but I happened to work under CEOs who are very entrepreneurial, who do not hesitate to give responsibilities to young people, and do not hesitate to give opportunities to people to extend themselves, which means they have that innate sense of comfort right now—not that it will succeed all the time. That’s probably what gave me that initial push.

You’ve been many things besides a CFO—even a CEO at one point. What elements of those experiences have you brought to being a CFO?

It’s a double-edged sword. [As CFO] you need to rise above [traditional finance duties] in terms of being a part of the leadership team, being a part of the support to the business groups to set up new businesses. That is the area where my past experience has helped me to play a role. Though sometimes I must be cautious. Sometimes, even though I’m a finance chap, we get carried away in seizing opportunities. My belief is that a development man and a finance man together are a good balance. If everybody turns out to be a marketing or a development man, then the company has to be careful.

There is also uncertainty. Business has changed and the level of uncertainty has definitely gone up. So if one were to remain in a conventional finance role of being cautious, of being a protector of processes, and having to be right all the time, I don’t think one would have a very constructive finance role. You have to understand that once you are a business manager you are exposed to uncertainties, and hence any plans, projections, cash requirements, and profitability are on the back of a particular judgment. That doesn’t mean that we don’t identify the downside scenario to warn the business managers. But coming from a business background helps you say, “Okay, it could happen. So what will you do in this situation? What strategies do we have to mitigate this?”

Have there been situations where a normal CFO might not get involved in an investment, but you have been willing because you knew from an operating side that the risk could be mitigated?

Recently, we bid for a US$4 billion project in India. There were three or four parameters where the level of uncertainty was high. You can take one of two stances. One is to take the conservative stance and be safe and wait, in which case you may not get the project. Or you can say, look, what is the best we can do in the situation? If everything in life turns to your favor, what will you get? And if you are in that position that it doesn’t turn to your favor, what will you do to mitigate?

That gives you a different perspective. It’s not that you’re spending sleepless nights having bid aggressively, but you know that there are some cards up your sleeve you may have to pull. You may have to ride with the difficult situation for a certain period of time, but you’ll sleep well.

Now that you’re a CFO, what is your view of finance’s role in having to stop projects that might be foolish?

My view has always been that it’s very difficult to predict the future with a single scenario. So we tend to do three scenarios, one of which is obviously bad, and then ask, if that happens, what are the mitigation measures? And if, even after [the mitigation], if you don’t like the scenario, as a CFO you ought to stop the action. Sometimes you still do it if you can afford to, and if the upside scenario is great. That’s the balance you need to bring about.