How Deveshwar turned ITC around

At a time when even successful professional CEOs in Indian companies find themselves playing musical chairs and merry-go-round, Yogesh (Yogi) Chander Deveshwar is clearly in a class of his own.

It is, therefore, not surprising that the ITC board has given him a five-year extension after a 15-year term as executive chairman.

With this extension, Deveshwar becomes ITC's longest-serving chairman. Longevity in office, of course, is not a virtue in itself but it does enable CEOs to consolidate in a way their shorter-tenure counterparts may not always manage.

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Cases in point are A M Naik, executive head of Larsen & Toubro since 1999 (as managing director; he added chairman to the designation in 2003), and E Sreedharan, managing director of the Delhi Metro Rail Corporation since 1997.

Both are outstanding performers and have fashioned themselves as prominent public figures.

Deveshwar, by contrast, is low-profile, but he has arguably been the better performer.

He inherited a company neck-deep in unsavoury controversies - tax evasion charges, a predecessor who had been jailed for financial irregularities in overseas deals and strained relations with its largest overseas shareholder, British American Tobacco.

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When he took charge, many suggested that, more than executive abilities, Deveshwar displayed consummate managerial skills in parrying the senior-level infighting in the early 1990s when tensions with BAT over the latter raising its stake from 33 to 51 per cent ran high.

Certainly, in the poisonous atmosphere at ITC's ornate Kolkata headquarters in those days, and as anointed successor to the feisty and earthy K L Chugh, Deveshwar must have possessed considerable talent for manoeuvre.

Still, if those controversies have faded into the mists of corporate history, the credit clearly goes to Deveshwar.

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Consider the hard facts: a shareholder who invested in ITC in 2002 (the earliest year for which consolidated results are available) would have seen investment grow at a compound annual growth rate of 21 per cent.

Sales have grown at a CAGR of 16 per cent and net profit 17 per cent - decent, not spectacular, going for a company that spent a considerable amount of its resources expanding and diversifying.

In contrast to the early 1990s when ITC exited several businesses - financial services, agri-business and seeds - Deveshwar has managed to build the hotel business into a respectable global brand (the Bill Clinton and George Bush visits no doubt helped) and grow the paper business.

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He has launched several new ones - a clothing brand (Wills Lifestyle) and a foray into information-technology-enabled rural information and trading network called e-choupal, an initiative that attracted attention more for its novel "inclusive" agenda before Indian corporations were forced to think of "inclusive growth".

Much of this was achieved by nurturing new managerial talent. ITC has also been one of the early adopters of environmental standards, becoming water- and carbon-positive long before environment ever came on India Inc's agenda.

For his remaining five-year term, Deveshwar's challenge will be to identify and build his successor, a project that he's clearly set for himself.

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But perhaps the bigger one is kicking the dependence on tobacco and cigarettes, much of which has financed the group's growth.

The business already accounts for a lower percentage of ITC's turnover - from 90 per cent in FY 2001 to about 70 per cent now.

Learning to grow without tobacco will be a real test of ability.