Future CEO Vaidyanathan talks of future with Warburg

When V Vaidyanathan was asked to grow the retail business at ICICI Bank, he had all of 50 employees in his division. By the time he left it after nine years, it had more than 26,000 employees at 1,500 branches in India.

Vaidyanathan left the bank within a year after Chanda Kochhar took over as its CEO. He joined Future Capital after its promoter KishoreBiyani was left with a half-baked business following a split with partner Sameer Sain, who parted with the private equity arm.

With age on his side (he was only 32), Vaidyanathan leapt into the unknown to grow a company that he would own a part of instead of being part of a company he could never own. Future beckoned.

V Vaidyanathan. image courtesy:moneycontrol.com

Did he succeed? It's too early to tell, but in 2010, Future Capital's loan-book stood at Rs 1,000 crore; today, it's four-and-a-half times as large at Rs 4,670 crore.

But Vaidyanathan's journey has been eventful. Within a year of joining Biyani, the latter hinted that he might have to sell his non-core financial business. And now Biyani has sold a a controlling interest to Warburg Pincus, the private equity firm. While Biyani's sale of his 53.7 percent stake at Rs 162 a share takes a lot of debt off his books, Vaidyanathan is now accountable to a PE investor rather than a regular promoter.

What does Warburg bring to the table? Firstpost asked Vaidyanathan. Sitting in his cabin on the 15th floor of the Indiabulls Finance Centre in Mumbai, he replies: "Its track record speaks for itself. It has supported companies like Kotak Mahindra Bank, HDFC, Bharti Airtel and their tremendous success speaks of its own achievements."

He explains that Warburg has a long-term bullish view on India, which is evident from the fact that they are bringing in so much money when everyone is bearish about the country. The private equity firm also believes in backing people and assures management that capital will not be a constraint.

But, as he admits, capital is precious. Therefore, he will be cautious as he plots the future of Future Capital. Small and medium enterprises form almost 75-80 percent of his loanbook. He will keep his focus on this sector as big banks do not want high exposures here.

Moreover, Future Capital has stringent cash-flow checks in place to ensure bad loans are at minimum, despite lending to small companies which bear the full brunt of a slowing economy. Future Capital has non-performing loans as low as 0.001 percent of its loanbook.

Future Cap will also focus on loans against gold, and the company is unfazed by the Reserve Bank's new stringent norms for such loans. As Vaidyanathan explains, since he has just entered the market, it will not take much effort to get used to the new regulations.

The other department that forms just 2.5 percent of his total loanbook is lending against consumer durables. Will the exit of Biyani mean it will not get the support of Future group's consumer sales? No, says Vaidyanathan. But he is not worried as only 30 percent of the consumer durables portfolio is dependent on the Future group. But he promises to bring a unique business model in this segment as well.

When Vaidyanathan joined Future Capital, his compensation of Rs 50 crore included 20 lakh warrants worth Rs 47.40 crore in August 2010. The warrants were issued at Rs 237 and were convertible into shares in February this year. The stock is trading at Rs 152 now. On a fully diluted basis, his stake in the company is now 9.1 percent and he is not selling any of this.

With Warburg Pincus' support in terms of capital and experience, this could be Vaidyanathan's chance to grow another success story like Kotak Mahindra Bank or Bharti Airtel; it's a chance to grow from a professional to an entrepreneur.

The Warburg deal could a game-changer both for him and Future Capital.


Published Date: Jun 06, 2012 04:01 pm | Updated Date: Dec 20, 2014 09:01 am