Mumbai: Exactly two years ago, Ramalinga Raju, then chairman of Satyam Computer Services Ltd, confessed to a Rs7,136 crore fraud, the biggest in India’s corporate history. The company has since been sold to Tech Mahindra Ltd but its auditor PricewaterhouseCoopers Pvt. Ltd is still involved in a long-drawn out legal proceeding with India’s capital market regulator.
In an interview, Deepak Kapoor, the new chairman of PwC India, spoke about how the firm has put in place more rigorous controls, improved processes and emerged stronger with a new brand identity. Edited excerpts:
You have won the election by a huge margin.
Four years back, for the first time in our profession in India, we said that we will have governance above everyone else, and we will elect our chairman. We went the whole hog. We said our partners will file nominations and we will have an open election.
There were 99 partners and executive directors of different network firms at that time. This time round, there were more than 150 and we had an even more elaborate process. We started with a process of nominations, like last time. Then, instead of straight away getting into the vote, the governance board, which is an elected board, decided to do a detailed sounding process with partners, something that other PwC entity firms around the world follow.
The board members went around cities and spoke to the partners on (their) expectations from the chairman, and that process zeroed in on one name, which was put to ratification by a vote.
Have you settled into the new role?
There is a new title, but for somebody who has lived within the firm for 32 years, whether I have settled down is a relative issue. It comes with a lot of responsibility that needs to be taken up. I am looking forward to that.
What is your vision for PwC in India?
I do not believe in slogans and platitudinal statements. What we as a firm want to do is to put a whole lot of emphasis on quality and growth, in that order. Quality and value addition to our clients will spur growth for us, and these are what I want to pursue. More so, considering what the profession has gone through in the past couple of years.
If we can be ahead in making a difference to clients, growth will automatically happen.
What is it that you are going to fix now which PwC lacked earlier?
I think in the last two years our brand did get affected. We were the auditors and Satyam happened under our watch. We accept that in all humility and are determined to learn lessons from that. What is it we need to fix? It is the perception part of it. Perception of our clients and of the general public. If you look at perception of our clients, who are our stakeholders along with partners and staff, the strength of our brand and our legacy in India for more than 130 years paid dividends.
We did not lose more than a very few clients. Our clients reposed faith in us as they knew the kind of rigour our people put in day in and day out. To me, that is far more important as perception.
There is a second part of perception, which is of the public at large. That did get affected. Am I worried about that? Yes, because even their perception is important and that is something we will work on to fix.
Can you throw some light on the challenges ahead?
Our network firms have three businesses: tax, assurance and advisory—consultancy and deals. In tax, we did lose a bunch of partners last year. If we have the best of resources, and a legacy of 130 years, where else will others find resources to take from?
Some attrition is always good. Today our tax business is stronger than it ever was. We recently won the tax firm of the year award for the second time, twice in two years, and that episode of a few partners exiting happened in between. It has not made a big difference.
In the meanwhile, we have acquired new talent from outside, including partners. The business is stronger and better.
Risk control is critical to any consulting and audit firm. How have you raised the risk bar?
Our internal mechanisms of what kind of client to accept and services to offer are much higher. The rigour that goes in is much more vigorous; not that it was less, but there is always room for more. We have got a risk and quality partner from UK. He has been here and is overseeing those operations. Everything is to enhance the quality and take it up another notch.
Have you said no to clients?
We have said no to clients. As a part of our risk management process, we have always said no to some clients. It’s very difficult to put a number or percentage, as there is a complex way used to assess. When I say the bar has been raised, if out of ten, we said no to 1 or 2 earlier, now it would be 2 or 3. It is not the number but the process which matters.
Any major changes you have made to your processes after Satyam?
A whole lot of remedial actions have been taken. The major one was the risk and quality focus. The risk and quality partner from the UK is here. There is a new assurance leader and she has a new assurance leadership team. The whole of leadership in the Hyderabad office has been changed. There is a new team there. An advisory board has been set up. Those are some of the measures that have been taken.
Are you putting in place any entry barriers for partners?
Partner admission was always very, very rigorous. That continues to be as rigorous as possible. There are tough tests and conditions before anyone becomes a partner. As a repercussion of Satyam, I don’t think that has changed much.
Are there plans to hive off the KPO(knowledge process outsourcing) business in Kolkata and hand over control to foreign partners?
We have to define what is “control” and what is “hive off”. All services that PwC network provides in India are structured differently from the rest of the world due to regulatory reasons. How businesses are going to be structured will be defined by what suits us best and what is allowed by regulators.
As for the KPO business, there are about 700-800 people in the business. It can grow fairly larger, which is why we have to listen to the stakeholders involved.
Going by the global slowdown, a lot of business is expected to come to India. What does the future hold for this business?
PwC is globally $26 billion firm and 20% of it comes from emerging markets. In the next 4-5 years, we expect 40% of global revenues to come from emerging markets.
India being one of the emerging markets becomes important. All our business will grow, including KPO which is a small part of our advisory business.
In India, advisory and tax practices are larger and will be the growth engines because of the nature of services.
We have our big bets. Infrastructure is a large sector, healthcare and pharma too. The number one big bet is infrastructure.