Home > opinion > online-views > Roopa Kudva’s 7-year itch at Crisil

Young analysts at Crisil Ltd, a Standard and Poor’s (S&P) unit, take immense pride in asking the top management of promoter-driven companies about their succession plans. I remember many years ago how Crisil’s rating analysts had grilled the promoters of a large automobile company on their succession plans. Crisil’s rating methodology puts huge emphasis on two critical aspects: the level of governance followed by corporations and the succession plans of the promoter.

In the best tradition, professionally managed companies ceremoniously mention successors when a chief executive officer steps down. However, when Roopa Kudva, 50, Crisil’s former managing director and chief operating officer, stepped down from office on 9 September, this was not done. Citing Kudva, a Crisil statement said, “Change at the top at judicious intervals is a sound governance practice and allows companies to refresh themselves. I am committed to ensuring a smooth transition." The stock exchange filing of the listed company stated that Kudva would remain with the company till a successor was identified. We have not heard any announcement on this yet.

Did Kudva’s assignment end abruptly? The last board of directors meeting at Crisil was on 18 July. Barely a few weeks ahead of the next board of directors meeting on 17 October, her exit was announced without any succession plan in place. Should the rating company be rated?

Kudva, who joined Crisil in 1992 as a senior rating analyst, rose to the top on merit. An obvious choice by the board, she successfully steered Crisil by changing its DNA and making it more proactive to market developments. Crisil could successfully wade through the challenging times in the aftermath of the collapse of US investment bank Lehman Brothers Holding Inc. when its rating stability studies proved superior to many of its peers’.

Crisil had its modest beginning when N. Vaghul conceived the idea of pricing credit by linking it to associated risks. It was promoted by project finance institution ICICI Ltd along with Unit Trust of India, the nation’s oldest asset management company, and a few other financial institutions. Pradip Shah, the first employee of the organisation and its managing director, launched credit rating services in 1989 to help corporations face a free market economy where interest rates would be dependent on the risk profile of companies, based on business and management strength and adequacy of cash flow to service financial commitments.

The organisation bloomed over the years under stable management and prudent and well-laid-down operational policies. In 1994, a year after Crisil got listed, R. Ravimohan succeeded Shah who had a seven-year stint. Well-versed with the nitty-gritty of project finance, Ravimohan, popularly known as RM, continued to leverage on the strong base created by Shah and the organisation sharpened its commercial hunger for new businesses, organic growth, related diversifications, and territorial expansions. This was followed by structuring emoluments linked to markets and introduction of performance-linked bonus, among other things. In 1997, S&P acquired a 9.68% stake in Crisil which culminated in majority control in 2004 when S&P bought another 49.07% stake through an open offer. In 2013, S&P, through another open offer, raised its stake to 67.8%.

In 2007, Ravimohan got elevated as managing director and region head of S&P, South Asia, paving the way for Kudva, an IIM-Ahmedabad alumni who started her career as a management trainee with the development finance institution Industrial Development Bank of India, to move into the corner room. To her credit, Kudva diversified Crisil, continued with the strategy of growth through acquisitions and made it a marketing-savvy company. While Shah was a visionary and Ravimohan was extremely savvy in execution, Kudva, perceived to be a hard taskmaster by many, combined the ability to implement with superb marketing skills.

After the trans-Atlantic financial crisis of 2008, she aggressively pursued a diversification policy and built new income streams to reduce dependence on the ratings business alone. It is indeed the leader among Indian ratings agencies but more than half its revenue comes from other businesses such as equity and derivatives research and analysis of economy, industry and capital markets. She was planning to reduce the revenue generated from ratings to a third of overall businesses and have a mix of domestic and global businesses in equal proportion.

Crisil insiders are sceptical about her sudden exit and various theories have been doing the rounds to explain this. One of them is the near-stagnation of business in the past couple of years with the UK-based Coalition—a company providing high-end analytics to global investment banks—driving the performance. Crisil acquired Coalition in May 2012. The statements on past few quarterly earnings have repeatedly spoken about a “challenging" operating environment, “subdued" business activities and “muted" revenue growth. One-off adjustments and currency volatility at times helped Crisil achieve higher profit growth.

While Kudva is a competent business developer, she perhaps didn’t pay much attention to creating a second tier of leadership. As a strategy, she provided adequate job rotation to the next level, but none of her colleagues have been groomed for higher responsibilities. Also, frequent role changes have not allowed the top tier to settle down. For instance, Raman Uberoi, president, corporate affairs, was made the head of infrastructure and risks after a three-year tenure. The new chief operating officer, V. Srinivasan, is an old hand in global research and analytics, but he possibly lacks experience in corporate affairs. The former head of global research and analytics Sanjeev Sinha (now head of research and analytics services at WNS, a global business process outsourcing services company) and strategy head G.V. Mani have left abruptly in the past couple of years. There has also been a spate of departures from the middle-level leadership. I won’t be surprised if Crisil follows the Infosys Ltd way and gets an outsider as CEO for the first time in its 27-year history.

Tamal Bandyopadhyay, consulting editor of Mint, is adviser to Bandhan Financial Services Pvt. Ltd, India’s newest bank in the making. He is also the author of Sahara: The Untold Story and A Bank for the Buck. Email your comments to bankerstrust@livemint.com

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