Ramesh Iyer successfully scaled up Mahindra Finance despite odds

Soon after joining Mahindra & Mahindra Financial Services (Mahindra Finance) in the mid-1990s as General Manager (Operations), Ramesh Iyer approached an M&M dealer and offered easy financing schemes for his retail clients. "I have my own finance company. Why do I need finance from you?" replied the dealer, who was lending to locals in his district. "Finance wasn't required in a big way in the mid-90s as customers tended to be debt- averse," says Iyer.

Iyer went ahead and launched wholesale lending products for dealers of M&M's jeeps and tractors. He actually called up dealers to convince them to take finance from Mahindra Finance for buying vehicles. "If the dealers had a credit balance with Mahindras, they used to get extra vehicle allocations from M&M," says Iyer. This was followed with the launch of retail products as the company gradually expanded operations.

Today, Iyer has delivered more than what he set out to do in the mid-90s when the company was founded to help support M&M. Mahindra Finance has transformed from being a captive finance company to becoming India's largest non-banking finance company in the rural and semi-rural areas. It has an asset base of Rs 31,665 crore, higher than many old private sector banks such as Dhanalakshmi Bank, Lakshmi Vilas Bank or Catholic Syrian Bank. The company has churned out profits of Rs 887 crore in 2013/14, which is one fifth of parent M&M's standalone profits. The company has also spread out across 893 branches with an employee strength of 12,816 people.

Iyer's journey to the corner room came with its fair share of struggles. He began his career as a management trainee with a Mahindra Group company in 1979 after completing his MBA from Mumbai University. He worked in the commercial department (tendering of projects and invoicing and collection). He rose to the middle management level in six years. In 1985, he shifted to Golden Tobbaco Company (GTC). He was responsible for raising finances for GTC's projects.

In 1990, Iyer joined Ashok Leyland Finance as a branch manager in Mumbai. "I grew to become the regional manager," says Iyer. The assignment at Ashok Leyland Finance exposed Iyer to lending operations for the first time. "The real learning in those four to five years was customer intimacy. At the end of the day, the success of a lending business is in recovery," says Iyer.

The shift from the well established Ashok Leyland Finance to Mahindra Finance in 1995 wasn't smooth. As GM (Operations) of Mahindra Finance, Iyer had to build a new business from scratch. "The Leyland learning was that the success of a finance company eventually is in retail and not on a wholesale product," says Iyer who started by opening the first branch of Mahindra Finance outside Mumbai, in Jaipur. This was followed up by opening five to 10 branches every year across the country. "We have not shut even a single branch since inception," says Iyer. In 1999, Mahindra Finance introduced retail financing of tractors in rural and semi-urban areas. Today, some 700 of its branches are in rural India.

Iyer was made the Managing Director of Mahindra Finance in 2001. Around that time, the company had begun financing non-M&M vehicles. "We went to Maruti. The dialogue started in 1999 and the tie-up finally happened in 2001,' says Iyer. "Today, we do about 8,900 vehicles a month for Maruti."

Bharat Doshi, Chairman of Mahindra Finance, says Iyer is a very inspiring leader. "Iyer leads from the front. He fully knows what is happening at the ground level," says Doshi.

In 2008, Mahindra Finance entered the home loans segment. This business, still in its infancy, was added based on the inputs from branches. "Many of our customers have houses which are not pucca," says Iyer.

Indeed, Mahindra Finance surprised everyone when it didn't apply for a banking licence. "Banking will always occupy top of the mind agenda for reviewing, but just for the sake of becoming a bank we will not become a bank unless the regulatory framework allows the current value to continue," explains 56-year-old Iyer. "We cannot destroy (existing) value to create value (in a banking platform)," he signs off.