Tata Motors' C. Ramakrishnan tops Business Today-YES Bank Best CFOs list

On weekends at home, when Tata Motors' Chief Financial Officer C. Ramakrishnan is not listening to or humming a Carnatic piece, he can be found in the kitchen, cooking up a storm. And when Ramakrishnan cooks lunch for his family of five, he pulls no punches: rasam, sambhar, vegetables, the works. Ramakrishnan clearly enjoys it. It's how he relaxes. "I used to play tennis and cricket, but then age took over," he says.

VIDEO: Tata Motors CFO's tough balancing act

That was probably the easy part - what hit Tata Motors after that was much bigger. The company had to refinance its short-term borrowing to acquire JLR for $2.3 billion, amid a global banking crisis and a demand squeeze in the auto sector. This was also when it had to launch the Nano.

Vedika Bhandarkar, Managing Director at Credit Suisse in India, who has advised Tata Motors over four years on JLR, says: "Mr. Ramakrishnan is a thoughtful CFO. He is clear about his goals, and also pragmatic."

Since the deal, Ramakrishnan has worked hard to get Tata Motors' balance sheet to where it is now: more than Rs 12,000 crore in cash and liquid investments, and a Rs 1,467 crore dividend payout, at 81 per cent of Tata Motors' standalone net profits.

It took innovation, he says. For example, when Tata Motors borrowed Pound 340 million from the European Investment Bank to part-refinance its debt in 2010, the EIB sought either a sovereign guarantee from the UK government or guarantees from banks it felt comfortable with. Ramakrishnan got the borrowings guaranteed by Indian banks, and arranged a second-tier guarantee from reputed foreign banks against the Indian banks' guarantees.

Another innovative move was the 'A-ordinary shares introduced when Tata Motors issued equity shares through qualified institutional placement. The shares get five percentage points more as dividend (Rs 20.50 instead of Rs 20 in 2010-11), but 10 shares combined have one vote at the company's general meetings.

Ramakrishnan is our best CFO this year, and also wins in the Best Transformation Agent (Large Companies) category. In 2010/11, the company reduced its net debt by 21 per cent (net debt is debt minus free cash), and improved its debt-equity ratio from 4.28 to 1.17.

"We needed to do three things," says Ramakrishnan. "One was to extract more cash internally. Second was to capitalise the balance sheet, which we did through rights issues and other instruments. Then we sold our shareholdings in Tata Steel and TCS. We also did a fourth thing: we extended the maturity profile of our debt - instead of 12-month instruments, we went for five- or seven-year terms."

In a March 31 report on Tata Motors, Rajesh Gupta, research analyst at SBI Caps, said: "We expect future revenue and profitability ... to be driven by JLR."

Jaguar car sales reported 11.8 per cent growth in 2010/11 to 53,000 units and Land Rover / Range Rover reported 30.1 per cent growth by volumes to 190,628 units. In 2010/11, JLR's EBITDA margin rose to 15.2 from 5.4 the year before. Profit after tax rose to Pound 1,036 million in 2010/11 from Pound 24 million in 2009/10.

Ramakrishnan underscores the importance of being nimble-footed in dealing with business cycles in the automobiles business. "Otherwise you get into a mess along with your suppliers," he says.

In the 1990s, Ramakrishnan spent time with Ratan Tata while implementing the ERP project for Tata Motors. He observed Tata's ability to look at every issue at a strategic level as well as the tactical implementation level, and still delve into details.

"When we met him, we had to be prepared at every level," says Ramakrishnan. "And yet he would surprise us." Perhaps those were lessons in nimbleness.