Managing the finance and treasury function at one of India's fastest-growing and best-known vehicle brands is no simple task. According to K Chandrasekar, senior vice-president of corporate finance and investor relations at Mahindra & Mahindra (M&M), it's a "hydra-headed" job.
As Mahindra Group's flagship brand, M&M's popular sport-utility vehicles are a common sight on India's roads. Originally founded in 1945 as a manufacturer of army vehicles, today the company is worth approximately $6.3 billion, employs more than 100,000 staff globally and is actively growing. In 2008, M&M acquired a 51% stake in China's Yancheng Tractors for $26 million.
In 2009, M&M reported a total profit of $155 million, up a stellar 242% from $45 million in 2008.
Credit Suisse recently named the company one of the 27 great brands of tomorrow, so we decided to speak to Chandrasekar about how corporate treasury supports a strong brand.
How would you describe M&M's corporate treasury?
In respect to the group responsibility, the treasury is hydra headed. With some of the mature (and listed) companies in the group, treasury's role is advisory, in terms of deploying group policies and best practices, and as a sounding board and consultant for specific treasury issues. In the case of other [group] companies, we carry out transactions and exercise an element of direct supervision over their treasury and finance activities.
How big is your finance and treasury team?
There are 15 people including support, project evaluation and investor-relations staff. Treasury per se consists of five officers.
What is a day like in M&M's treasury?
There are myriad other things that happen during the day -- banking, trade financing, end-of-day reporting, MIS [management information system], review and feedback and trouble shooting. This is not to mention project evaluations, credit rating exercises and investor relations activities that also reside within the treasury.
The treasury at Mahindra starts the day early with financial markets opening at 9am. The yields, currencies, stocks and securities are keenly tracked and the outlook quickly digested. Soon follows the treasury's management of cash flow that is like a well-tuned orchestra -- treasury seniors interact closely with businesses to map the movement of funds into pooling accounts, fulfilling various cash needs and ensuring that by midday the float in the system is nil and the investments are completed in accordance to a well laid-out, surplus-funds-investment policy. The company maintains a surplus most days. The back bone of our treasury is a well-defined policy that lays down clear mandates which are, in order of priority, safety, liquidity and return.
On the currency side, a typical day revolves around impromptu meetings on currency movements in markets and debates on instruments of hedging. Here again, the policies are well drawn out -- no hedges without net underlying and adopting a golden mean in terms hedging percentages, for example neither 100% nor 0% covers. The overall policy guidelines are again set by a forex committee and we adhere to a system of back-, mid- and front-offices to ensure best practices and sound risk management in our surplus-investment funds and forex management.
How do M&M's subsidiaries and overseas operations fit into the group treasury?
The group companies in a sense enjoy the relationship of a federal structure that brings in a linkage of responsibilities and autonomy. One of the clear responsibilities is about deploying common policies and management standards in all aspects of financing.
Another important management facet is that subsidiaries fall under their respective sector -- say auto or farm equipment -- in terms of their activities and the sector CFOs function, along with other responsibilities, as a vital links in oversight. This brings in all-round accountability in the authority structure.
In your opinion, does M&M employ any special treasury practices?
The special practice that M&M's treasury has sought to suffuse is the financial balance metrics -- evaluation of the portfolio of investments under the rigorous scrutiny of a financial scale. While finding a place for passion in the scheme of things, the metrics bring in long-term financial sustainability as a measurable yardstick. We have reasons to believe that this approach has yielded us much benefit during difficult times leaving Mahindra to carry abundant cash on its books in extreme situations throughout the past year.
Mahindra Group was recently named one of Credit Suisse's 27 great brands of tomorrow. From your perspective, how do you plan to build on this distinction?
We do believe that by remaining true to the company's core values and the finance department's declared mission of being at the cutting edge of financial expertise, through proactive business partnering, nurturing an empowered team of professionals and sticking to our fiduciary responsibilities, we can enhance and expand the Mahindra Group brand capital. By building the back bone of a strong and vibrant financial architecture within the group and acting as a bridge between the universe of investors and group management, the finance and treasury function can seek to create brand and stakeholder value.