Dhanalaxmi Bank when it was just transforming from being a "Dhanalakshmi Bank"
Dhanalaxmi Bank when it was just transforming from being a "Dhanalakshmi Bank"
For the first time in his life, 40 year old
Amitabh Chaturvedi wore a dhoti, the traditional attire of Kerala on October
19, 2008. It was his first day as managing director of Thrissur based
Dhanalakshmi Bank and his first stop even before he entered their headquarters
at Naickanal in Thirssur was at Guruvayur. The Krishna
temple at Guruvayur permits only those who follow thits dress code. For
Chaturvedi, the decision to don the new garb was also symbolic of the adhering
to the cultural traditions of the God’s bank. The bank which was started by a
handful of Brahmins in Thrissur is the banker to two of Kerala’s important
shrines, Guruvayur and Sabarimala.
Chaturvedi was prepared to adapt and
convince the bank steeped in tradition and old
world banking that the new management will
transform it, even while maintaining its identity. For, outsiders it seemed a
peculiar mission as Kerala was a daunting territory. Vested interests and
labour unions have always come in the way of takeovers and transformations. “There
were no vested interests here and with the union it was the way we communicated,”
says Chaturvedi. He had done his due diligence about the quality and of the
bank when he decided to go through the recruitment process at Dhanalakshmi. The
panel of the bank with less than 200 branches and majority of them in Kerala,
included eminent former bankers like Janaki Ballabh and HN Sinor.
Dhanalakshmi Bank had shed community
association long back and by the time Chaturvedi joined it had technically
become a professionally run bank and not promoter controlled. The main
challenge was to guess probable questions from the employees and get them
answered even before they were raised. One was to assure them Thrissur would
continue to be the Bank’s headquarters. If there were fears about job losses
with new management, it was cleared with the announcement that there would be
no voluntary retirement scheme. In fact, employees got bounteous across the
board salary hikes and were assured of becoming future shareholders of the Bank
through an ESOP. Employees were easily won over and that mindset change is the
first victory, declares Chaturvedi.
The endorsement to a dramatic change of
scene at the bank comes from N.R.Balasubramanian, a senior heading Mumbai
operations and the grandson of one of the bank’s founders. It has been a long
journey for him and the bank, as he recollects the day he tookover as a branch
manager of branch that did not even have a telephone. “I had to go the local
post office to make a call. We are happy now we have a dynamic management and
the transformation they bring,” says Balasubramanian. The tradition was to keep
a hawk’s eye on the bank’s loans as the core principle was to safeguard every
penny the shareholders and depositors put in the bank.
Being God’s bank gave Dhanalakshmi the
visibility in Kerala but that was not fully tapped by consecutive managements
to grow the bank. For long it held a position in Reserve Bank of India Bangalore
Things have panned out well and in a systematic
way for the bank since then. G.N.Bajpai, former chairman of LIC and SEBI who
was a director on the board was nominated non-executive chairman in April 2008.
An investment banker in the know says, he was known to the earlier chairman and
Rao too willing to shed his stake to comply with RBI norms if the management
passed into strong hands under Bajpai’s guidance. Soon he got Mumbai based high
profile chartered accountant Shailesh Haribhakti to join the board. Former State
Bank of India hand and
Credit Information Bureau chairman S Santhanakrishnan
is another member of the new board. If all those changes went unnoticed, it was
Amitabh Chaturvedi’s (ex-CEO, Reliance Capital) appointment as CEO in October
that turned Mumbai’s attention to Dhanalakshmi Bank. The news flow has been
constant since then about additions to the high profile management team.
“Obviously these
big names are not coming together on their own. There is larger force that’s
bringing these people together. I don’t expect Bajpai to wake up after
retirement and suddenly take up chairmanship,” says an investment banker based
in Chennai Bajapi could not spare time for an interview. However, Chaturvedi as
also Haribhakti said it is the passion to work with life minded persons and a
fundamental motivation to transform the bank and create an institution that has
brought the top notch professionals to a bank with mere Rs 3000 crore advances
and Rs 4000 cr in deposits.
Immediate aim is
to grow the loan book and go in for another round of capital raising asserts Chaturvedi.
Last year’s rights issue has placed the
bank in a comfortable capital adequacy position of close to 15 per cent. Once the
loan book grows and the CAR falls to 12
per cent, the bank plans to first go for an additional 10 per cent equity
issuance under ESOP, followed by another rights issue. The Bank has applied for
additional 68 branches and hopes to execute it in four months from the time
approvals are obtained. “It is possible to do, if the promoters can bring in
more capital,” says V.A.Joseph, MD & CEo another Thrissur based bank. South
Indian Bank is not only a co habitant neighbour but also a shareholder in
Dhanalkshmi Bank.
Today,
Dhanalakshmi is a professionally managed bank with technically no promoters to
depend upon for the necessary capital. “I don’t believe we are ever going to be
short of money,” says Haribhakti. He was already a member on boards of 15
companies, the maximum permissible limit under Company Law when Bajpai offered
him a seat on Dhanalakshmi Bank. He quit one of those boards to join the Bank. So,
the management as well as money is taken care of and the execution ability that
would be watched closely. Chaturvedi has been quick to bring on board a dozen
top executives with vaired experience to prepare the bank for the top five slot
among private sectors banks in the next five years.
Would all this
value creation efforts make the bank an attractive take over target? Inference
is drawn to indicate how the Centurion Bank of Punjab absorbed the Bank of Punjab and Lord Krishna Bank under Rana Talwar and
finally got taken over by a large bank like HDFC. “After the stakeholder issue got resolved and
the networth crossed Rs 300 crore, it had become an eligible bachelor,” said
A.D.Navaneetham, former chairman of Dhanalakshmi Bank. But he is quick to add
that he does not see any sinister takeover effort by anyone and points to the
strong RBI regulations. Anyone picking
up stake in a bank upwards of five per cent has to obtain RBI approval and no
single entity is allowed to own more than 10 per cent voting rights.
This is a point that has been emphasized by
insiders as well as experts outside. Having worked with Reliance Capital, and
knowing Reliance’s interest in obtaining a bank, Chaturvedi’s move to
Dhanalakshmi raised questions about the connections. “We are not a proxy of any organization. We
will not allow anyone to takeover,” was an upfront message Chaturvedi gave to
the union and employees. P.V.Mohanan, representing Officers Unions at the Bank says
they are willing to believe that. “Anyway, I don’t think it matters even if
Reliance is behind this. I don’t know how it will affect anything.”
For now the 1400 employees are enjoying
more money, job guarantee and a whiff of fresh air. The change in atmosphere is
well captured by what K Rangarajan, DGM Planning says: “Change is of a very
significant order. Resistance to change has been won over through informality
of relationships. Today, I can call him Amitabh and get away with it. Five
years back if I had called the managing director by name, I would have open to
disciplinary action.”
P.S. This was also written in 2008 but never published.
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