Baptism by fire would perhaps be an understatement for Yogesh Chander Deveshwar, when he was appointed chairman of ITC in 1996. Just a day before he took charge, ITC received a retrospective excise duty demand of Rs 803 crore. That was just one of the many formidable challenges he faced: the company was neck-deep in unsavoury controversies - a predecessor who was in police custody for alleged financial irregularities in overseas deals, made worse by the company's strained relations with its largest overseas shareholder, British American Tobacco (BAT) that led to a huge smear campaign. As if those weren't enough, ITC's earlier diversifications into hotels and paper were faltering and a slew of new businesses such as edible oils, financial services and international trading sank without trace, thereby strengthening BAT's demand that ITC sticks to being only a cigarette company. But the mechanical engineer, who has spent his entire working life at the company once known as Imperial Tobacco, save for three years when he was invited by the government to run Air India, can look back with a lot of satisfaction at his 20-year stint as executive chairman, as he prepares to slip into a non-executive role from February next.
Mr Deveshwar stuck to his conviction that diversification is the way to go for transforming ITC from a cigarette maker to a fast-moving consumer goods (FMCG) company. He got rid of businesses that did not conform to his vision of ITC and merged paperboards and hotels with ITC. He reshaped the company's agri-business by nurturing e-Choupal and created a set of strong food brands - Aashirvaad and Bingo, to name a few. Mr Deveshwar also managed to build the hotel business into a respectable global brand and grow the paper business. He launched several new brands - a clothing brand (Wills Lifestyle) was just one of them. While some of these businesses have proved to be a success, Mr Deveshwar also learnt to be careful in future diversification ventures, avoiding the cash-on-tap temptation. That explains ITC's measured expansion in the personal care space. Much of this was achieved by nurturing new managerial talent, which is why choosing his successor is expected to be a relatively smooth affair.
The numbers speak for themselves. A shareholder who invested in ITC in 1996 when Mr Deveshwar took charge as executive chairman would have seen her investment grow at a compounded annual growth rate (CAGR) of 19 per cent while the Sensex has grown at 10.5 per cent a year over the same period. Consolidated sales, which the company started reporting from 2001-02, have grown at a CAGR of 15.6 per cent till the year ended March 2016 and net profit has grown 16.6 per cent a year in the same period. The tobacco business accounts for a lower percentage of ITC's turnover - from 77 per cent of consolidated sales in 2001-02 to about 42 per cent now.
His successor's biggest challenge would be to slip into the rather large shoes of Mr Deveshwar. It is common knowledge that the chairman, who acquired a larger than life image, has himself been driving ITC's strategy in a bid to ratchet up the growth rates and many of the key decisions emanated from him. And then there is the uncertainty over how BAT would move after his departure. But all that is in the realm of speculation. For the moment, Mr Deveshwar deserves full credit for keeping ITC an independent, professionally managed firm, which has been able to reduce its dependence on tobacco substantially.