CashFlo Unscripted is a Indian business podcast where we speak to various businesses and finance leaders across the country, on topics relevant to the day.
We had the opportunity to bring Mr. Snehal Shah as a guest on our podcast – Cashflo Unscripted.
Mr. Snehal Shah is a CA by qualification and is currently Group CFO at Century Textile and industries ltd. He is a veteran leader in the financial industry with over 30 years of experience in many sectors. Being part of Century Textiles and industries ltd, Snehal has had an experience of managing finances of a diversified business, looking over textile mills, pulp, and paper division, cement division and more. His experience over the years has given him a nuanced and unique perspective on the functions of a CFO in a diversified organization. We were glad to have him on the podcast, hosted by CashFlo CEO Ankur Bhageria, to share his insights on the “CFO’s role in driving Strategy and Decisions for a diversified business”.
Before Century Textiles Limited (CTL), Snehal worked at Aditya Birla Group (ABG) and saw a broad distinction between the way the different organizations worked. There was a significantly different division of responsibilities between separate unit finance divisions and the central CFO.
The CFO role at CTL was more of a consolidator with different policies and processes at the units and only the long-term funding was done by the CFO. Therefore, when he took over CTL as the CFO, Snehal’s primary goal was to create a central finance division particularly for developing & owning standardized processes, systems and guidelines, and risk management across all the divisions. Currently, the role of the CFO at CTL is to provide broad guidelines for fund management and guidance to each division, annual reports, bank management.
“Its like being the custodian of the company assets and monitor the financial health and report any financial deviation to the board of directors”
The major challenge Snehal faced when he started working at CTL was the inertia from the organization towards proposed changes in the process of the finance department. Earlier the functions were carried out independently by each division but when attempts were made to centralize the process there was resistance. This took time and required Snehal, as the CFO to also spend time and energy in evangelizing new methods of working across the organization. Snehal had has the benefit of seeing these methods work at ABG, but needed to be sensitive to more traditional methods at CTL. Over time, changes in the operational model have proven beneficial to the company.
Snehal also elaborated on the basic operation model which is influenced by technology, people, configuration, ownership and are needed to be kept in mind while designing the process of the organization. Before deciding on anything the process needs to prove its efficiency, productivity, and profitability to convince all. This is a key consideration, because very often, leader may focus on only one or two benefits. This may not be enough to get a diverse organization behind a change.
Switching to challenges faced by CTL over the last year through the pandemic, Snehal feels that each and every organization during the pandemic faced problems and CTL was in the same boat as the others. Pre-covid, the textile and pulp business faced headwinds due to which the revenue and EBITDA numbers were low. Fortunately, the real-estate business, recently established, was growing.
The goal was to double-down on the growth of the real-estate business, but without cash being generated from the other businesses, CTL was stretched for cash. Through their association with a strong brand like ABG with a good credit rating, they were able to borrow from the market at a reasonable rate and raised upwards of 1100cr right before the COVID lockdown. This was a fortunate move that let them withstand the effects of the lockdown.
Contrary to our impression, being a diversified business actually made it easier to ride through this pandemic because one business could compensate for the losses of the other businesses. In the first quarter, there was a huge demand for paper and the government required CTL to start manufacturing. Q1 FY2020-21 was profitable for the paper business. By the second quarter, demand fell because people had stocked up on paper, but fortunately, the real-estate and textile business improved. As a result, different businesses were able to contribute and balance out each other’s struggles. As a result, cash flow was not too affected and CTL was not hit too hard by the pandemic.
We moved to a more personal note, talking about Snehal’s multi-decade career. Snehal believes that the role of a CFO has changed significantly – the CFO is no longer a silent member of the C-Suite, with little active role or power in the decision making. Now the CFO’s role has expanded, and he / she is involved in every important decision-making process.
“Now CFO is certainly involved in all and every strategic decision an organisation is taking”
When asked about the finance role in a diversified business, Snehal said that the way the strategies are made in a diversified business is by taking into account which business you are in, how much is it contributing to the top line and bottom line, what business cycle you are in and at what maturity stage you are in; and then decide capital allocation and where to give more attention. It is all about understanding the nature of the business and making decisions accordingly. This takes effort for the CFO to get a deep understanding of the business, the business cycles and make decisions accordingly. One thing a CFO needs to ensure in a diversified business is that there can be no “one size fits all” decision making process for finance, and especially capital allocation.
We could not end the discussion without some thoughts from Snehal for up and coming finance leaders. Snehal’s advice for the up-and-coming finance leaders is to not fall into the trap of thinking that finance is the single most important function in the business, a lot of critical decisions are made by sales and procurement teams along with the CEO. Therefore to make the best decision, finance leaders need to assess the imperatives for the sales and procurement teams and make decisions that support them. The major role of finance is to balance out the operations of the entire organization.