Speak softly but carry a big stick: Shikha at Axis

LAST MARCH, the projects team at Axis Bank was working on the interiors of their new, 340,000 square foot corporate headquarters in Worli, Mumbai, when CEO Shikha Sharma made a couple of odd requests. That her office be no bigger than those of the other directors, 225 square feet. And that lots of glass be used. Applying design principles at the workplace was something
Sharma had got from her husband of 29 years, Sanjaya Sharma. “He thinks a lot about design principles, and introduced me to those concepts,” she says. Sitting in one of the glass-enclosed rooms—4,000 square metres of glass were used for the interiors—Sharma explains her motives. “I wanted to signal transparency and that we are a flat organisation.”

She influenced other things as well. Hemanth Yale, senior designer at Space Matrix Design Consultants, a Singapore-based firm that worked on Axis’s office, recalls a four-hour marathon meeting last August where she insisted that the shades of the fabrics and other materials “exactly match” the colour theme for that floor. “We were a bit sceptical about the colours she wanted (sea green and orange), but if you look at what has emerged now, there is an overarching warm hue that comes through,” says Yale.

These touches define who she is, say those who know her well. “Shikha is emotionally very transparent,” says a long-time associate, adding: “In the position she is, that may not necessarily be a good thing.” It seems to have won her fans though. An Axis old-timer says her predecessor, P.J. Nayak, was a career bureaucrat who came from a long, aristocratic line. “So even after an endearing tone that welcomed you into a conversation, you could see he was speaking from a pedestal. This is no longer the case.”

Former Life Insurance Corporation (LIC) chairman S.B. Mathur, now an independent director with Axis, explains how even the board’s dealings with the managing director has altered. “Earlier we had a CEO who was very bureaucratic, always in a dominant position and I don’t think there was much teamwork. Today the board questions the managing director on everything. There is a more thorough scrutiny that happens.” Nayak did not respond to Fortune India’s repeated queries. While nobody denies his business acumen, few believe his style was collaborative.

Sharma prefers a gradualist’s approach—and is changing Axis from within, in a way that only she can: unobtrusive, shorn of trumpet calls, yet determined. The bank’s already piled on an incremental Rs 28,995 crore of shareholder wealth during her 22-month watch. It was Rs 26,679 crore when she started, so she’s more than doubled it. Sharma’s not gunning for brute size, but value. She wants to make Axis one of the top 50 banks globally value-wise by 2015. Capital IQ, which provides data for global financial professionals, has ranked Axis 89th, behind ICICI Bank and HDFC Bank. There have been some setbacks as well. Her Rs 2,067 crore buyout (an all-stock deal) of brokerage Enam Securities has been assailed by the market and questioned by the Reserve Bank of India. (See box.)

Axis is perhaps at the same stage where ICICI Bank was when K.V. Kamath (Sharma’s guru in some ways) took over in 1996. Not in terms of challenges but in terms of possibilities. Thus, there are bets on the street on which bank Axis may finally resemble as Sharma goes on to fulfil the possibilities—ICICI Bank or HDFC Bank, Axis’s two bigger rivals. ICICI Bank has grown 17 times in the past decade, while HDFC Bank’s growth has been more conservative at 14 times. Dalal Street has rewarded both, with their valuations rising 35 times and 19 times respectively in the same period. Seshadri Sen, head of J.P. Morgan India’s equity research, says Axis is “positioning a change from a mid-corporate lender to becoming a premier private sector bank”.

There’s also the undercurrent of comparing Sharma with ICICI Bank CEO Chanda Kochhar. Both joined ICICI Bank around the same time (the early 1980s), rose to the top, and were in the running for K.V. Kamath’s job in 2009.

Asked which way Axis is headed, Sharma just smiles and says she would like to absorb the edifying aspects of both ICICI Bank and HDFC Bank, yet retain Axis’s individual identity. She then throws in a bit of homespun wisdom. “In both life and business, if you benchmark yourself with others and try to become like this or like that, you get stressed,” she says. “ When I came out of IIMA (the Indian Institute of Management, Ahmedabad), some of my peers went to MNC banks, earned fantastic salaries, lived in huge houses, and drove big cars. I was living in this tiny house, and travelling by public transport. I was very fortunate in the life partner I chose. Sanjaya and I didn’t really care a whole lot about this.”

SHARMA’S EARLY DAYS AT AXIS were mired in controversy, not of her own making. Nayak was scheduled to retire in July 2009, after a decade or so of building Axis into India’s third-largest private bank. Axis was the first private bank to kick off in 1994; it was promoted by a motley group of state-owned enterprises such as Unit Trust of India, LIC, and General Insurance Corporation. Analysts such as Punit Srivastava at Daiwa Capital Markets say Nayak’s biggest contribution was improving the bank’s current accounts and savings accounts (CASA) deposits as a percentage of total deposits from between 12% and 14% to almost 40% in less than a decade, thereby giving the bank access to low-cost capital. Nayak clearly thought he was entitled to appoint his successor. His choice: Hemant Kaul, head of retail.

However, the board (all eight members, other than Nayak) dismissed his choice. Kaul’s experience didn’t find any takers. The nominations committee comprising three independent directors—Rama Bijapurkar, R.H. Patil, and N.C. Singhal—appointed Egon Zehnder International in January 2009 to find a new CEO. Since Axis was already well established, they weren’t looking for a person who would try something radical. They wanted someone who could execute the existing strategy well. “The mandate, in short, was to find someone who came from financial services, and had the ability to pull a team along,” says Govind Iyer, partner, Egon Zehnder International, who led the search.

He identified around half a dozen candidates; Sharma was one of them. She was the MD and CEO of ICICI Prudential Life Insurance, the joint venture between ICICI Bank and Prudential. She quit ICICI Prudential on April 21, 2009, the day after Axis named her CEO, and joined Axis on June 1. But not before Nayak had quit in anger, at the board meeting of April 20. Sharma says those days were bruising. What she hated most was her two children seeing her “mug in the papers every day”.

Because of all the fuss, Sharma had been denied a handover, and was left with a bank to run. What was she to do with it? Within Axis, there were other fears. So far, she had worked only at ICICI—would she bring that culture over? How would she deal with senior employees who had been at Axis for nearly all their careers?

AS IT TURNS OUT, she handled things pretty well. Early on, she had been given books on what to achieve in the first 100 days. Many of her friends lectured her on the importance of this period, and she ignored them all. “This ‘100 day’ stuff was really stressing me out,” says Sharma. But she did listen to Iyer, who had brought her to Axis. He had figured that there was really nothing that needed immediate attention. “It was a bit like, why fix it if it ain’t broke,” he says.

Iyer also had insights into the bank, which she lacked. Between January and May 2008, Egon had spent over 300 hours evaluating Axis’s 16 top managers. “I pretty much knew each and every member of her team even before she joined. I said here is an outside, unbiased, nonagenda-driven feedback on each person,” Iyer says. His advice: In the first 120 days, just take stock of your people. In the next 180 days, put your thoughts into action.

She did just that. “I was talking to other CEOs to find out what the first 100 days were like for them, and wondering whether, by the end of that period, I could’ve a strategy for the bank. That’s all I was trying to achieve.” It also helped that the market didn’t have too many expectations. As an analyst with a U.S.-based investment bank says, the focus was on “P.J. Nayak’s exit, rather than her joining. To many, Shikha was an unknown entity, as she had headed an unlisted firm till then.”

Thus began a series of conversations with Axis employees, particularly with Snehomoy Bhattacharya, the HR head. “She wanted to understand the organisation structure, who did what, roles of key people, their backgrounds. As the HR head I took her through all of that,” he says.

This familiarity paid dividends later when Sharma hired Srinivasan Varadarajan as executive director of corporate banking, her first senior recruit, whom she had worked with at ICICI. His induction went well, mostly devoid of the ‘she’s now getting her own people’ feelings.

All along, Sharma kept absorbing what was happening around her. K. Ram Kumar, executive director, HR, at ICICI Bank, who has worked closely with Sharma for almost a decade, says: “She’s a very intuitive person and her ability to read a situation is amazing.”

Soon she started holding weekly meetings with her senior colleagues. “You know, five of the senior people sit down, shoot the breeze, and have a conversation,” she explains. Her colleagues resisted initially, claiming they would be better off finishing work. She suggested they give it a try and if it didn’t work, she would drop the idea. The meetings are now institutionalised, though they happen once a fortnight. Sharma considers this one of her big achievements.

But the idea that got everyone nervous, especially Bhattacharya, was the plan to hold a visioning offsite, about 90 days after she had taken over. The aim was to come up with a vision statement, an exercise the bank had never undertaken. “I think there was a lot of hesitation because not many people had participated in such an exercise, and she was planning to take a team of around 30 people, and not just restrict it to the very senior managers,” he says.

Sharma persisted, knowing that this could be her defining moment. She had done visioning exercises many times before—at ICICI Bank, later at ICICI Securities, then at ICICI Prudential. But it had always been with “my team, people I had hired”, she says.

Now, she had to win the credibility of managers she had inherited. “I stressed about whether I could get them to buy into my vision. This was the first time they were doing something like this and they were not my team, yet,” she says.

At the end of the two-and-a-half days spent at Devigadh, near Udaipur, in Rajasthan, the executives came up with a vision statement (focus on value, not size). More important, “they became part of my team, if not fully my team”, says Sharma. She counts this as her second big success.

She was getting a good idea of what needed to be done. In preparation for the next 180 days, she raised $784 million (Rs 3,768 crore) through a global depositary receipts issue in September 2009. This she counts as her third big success.

SHARMA MAINTAINS THAT SHE doesn’t want to overhaul strategy, merely sharpen it. As Axis’s executive director and chief financial officer Somnath Sengupta says: “She has riveted our attention to our strengths.”

One of the first things that struck Sharma was the bank’s infrastructure expertise. “People talk about IDFC (Infrastructure Development Finance Corporation) and other institutions; after a few conversations, I realised Axis had a very deep understanding of infrastructure,” she says. With M.M. Agrawal, then director for corporate and international banking, whom she calls “a fountainhead of knowledge on corporate clients and infrastructure”, Sharma set up an infrastructure vertical.

“We already offered a host of services such as underwriting, advisory, restructuring, cash and current accounts, and a lot of annuity businesses. The difference is that earlier they were all scattered across divisions. Now it is packaged better,” says Varadarajan.

He adds that the bank is keen to build its image as a last stop for infrastructure projects. “Earlier, if there was a road project, we would be one of the banks considered. Our aim is to be the first bank to be spoken to.” The objective: Think infrastructure, think Axis.

The realignment of Axis points to a more fundamental change quietly under way. At the heart of Axis lies the business it does with small and mid-size firms (turnover of up to Rs 750 crore), which accounts for 25% of corporate assets. A senior executive from a competing bank says what Axis really needs to do is to go after the big ticket projects, “where SBI and ICICI Bank are well entrenched”. Varadarajan is only too aware of that and believes that the big companies need to be wooed. This is why he’s built a team of 60 senior relationship managers to interact with the big companies. Rival bankers say that Sharma herself often leads the way. “It’s not as if she’s walking around with term sheets, but she’s definitely opening doors,” says one. As an analyst says, Axis needs to advertise its strengths more.

Bhattacharya concurs: “We’ve always been aggressive in business, we just haven’t talked about it.” Even Sharma says that when she joined she had no idea what Axis stood for, except that it was the third-largest private sector bank. One of the things she did was to hire Manisha Lath Gupta from Colgate-Palmolive as chief marketing officer to ensure the Axis story gets told. She also kicked off a brand-building campaign. The bank has earmarked about Rs 7 crore for branding. That’s paying off, with Axis Bank being the third most easily recalled bank brand according to a survey conducted by market research agency IMRB, up two notches since five months ago. “We realised that once you’re a customer, you’re happy with us. But if you’re not a customer, you don’t know what we stand for, so we have to work that much harder to get you to be a customer,” says Sharma.

The big question for Axis now: How aggressively does it want to grow? Comparisons with ICICI Bank are inevitable, if only because that’s where Sharma learnt her banking. One of the things that defined ICICI Bank over the last decade was its bid for scale, with the belief that with critical mass, all other problems and challenges take care of themselves. Sharma agrees that “without scale, you don’t earn the right to do certain things”. But she is quick to point out that she has seen the negative side of unrestrained growth as well. “You want to fly the plane, but you need to have the discipline to slow down when necessary,” she says. Sharma’s background in insurance also makes her more conscious of risk.

Sengupta, who has been with Axis for about 15 years, says the bank’s approach has always been to first understand the risks involved. Five years ago, while the retail asset market was booming, Axis was barely on the scene. HDFC Bank’s retail assets comprised more than 50%, and ICICI Bank’s was more than 60%. “We knew we did not have a good collection mechanism and risk underwriting standards, so we did not aggressively grow the retail book,” says Sengupta.

Sisir K. Chakrabarti, deputy managing director and head of retail at Axis, says in the next three years, retail advances should contribute 28% to 30% of the loan book. One indication of that: the 400 branches that were added last year. “We need a proactive, cross-selling culture. But we don’t want to hard sell. That will go against our roots,” he says.

The market expects Axis to grow at 25% to 30% annually. “Right now Axis is a strong bank. In the next decade, it should be viewed as a benchmark,” says Varadarajan.

SHARMA’S JOINING AXIS WAS one of those curious cases in India Inc. where a rank outsider had been placed in the corner office with no really grand task (turnaround, sell-off,
and the like) at hand. That suited her temperamentally. There was a time, a decade ago, when she almost quit ICICI to start her own IT firm. Kamath (“He really knew what made me tick,” she says) held her back and asked her to start ICICI Prudential. Now, she says, she doesn’t have to prove anything to anybody. “I’ve been there, done that.” For any CEO, that’s liberating.