Quick Gun Damodaran

Today a satisfied finance ministry has given him the extra charge of heading Industrial Development Bank of India IDBI too which is facing a crisis of confidence, if not a total collapse.

Says ICICI Bank CEO and managing director K V Kamath: 8216;8216;Damodaran is a great leader8230; after what he has accomplished in the UTI, I am sure IDBI will have a great future.8217;8217;

When Damodaran took over as UTI8217;s chairman two years ago, the mutual fund was in a great mess see chart. Damodaran8217;s predecessor P.S. Subramaniam was shown the door by the government as UTI8217;s and India8217;s biggest mutual fund scheme US-64 worth Rs 15,000 crore faced a collapse following accumulation of huge non-performing assets and massive withdrawals.

UTI had made wrong investments calls on both new projects as well as in the stock market operations. The investors 8212; who were till date getting good returns 8212; were taken aback when told that the trading on the scheme has been suspended due to huge losses. No wonder investors as well as the government, fearing voters8217; backlash, were angry with Subramaniam.

The government zeroed in on Damodaran who had by now accumulated rich experience in turnaround cases. His first big challenge was in the tiny north-eastern state of Tripura where, as chief secretary, he had to hold elections during turbulent times. Later, as officer on special duty in the Reserve Bank of India during 1999 and 2000, he was instrumental in getting three weak banks 8212; UCO, Indian Bank and United Bank 8212;out of the woods.

In fact, the steps initiated by Damodaran to salvage these three weak banks had already gave him a tag 8216;8216;turnaround CEO8217;8217; in the financial sector. The UTI experience reinforced this title. Finance gurus in Mumbai are now keenly waiting for his IDBI initiatives.

8216;8216;I will free UTI offices from vested interests and shady groups,8217;8217; Damodaran told this paper after taking charge at UTI two years ago. UTI insiders say that he has accomplished this job perfectly. His first job in UTI was to let investors know that the UTI will remain as strong as ever but it needed time. He also sewed up a deal with the government as UTI was split into two separate funds. One holding all the assured return schemes UTI-I and the other holding all other good assets UTI-II.
8216;8216;I have taken it upon myself to get a five minute slot before the popular programmes in the All India Radio AIR to reach out to the masses who have been investors in our schemes from the beginning. In these slots we will have our experts speak in a lucid manner about the benefits of our schemes that will in turn convey the message to the very grass root level,8217;8217; says Damodaran. Apart from Damodaran8217;s initiatives, the government also extended a generous package which has grown to Rs 4,666 crore as on August 12, 2003.

With the situation getting better, investors started flocking back to the UTI. Success of the debut fund of UTI MF, UTI Liquid Fund in 2003 which mopped up nearly Rs 1,100 crore in two days and SUNDER, its exchange-traded fund which collected nearly Rs 390 crore in in its initial public offering IPO, are testimonies of the UTI8217;s success.

While Damodaran may be a satisfiedman with his UTI8217;s stint, his next job 8212; though interim 8212; at IDBI is equally daunting. Says Chairman and managing director of Corporation Bank, K Cherian Verghese: 8216;8216;The challenges before IDBI are huge. In spite of the huge non-performing assets one should not forget the positive role played by the development financial institutions DFIs in industrialisation of this country. IDBI needs to tackle the problem of NPAs plus keeping the growth momentum of the economy.8217;8217;

Agrees Kamath: 8216;8216;I do not want to talk about IDBI per se but the first thing any incumbent should do is to clean up the balance sheet, identify revenue growth areas and execute the growth plan. Any DFI needs a great leader for facing the challenges of tomorrow.8217;8217;

Today the Indian financial sector is witnessing a massive transformation with all banks and the FIs targeting the retail sector. The IDBI is reeling under bad loans worth over Rs 16,000 crore which even threaten its existence. Enron, for example8212;one of the biggest NPAs to the tune of Rs 2,300 crore8212;in IDBI8217;s books but the FI does not have the guts to admit it to its shareholders.
Against this background, Damodaran will have a tough time managing the IDBI8217;s affairs. But knowing his background and patient, but firm, temperament, don8217;t get surprised if you see a new IDBI two years from now.

MBA in Tripura8217;s killing fields

When posted as a young IAS officer in Tripura, M Damodaran perhaps was not aware that his experience in the tiny state will come in handy while working in the country8217;s financial capital three decades later.

The 8217;70s and 8217;80 were a tough period for the State which was beset with a host of problems. Insurgency was one of them.

8216;8216;It was a good experience for me. The north-east region had its own problems,8217;8217; Damodaran told The Indian Express in one of his interviews. Though he originally belongs to Kerala, Damodaran opted for the Tripura-Manipur cadre in 1971. He served the State when the region was rocked by a series of insurgency problems.

Born on May 4, 1947, Damodaran has had an illustrious academic career prior to joining the IAS. A rank-holder in economics from the University of Madras, Damodaran subsequently graduated in law in the first division from the University of Delhi.

Damodaran also worked in various Ministries of the Government of India and Government of Tripura from 1979 to 2000 in several capacities, including as Chief Secretary of Tripura in the mid-80s.

He returned to Delhi in the mind-1980s and joined the finance ministry as a joint secretary. He was in the North Block for over four years before the then Finance Minister Yashwant Sinha sent him to the Reserve Bank of India RBI as an officer on special duty to oversee the turnaround plan for three public sector banks 8212; Indian Bank, Uco Bank and United Bank of India.

He initiated the restructuring plan for the three banks in the early 2000. 8216;8216;I was hopeful that the banks would come out of the red,8217;8217; Damodaran told this newspaper in an earlier interview. All the banks have since then turned the corner and started making profits.

8216;8216;The way he tackled the sickness of sick banks prompted the Finance Ministry to send him to salvage the UTI which was reeling under massive shortfall, redemptions and mismanagement,8217;8217; said an RBI official who watched his performance in Mumbai8217;s financial sector.

UTI was restructured by splitting the trust into two. He also got a bailout package from the government. Thus when IDBI chairman Padmanabh P Vora retired on September 30, 2003, the government did not think twice before bringing in him as interim chairman. IDBI is in a financial quicksand: its non-performing assets are soaring, asset size is shrinking and profits are under pressure.
It8217;s going to be another restructuring and confidence-building exercise for the bureaucrat-turned-fund manager-turned-development banker..