Every week on the Unstoppable Indians, we take a journey into the life of an outstanding Indian, a person whose talent, acumen or moral example is transforming India. The best and the finest from every field join Manvi Dhillon on the show to share their life story and their journey to success.
Our guest this week was a man who heads India’s largest mortgage house. He is widely admired by India Inc and is a trusted advisor to the government - the one and only Deepak Parekh, chairman of HDFC.
NDTV: Mr Parekh thank you for joining us on the Unstoppable Indians. When one is sitting across Deepak Parekh, there are so many questions to ask and I have no idea from where to begin, so I’m going to start with a fun question. I know that you are a Bridge enthusiast and I’m curious to understand how you keep that going?
Deepak Parekh: Well the weekends are there. You learn to play bridge or enjoy bridge in your student days. I studied in England and the climate there was miserable. So what do you do in the evenings? You play bridge.
NDTV: And you kept that going?
Deepak Parekh: I kept that going. I want to play everyday but I don’t. So, after I retire, I’m going to play everyday.
NDTV: Shifting gears to more serious matters like the ‘state of the economy’ and I think many people want to hear it from you. Has that recovery environment kicked in? Are we finally on the growth path again?
Deepak Parekh: Well I think it’s too early to say. The best news we have received is the election results. And it is amazing that the recognition of India’s results is a victory for democracy, it’s a victory that a small man, a man on the street, an uneducated man, a man living in slums, a man living in rural India still votes for a national party, one of the two national parties. So I think it is he or she who knows that it’s a general election of the country. Let regional parties / local parties not run the centre and I think it is the victory of the Indian people and the victory of Democracy. And the best news we’ve had is that we have a stronger government, irrespective of whether it is Congress or BJP but we need a two-party system not a 50-party system.
NDTV: And a stronger government makes you optimistic of better growth because growth can be managed better?
Deepak Parekh: Of course, most certainly because now they have no excuses, previously the government had excuses that the Left is not allowing me to do this; this is coming in the way. Now there are absolutely no excuses so I think now the Congress must perform, the ruling party must perform.
NDTV: The two I’s - Inflation and Interest rates, the levels that we are looking at. Are they stable now?
Deepak Parekh: Well I think the interest rates are stable, I don’t see interest rates going up, possibly going down by another 50 – 100 basis points- that’s the maximum. But I don’t see interest rates shooting up, maybe 2 – 3 years later when infrastructure projects take off, when demand is there on money, interest rates may inch upwards but for the next year or two I don’t see interest rates shooting up. As far as inflation is concerned, as you know the WPI is really low.. it’s almost 0 – 1% but we have to bring the consumer price index down and CPI still is around 6 - 8%, so the fear amongst economist is that inflation will start hitting India a year from now when the government starts spending more money and when some of these projects take off, when the liquidity starts drying up, there is more demand for money. That’s the time even the global economy is such that the commodity prices are low, oil is at a reasonable $60 so at the moment the indications are inflation is not a concern anywhere in the world.
NDTV: But it is hovering in the subconscious?
Deepak Parekh: It is. It is always hovering in the subconscious, but again I don’t think it is a concern or an issue or a worry for the next year or so.
NDTV: While on the subject of economy, I have to ask you about property prices and again stability there?
Deepak Parekh: You can’t generalize, because different parts of the country and different parts of a city react differently. The demand in South Mumbai for instance the prices may come down much more steeper than in Thane. So you know in Central Delhi the prices may come down much more than in the suburbs in Noida, because there the base is small so the chances of it coming down to 30 – 40% is not there. But in some places they have come down 30%. I would say on an average across the country real estate prices have come down 15 – 30%.
NDTV: You predicted this property bubble 2 years ago, what does it feel like to be in that position of “ I told you so”?
Deepak Parekh: I must say that 2 years ago I expected this to happen so I have been totally wrong. I was off mark by 2 years almost, because 2 years ago I used to say they are unsustainable, they are impossibly high. They have to come down but they just went on going up so you know I don’t think I guessed it right. But for the housing sector, for India’s economy its not good to have such high property prices because you take so many people out of the market and where would people live, it is a necessity, housing is a necessity, you want a property owning democracy in India and you must ensure that housing is within the reach of the common man. Otherwise it defeats the moral or the principal of democracy.
NDTV: But it is that philosophy that continues to drive HDFC even today and I can tell from the passion in your voice that, that is the ultimate goal. Coming to HDFC, we can talk about each business and what’s going on. But essentially I want to get a sense from you, that from now on is there going to be one big idea that you are going to be working on or is it going to be incremental growth, changes and tweaking in all of the businesses?
Deepak Parekh: Well as you know I have announced that I’m going to retire. So obviously it is for the new management to think what they want to do, what greater vision or where they want to take the company. But see we have survived and survived well for 30 years handling one product. HDFC the parent companies is mortgage company and an investment company, so mortgage is our only product. We don’t have any other product. But because of the shortage and demand we have talked about, I think we have to continue, we have not even scratched the surface, we have to go more interiors, we have to go more to smaller cities and make this facility available, so that everyone can dream and own a house. So I think there is a lot to be done in this sector. So I think HDFC will continue to do that. As an investment company we own a part of the bank, we own a part of an insurance company, asset management, non life property and casualty company and all these companies have been growing. If you take our last 10-years we’ve grown at 25 – 30% on an annual basis, year on year, so the compound in annual growth rate has been extremely high, despite the denominator being so large we are still growing at 20 – 25%.
NDTV: Very quickly I want to understand the asset management company and the insurance business. There was talk of the IPO business in August – September, so those timelines pretty much stay?
Deepak Parekh: No the timelines have differed a little bit because we’ve had a couple of bad quarters in every sectors, because October onwards till February – March, I think most industry financial sectors, they all had taken a beating because people differed buying and there were global issues which for some odd reason impacted us also in the financial sector. All though, our banks have been strong. We don’t have any of the problems that the western banks have, so the issues should not have impacted us but in October – November it did impact us. But anyway, those days are behind us and both these companies will do an IPO but I think it will be sometime in calendar year 2010.
NDTV: The other idea which has been talked about, and one gets a sense that it is something in the sub conscious, is that of the Holding Company format. Does that continue to stay?
Deepak Parekh: Certainly there are a number of options we have and I don’t think we will be able to achieve everything in this year but there are options which any parent company or a group always thinks and talks about and plans about. Holding company is certainly one option. There are many other options we can think of but we have to see what the Reserve Bank’s view is on the Holding Companies.
NDTV: Would it be fair to say that that’s not the number one thing on your list between now and December 31?
Deepak Parekh: It is one of the top things on my list.
NDTV: So what are the other 9? Because, we are talking about a really short period here.
Deepak Parekh: What to do after I retire?
NDTV: I can imagine that will be a challenge, because I think it will be a systemic shock to you to have time on your hand.
Deepak Parekh: But everyone tells me that after you retire you become busier than while you are working. So I don’t know. I will have to wait and see how it will goes.
NDTV: But I’m utterly skeptical of whether you will actually be able to entirely walk away?
Deepak Parekh: No what I will do is that I will continue to be a non-executive chairman of HDFC. Today I’m the executive chairman so I won’t look at day-to-day. I will preside over board meetings and on strategy and things like that, but I will not do the day-to-day running in the company. So I don’t have to come here the whole day, I may not have to come here for many days of the week.
NDTV: But you would in some sense also continue to play mentor to HDFC?
Deepak Parekh: Well you know after you retire, if the people who are running the company ask for your advice, you can give it on your own. That’s because people who take over have aspirations, they have their own ideas, they have plans, they have their own visions and you must let that flourish. So mentor is there if advice is needed. But mentor should not push himself and give advice unless he’s asked for. I wish I could do that. I’m still a little skeptical because after being here for 32 years, can I walk away, can I keep quiet if I see something is going wrong, or something is not going the right way. Some of my senior colleagues feel that nothing will change but I feel everything will change. So let’s see what happens.
NDTV: But you must get comfort from the fact that the leadership team is a team that you have worked closely with in all the companies and we are talking about decades of joint work here, so that has to give you confidence and satisfaction.
Deepak Parekh: Huge satisfaction, particularly as you know we emphasize on value system, on integrity and we are known as an honest organization and that is where my confidence is 100% with the senior management of all the companies we have in our group, that we have inculcated that habit amongst everyone and it is that we are trying to portray and trying to give to younger managers and younger leaders that it is absolutely necessary. To succeed ,you have to be honest, you can survive and make money and be prosperous not being corrupt.
NDTV: I have heard many descriptions of you as a leader- is accessible, sort of casual. But they say you are very hands on and you like to dive in to whatever it is. But in your own words, what kind of a leader are you?
Deepak Parekh: Well you have said it. I’m accessible to anyone, even to strangers- open door policy but hands on. If I’m in-charge, I would like to know what is happening. I think you must give a little free hand to your senior managers to perform, if you see them not doing well or not taking the right decisions or moving in the right manner, you have to pull them up or advice them to do it in a different way. But the key in leadership is you must be in close contact with your managers on a regular basis, you cannot sit separately and say that I’m the CEO and they sit separately. You have to sit in the same building, it makes a lot of difference.
NDTV: Government has turned to Deepak Parekh for all sorts of advice, on all sorts of policy issues. You have been actively involved with banking, insurance, power, you know the turn around of UTI’ s unit 64 and most recently of course trouble shooter at Satyam and your entry into the board of Satyam lifted hopes overnight. What is it about you? Do you think that makes you Mr troubleshooter?
Deepak Parekh: Well first of all when someone asks me to do something, my weakness is I can’t say No. So I get involved in all kinds of things and that is a weakness.. But basically I guess people look at clarity, what needs to be done. When six of us went into Satyam, we knew that we had to quickly find a buyer and in a transparent manner. Otherwise 6 months later, there would not be any Satyam, the clients would disappear, then what do we have, what will the people do. So you know that clarity of vision must be there when you do a policy paper that what do you want to get at and how do you get to it. The road must be clear and transparent and straight forward.
NDTV: And you are obviously able to see that road fairly clearly?
Deepak Parekh: Yes. In Satyam, we all saw that road. Our role was to turn it around and it was India’s image, it was the IT sector which gives us the maximum amount of foreign exchange and we did not want to tarnish India’s image in IT, so you know for 3 months, all 6 of us literally, every week were in Hyderabad.
NDTV: I want to ask you a personal question. Of all of the policy action that you have been deeply involved in, what gives you the greatest sense of satisfaction in terms of “Gosh I’m glad I was involved and steered that”
Deepak Parekh: Satisfaction is.. “thank god its over”. Like you know all of us at Satyam also, we feel that our job is done, although we are still on the board but Tech Mahindra people are really running the show and government has still not removed us from the board and we feel that we may have some role because the open offer is still happening, it is in the process. But when you do an assignment you are really relieved after its over, so that is the satisfaction.
NDTV: We have a new government Centre and I think there is almost somewhat over hype in terms of expectations. Play advisor to this new government; prioritize for them, their immediate tasks?
Deepak Parekh: Well there are a number of tasks ahead of them, infrastructure is one, education is one, and you know we have lost many years in the HRD ministry. India as we say is a young country- some 50-60% of the people are below 30 and I think HRD ministry is one of the most important. How do we educate our youth and we have lost a lot of time on that. Employment is another issue. The government has to do more spending on social sectors like health and education, we are already running a big fiscal deficit. We cannot afford a higher fiscal deficit, concern of the economist is that you cannot sustain a 10 per cent fiscal deficit for all times to come. Now, how do you raise more resources when you need to spend money in infrastructure, you have to spend money on social sectors like health and education? You have to raise some money, some resources have to come in. How do these resources come in? I don’t think government is in a position to increase taxes straightaway, disinvestment is possible and I think you will see disinvestment and some announcements have been made. For instance there are many companies in the public sector where the government holding is 80 – 90 per cent and there is enough room there to come to 51 per cent. ONGC is the largest market cap in India why can’t government holding come down to 51 per cent. NTPC is 88 or 89 per cent it generates 1/3rd of our power, and it is a large market cap one of the top 5 market caps it can easily come down to 51 per cent and government can raise a huge sum of money which can be plugged back to the power sector because there is an acute shortage of power and we need to invest much more money in power than what the budget can give you.
NDTV: When you say these things Mr. Parekh I’m trying to believe that these things could actually be thoughts of government right now. Is it, what you have just expressed on a scale of 1 to 10, the probability of action coming through on such fronts.
Deepak Parekh: I think you will see some action, as I said that they have no one else to blame if Congress has to remain a national party, they want to come back into power, they have to demonstrate, we need action, we need results.
NDTV: For instance even on things like FDI and Insurance, do you think it’s on the radar?
Deepak Parekh: I think it’s on the radar, I think even insurance is on the radar it’s been on the radar for many many years but the Left was not allowing the government to open up the insurance sector upto 49 per cent, we don’t want more than 49 per cent but are just saying 49 per cent. I think that is a probability and that itself can bring in $5 – 10 billion. There are 40 insurance companies in India, Indian companies with foreign partnerships. And many of these companies as we talked about want to do an IPO, so again with an IPO you get foreign inflow, the simple fact is that immediately after the election results the rupee has appreciated 10 per cent.
NDTV: I want to turn the spotlight back on you, your sons are early career professionals now, what advice would you give to them as they navigate the corporate landscape and other young managers?
Deepak Parekh: First of all I don’t think children these days take any advice from their parents, I think its universal and parents should not give advice to children. If they want they come to you otherwise you have to let them do what they want because it doesn’t work and it brings unhappiness everywhere. So its better to leave them alone.
NDTV: Okay advice for all the other young managers out there?
Deepak Parekh: I think there is enormous opportunity in India, the growth is going to be in India, we may not think the growth is going to be in India, but the entire world thinks the growth is going to be in India. Anywhere you go, I have returned from Scandinavian countries and I met half a dozen investors there from countries like Denmark and Sweden. They want to invest their money and their pension money in India because they say that they see a great future for India- much better than what we see today in our eyes. So the youth must be convinced that future is here, you will get opportunities, you need to be patient. So I think the craze of Indians going abroad is over and the young Indians complaining that opportunities are not there is over. I think there are enough opportunities in India, there is enough opportunity for entrepreneurs in India and there are many many entrepreneurs who have proved that. What we need to do is we need to have more funding for entrepreneurs that risk capital is still missing and somehow we need to create that risk capital where thousands of Indians can use that money, even if 10-20 per cent succeed, your money comes back because the ones that succeed give you a far higher return. So that risk capital is something we need, so that Indian entrepreneurs who have vision, who have passion can look at starting a new project.
NDTV: You have power and influence in your life and I’m sure that’s also taught you that power and influence needs to be handled carefully. Has there been any real learning on that front as well?
Deepak Parekh: Don’t use your power because you are learning everyday as you go along in life, you learn everyday.
NDTV: Deepak Parekh, December 31 and its retirement time. What will you do on a daily basis? Is it going to be bridge?
Deepak Parekh: It’ll be everyday bridge and other things. We’ll meet in January or February again.
NDTV: Well I’ll look forward to that. All the very best for the months ahead and ofcourse the fun times post December because you are quite categorical about that. Thanks so much for joining me on the Unstoppable Indians.