Chapter 2B: When the going gets smooth, the founders are dumped. When the going gets tough, the tough leave.
In mythology we speak of the creator, the sustainer and the destroyer. And so was the case with HDFC Ltd. The original founders were TN Nagendra and HT Parekh. The latter was just in a titular post retirement role. The types you take on if you don’t have interest in golf. The former had staked his career to make this happen. The true entrepreneur. Was Deepak the mythical destroyer ?
The sustainers were the first set of say 21 employees. Starting with Pradeep Shah at number one and ending with Ranjita Rao at 21. Employee numbers were in chronological order. Somewhere inbetween, Deepak Parekh had been para dropped into the party and given the top seat. The already retired Chairman saw no reason to retire. But the founder CEO had to retire at 58 to make space for his inheritor. Not unlike what investors do to founders today. This was after all, India’s first true private sector startup. One that got to an IPO within a year of starting.
HDFC had marquee investors – Aga Khan, IFC, World Bank, ICICI. Dewan Housing had similar investors. Aga Khan was honing his playbook. Outside of HDFC, he set up the DCB Bank on his own in India. And set up Habib Bank in Pakistan. This time again with a Citibank angle. The world as they say is round.
Before I go back to the cyber attack of 1994 from the earlier post and the merry go round called COSL and Prime – let me finish this train of thought.
India had unleashed its first round of liberalisation. India was broke and at the mercy of the world. A situation that IFC and its allies feasted on. Dr Singh was trying to re-read Paul Samuelson that he taught from in his DSE days. Those were not normal times.
One of his mistakes was opening up Telecom, Power, Insurance and Banking concurrently. The guard rails were easy to jump over. The ideal playground for mischief makers.
Dr Singh got one thing (among other things) right. He figured out that forex was leaking. Exports were being under invoiced. Imports of services and software which didn’t attract duties were being over invoiced. Remittances had tanked after the Gulf War. The war was over but remittances were not coming back up. He figured they were being retained elsewhere. The situation was dire. Any kid on the street will tell you that small time money changers can’t smuggle out billions of dollars. Or tens of billions. Every bureaucrat, every politician, every crony businessman, every large company …. Was keeping money overseas. And two large banks were facilitating this.
The problem is that neither was incorporated in India. And neither was willing to create a local subsidiary. Both the banks were operating as branches of the foreign banks. Which means they were scarcely regulated. And impossible to control. This couldn’t go on.
In preparation, Citibank created a Bank to further their agenda.
That was HDFC Bank.
