Y.C. Deveshwar on Conglomerate Building

Reliance's recent moves are framed by Founding Fuel as altering the three-horse hospitality race among Taj, ITC and Oberoi. Reliance spent about $100 million acquiring a controlling stake in Mandarin Oriental in New York, then announced a tie-up with Oberoi Hotels to co-manage three properties across India and the U.K., including Stoke Park in Buckinghamshire.

Open Magazine's obituary frames Deveshwar as a nationalist and stalwart of sustainable business. Across two decades of leadership (1996-2017), ITC's revenue grew ten-fold from Rs 5,200 crore to Rs 51,500 crore, while shareholder returns compounded at 23.3% per year. The market capitalization at the end of FY2015-16 stood at $45 billion — almost 50 times the market value in 1996 —.

Deveshwar then went on what Open calls a diversification spree with a 'let's put India first' clarion call, transforming the Kolkata-based cigarette maker into a conglomerate spanning FMCG, paper and packaging, hotels, agriculture and information technology. When he took over in 1996, nearly 75% of ITC's revenues came from tobacco; by the time of writing tobacco was down to slightly over 40% of revenues.

Anand Nayak, former ITC HR head, tells Open that Deveshwar's greatest strength was articulating a mission framing ITC as a commercial enterprise with the overarching objective of 'putting India first' and creating value for the country. His concept of distributed leadership held that leadership was not concentrated with the top team but required at multiple organizational levels —.

Wharton frames ITC's transformation under Deveshwar as a journey from a single-product tobacco company founded in 1910 as the Imperial Tobacco Company of India to a multi-business corporate enterprise with turnover around US$6 billion by 2010. Non-tobacco businesses — foods, personal care, hotels, paper, agriculture and IT — accounted for about 40% of revenues by 2010.

Deveshwar joined ITC in 1968, became chairman in 1996, and from 1991 to 1994 served as chairman and managing director of Air India — a brief detour through India's national carrier between two ITC tenures. Returning to ITC in 1996, he faced the choice of staying in the comfort zone of a tobacco business ITC had run for nine decades or creating multiple new growth drivers to match the emerging Indian economy.

Deveshwar's diversification thesis, in his own words to Wharton, was unconventional at the time. He recalls being told conventional wisdom did not favor diversification as a prudent growth strategy. He countered with two beliefs: in an emerging economy with untapped opportunities, diversity managed well via innovative business strategies could yield significant growth; and that diversity could lend unique sources of competitive advantage unava...

On governance of a diversified portfolio, Deveshwar explains ITC's 'distributed leadership' model: a three-tier structure with the board handling strategic supervision, a corporate management committee handling strategic management, and divisional management committees handling executive management of each business. This clarity lets top management function with what he calls a venture-capitalist mindset —.