Y.C. Deveshwar on Governance

The author notes the announcement surprised the market: ITC's board retained a 40% stake in the new ITC Hotels entity rather than a clean spin-off. The ITC share price fell from Rs 471.35 on the announcement date of July 24 to Rs 442.60 by September 25. Analysts questioned whether ITC was wary of fully cutting the umbilical cord with hotels, and whether a perceived takeover threat drove the decision to keep a controlling stake.

Founding Fuel notes the historical irony: in the early 2000s, ITC under Deveshwar accumulated shares in East India Hotels (the Oberoi Group), reaching 13.69% — just below the 15% open-offer trigger of that era. Deveshwar publicly maintained the stake was a financial investment, not a takeover attempt.

The column recalls that ITC also built a roughly 13% stake in the distressed Hotel Leelaventure between 2008 and 2013, and attempted to increase that stake in 2019 when Leela tried to sell its assets to Brookfield. ITC sought a Sebi stay on the sale, but the Securities Appellate Tribunal rejected its appeal in September 2019 — leaving the matter pending before the NCLT.

Analysts, Founding Fuel observes, were never happy with the hotels division's performance. While it accounted for 20% of total capital employed, return on capital employed stayed in single digits and contribution to the topline was insignificant compared with the healthier performance of tobacco, paperboards, agri and FMCG. Critically, erstwhile parent BAT — still holding 29.1% —.

Deveshwar's relationship with British American Tobacco (BAT) — the 29% shareholder in ITC — is described as the defining corporate battle of his career. In March 1995 BAT publicly claimed a lack of confidence in ITC chairman Krishan Lal Chugh, alleging financial irregularities in the power-generation business and pressing for a majority stake. In reality, Open reports, BAT wanted cash-rich ITC's funds for itself.

Deveshwar is quoted dubbing ITC 'India's Trademarks Corporation' — a phrase that recast the BAT-controlled cigarette maker as a national champion rather than a foreign subsidiary. The phrase mattered because it gave ITC a nationalist halo during the hostile takeover fight and aligned the company's identity with the post-liberalization ambition of Indian firms defining themselves against multinational parents.

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 —.