The morale at PwC is excellent now: Gautam Banerjee

Gautam Banerjee landed in India in October last year — just as the Satyam Computer Services scam was hitting the company left, right and centre. It almost took PricewaterhouseCoopers (PwC), one of the Big Four audit firms in the world, to the cleaners.

Banerjee, who was chairman of PwC’s Singapore outfit, was drafted quickly by the global head office and sent to firefight. His unenviable mandate was to salvage the firm’s reputation.
A year on, the mood at PwC is one of optimism and calm; most clients have reposed their faith after the initial scare when 17 partners from the tax practice along with their staff quit.

Banerjee is now handing over charge to Deepak Kapoor, who was elected by the Indian partners of PwC. Kapoor takes charge in January.

He will return to Singapore, but, as he says, in an interview to DNA, whenever he writes his memoir, his India stint will be an important chapter. Excerpts:

Yours was a short tenure. Tell us something about it…
It has been a unique experience. On balance, I remember some great moments and some obviously frustrating moments. I am glad that I had the opportunity. I left India when I was sixteen. In terms of interactions with regulators, bureaucrats and clients, I spent quality time with some of the icons of Indian industry.

But my family is in Singapore and I have some obligations to them. I had a great opportunity to be a part of a very vibrant environment.

The first thing that struck me when I went around talking to people was how much of a brand we have built in this market. We’ve been here for 130 years. The client loyalty which we have enjoyed over the years was an eye opener. The clients were waiting for us to make sure that we addressed our issues. And a majority of our clients stood by us even though competition was trying to woo them away.

We had to do something similar in the Philippines, but then Philippines is a small market. The vibrancy is not the same as in India.

Why exactly was yours a short tenure?
Our Indian partners have chosen Deepak (Kapoor) as the new chairman. It was always envisaged that I would do this for a period of time until the firm was stable.

One of the things I was appointed for was to bring all the partners together and prepare a roadmap for the India practice. That was done in October.

We had a partner meeting in Mumbai where all the 150-170 partners were here. Our chairman was also here. And the partners adopted a governance plan for the transition from me to the local leadership. The adoption of the plan was by a secret vote and well over 90% of the partners agreed on the way forward.

It will take 2-3 years to implement the roadmap but we will not leave it entirely to the Indian firm, we will have somebody from the global network to help Deepak — perhaps a managing director to operationalise that plan. He’s already shortlisted a candidate. We have a blueprint, now we need to execute it.

What’s in the blueprint?
It’s essentially the plan for each of our three lines of services, what we need to do in the next three to five years — what changes we need to make, what investments we need to make. Also, we need to look at where the money will come from to make the investments.

To grow the practice, we need to invest in people, we need to invest in infrastructure, quality systems and I think the Indian firm will not be able to put all of it on its own, so the network will provide some of the funds. Some of it will be in the form of pure grants.

Having a strong Indian firm is imperative for our global clients such as Unilever, Glaxo, J P Morgan and Barclays. So we will provide that kind of funding.

We are a people business. We have to do two things: develop people and train and get them to operate effectively. That has to happen at every level. One of the important decisions we had to make was when do we make someone a partner.

In India, it was not that involved a process as it should be. So the candidates for partners should be cleared by an assessment centre. For the assessment centre we had to get people from Australia, from Singapore to come to Delhi to set it up. That calls for money.  We are doing that in Delhi now, we will do that in Mumbai.

All these programmes — the training programmes and partner programmes — we started sending our partners to them so that they get better knowledge and know the best practices for benchmarking. We sent 10-15 partners to the Insead unit in Singapore. If you want to improve the quality of audit you need to hire people who have specific industry experience. So when we have to audit a bank, we need someone who has worked in a bank before, understands derivatives, understands valuations of these products.

That costs money. We may not be able to recover that quickly. Hopefully, as you deliver quality, clients will see it and pay but there will always be a lag. Hopefully, we’ll be able to convince our clients to pay more.

What was it like earlier? Were there too many silos in PwC?
I think India itself has changed as a country. Ten years ago, where was India? We did not have too many companies. Foreign direct investment was little, and most of the companies were local. But that has changed in the last ten years, and the pace of change has increased.

Now Indian companies are going overseas, so we need expertise in managing the international operations of Indian companies; for example, Lanco just bought a coal mining company in Australia on Wednesday.

And managing an audit operation is different from managing a national practice. So it is basically a recognition of the fact that Indian companies are becoming complex. As Indian companies become international we need to understand cross-border issues.

We need to understand and appreciate more complex intellectual property systems, more complex trading products. I have always reflected on why our China practice is more larger and more successful than India.

China opened up in the 1980s, India in the 1990s. But China had Hong Kong. There we had a very, very sophisticated firm working in a very, very sophisticated market. What we did was combine the Hong Kong market with our China practice.

And that enabled our China practice to have access to resources as it grew. In India we didn’t have any of that, so now we are infusing talent from overseas.

These are interesting times for audit firms…
Audit quality is a challenge across the world because expectations have increased. The expectation gap is something we always have to manage. An auditor cannot prevent a company from going under.

The company goes under because of poor management. We are there only to report historical stuff. We have to report that quickly and raise alarm bells quickly enough. It is a challenge.

Businesses cycles are smaller now; from boom to bust time can be very quick. Competition is much more international.
You came with a mandate to manage, to firefight, when the Satyam case was festering…

In this building (the PwC office in Bandra west, Mumbai) soon after I joined about 17 partners with their 100 staff left. But now I am happy that the tax practice has completely turned on its head; we completely repositioned it. We brought in talent from abroad and the local market. We made Ketan Dalal and Shyamal Mukerjee the joint tax leaders to revamp the tax practice.

Then we got six partners from competition. Recently we hired a tax M&A person who came from a large industrial house — he was with us before.

The tax department is back in business. It has grown to over Rs400 crore; it’s profitable and very well-positioned. The great thing is that even though we lost people, a lot of our clients remained with us.

Did you manage to retain all your clients?
I wouldn’t say all but a very substantial portion. That’s because the partners who stayed behind went to the clients and told them we’ll make sure we will serve you.

Clients don’t like the fact that partners gang up and walk through the door — they feel if they can do it to us, they can do it to them too. I personally met some of the senior clients. Big commercial houses reposed faith in us. I am confident that we’ll have the best tax practice in the country, going forward. With 50 tax partners we plan to grow that practice.

On August 14, the indirect tax head of another Big Four firm joined us. The practice is really flourishing.

How do you look back at your stint in India?
It is very unusual in our network for someone to run two strategic council countries. 21 countries out of the 150 we are present in are called strategic council countries. Singapore is one of them.

The Singapore practice even today is larger than the Indian practice in terms of revenues. There are 2,000 international companies operating out of Singapore. Running PwC’s Singapore firm along with the Indian firm was a unique opportunity. There was a huge amount of stress on the physical side, but it has been a tremendous opportunity to work and learn.

I’ll go back having learnt how the Indian market operates. It will be a very important chapter in my memoir when I write it. I am leaving the firm in good hands; the transition has been a good one.

When Dinesh (Kanabar) left as the tax leader, I made a decision that we must have joint tax leaders. So we had Ketan (Dalal) and Shyamal (Mukerjee). It was my decision. Ketan told me the other day that it was the single-best decision we took — pool together two different individuals from very different backgrounds. So those type of things … I think I was able to delegate in an objective manner.

See, China is more homogenous. In India, I also tried to build a national practice. There is no Delhi or Mumbai or Kolkata practice. Then you really become very strong. This is why PwC India needs a chairman who is 24/7 on the job.

What were some of the frustrating times?
The exit of partners en bloc was both frustrating and rewarding. Then in India, I think the pace is slow. Everything from regulators, clients … they work in their own way - and rightly so, as there are a lot more considerations. But in Singapore, you move on. Here, you have to pay the price for being a democracy.

You look at China, the way they are moving. The Chinese practice is four times the Indian practice.

Have the Nira Radia tapes dented India’s image?
Well, Ratan Tata gave a good definition of a Banana Republic (laughs). You can look at it two ways. The way people are talking about it, it seems to be reaching some catharsis point in the willingness to openly discuss.

Corruption is not endemic to India. That we are discussing it is a good step. It should make the country stronger. But then people also say that if I am foreign investor I need to be careful. We as a country have to address it. Now you look at infrastructure.

In the Five Year Plan, you need $1 trillion. Where will the money come from? You need people from overseas to invest. And then you need to compete against other locations which are also trying to get more foreign direct investment.

So a foreign investor will look at transparency, level of accountability and openness.

Going forward, what would be some of the challenges ahead of the new chairman?
Like in most countries, you need good people. Talent is always going to be a challenge. There is a war for talent. But the good thing is India’s economy is expanding and there will always be work.

This is not Greece or Ireland where there is no work. India will grow at 9%, so a lot of opportunities will come up. All these (Radia tapes) issues will end. Deepak (Kapoor) needs to navigate through all this.

I think Indian revenues are 1% of our global revenues. Ten years from now, it will be much more, growth will be far greater. And, at the same time, you need to put in checks & balances because the moment you start growing very fast, you could trip.

Does the Satyam case continue to haunt you?
I spoke to one of the top businessmen in India and he told me an interesting thing: that the problem with India is that you can never close a file. A person dies and the file is still open.

People have realised what happened in Satyam. So now probably, you should close the file and move on. You get them to pay the penalty and move on. Because in a capitalist environment, companies will collapse and there will be frauds.

How is the morale at PwC?
Excellent.