?We?ll know what 6,500 people do each day?

?So, have you applied for a banking licence?? I ask Vellayan Subbiah, managing director, Cholamandalam Investment and Finance Company Limited, the NBFC wing of the $4.4 billion Murugappa Group. We are meeting over breakfast at Amethyst, a warehouse converted into a lifestyle store and caf?, a lovely green space in a crowded commercial area of Chennai. Vellayan skips lunch and prefers breakfast. Amethyst, which can resemble a European caf? in the cooler months (yes, Chennai does have them), serves continental and English breakfast. We ask for fresh orange juice and settle down to chat. ?We don?t even know what the guidelines for banking licences are. We can?t apply for a licence till the picture becomes clearer. If the conditions laid down are too onerous, we may not want to go ahead,? he says.

Cholamandalam, an NBFC offering services like hire, purchase and leasing to both corporate and retail customers, was set up by the Murugappa Group in 1978. It entered vehicle financing in the early 1990s. By 2005, it had a large customer base and was rated among the top Indian-owned NBFCs in the country. In January 2006, Cholamandalam tied up with DBS group of Singapore to enter personal finance. Unfortunately, the personal loan portfolio pushed the company to the brink of disaster in 2008. Cholamandalam DBS ended up with R1,500 crore of delinquent debts. With 2008 turning out to be a bad year with a massive mismatch between funds and personal loans, Murugappa decided to shut down the personal loan business. But there was resistance from the DBS side. The Group finally managed to buy out the DBS Group and dropped their title from the company?s name in 2010.

Cholamandalam has been successfully turned around. The year 2011-12 was good with total assets under management growing by 40% from R10,441 crore to R14,643 crore. Profit after tax was R172 crore as against R62.18 crore the previous year, registering a growth of 177%. The first quarter ended June 30 has also been good with an 84% increase in net profit at R70 crore, compared with R38 crore in the corresponding quarter last year. Revenue from operations was R558 crore (R381 crore) registering a growth of 46%.

Vellayan, 42, son of MV Subbiah, former chairman of the group, and part of the fourth generation of the Murugappa Group, was given the task of running Cholamandalam in 2010. ?A lot of the gaps had been plugged by the time I came in. It was our director-finance, N Srinivasan, who did a tremendous job doing the crunch time. His energy levels were amazing,? he says. ?What we are doing now is strengthening our core business. Vehicle finance and home equity comprise 73% and 23% of our business, respectively. These two businesses drive the fortunes of Chola. How do we make these two a lot stronger??

Breakfast is being served. Vellayan has muesli and eggs. I have toast and feta cheese. He says he is tackling multiple areas to improve fundamentals, such as operations, risk management, technology, talent management and overall business process management. ?Chola has gone through three phases. Before DBS, it was a good, conservative, South Indian company. Then came the DBS years. During this current third phase, we have launched several difficult initiatives. It is a four-year journey. Once we strengthen the core, we would have earned the right to do other things.?

According to Vellayan, HDFC Bank has the best technology among financial institutions. ?HDFC is the gold standard for technology. We want to be like them.? How are they going about this? ?Our frontline field force of about 6,500 is responsible for originating and collecting the loans. Then the loans get transferred and go through many processes. All this involved mostly manual entries till now. We needed to change this. As it was not practical to give computers to everybody, we are doing it through mobile applications. The mobile phone becomes their office. Take the example of collections. Our guys used to enter them in receipt books. It is a highly archaic and slow process. Now, with the mobile phone and a bluetooth printer, we have totally changed the way these people work. By March next year, everybody will be mobile enabled. We will also know each day what 6,500 people do.? We have a database of 6 lakh customers who were with the company at some point. Both our major competitors, Sundaram Finance and Shriram Transport Finance Corporation, are better at customer retention. I am trying to correct this.?

Amethyst also serves great coffee and tea. I have a cappuccino and health-conscious Vellayan asks for green tea. ?We are scaling up by design. Axis Bank has registered 30% growth consistently for 10 years. These things don?t happen by accident. We are working on 22 different things to improve sales force productivity. Each one is a mini-project. I am creating a project management office that will report directly to me. We have piloted four branches. Then we move on to the 30 largest branches, then 100 branches and 200, and so on. It is all quite systematic. We have set up regional training centres across the country, creating internal change leaders. We will slowly get the whole organisation to transform. Things take time.? However, Vellayan is determined to improve productivity as quickly as possible.

In the last two years, Chola has added more than 100 branches each year, all in smaller towns. Very soon, it will have 450 branches in contrast to the 200 two years ago. They are not super-expensive branches, with high capital and operating costs. Vellayan says that 80% of these branches break even in the first six months. ?We spend time on the process of opening branches. We will be pushing the envelope in each of the areas. Branch expansion will be at this pace for the next three to four years.? Vellayan?s focus will be on achieving a strong return on capital. Chola has strong well-entrenched competitors. Is that going to make it difficult for him? ?There is enough potential for growth in vehicle finance and home loans. We have 8% share in vehicle finance, which gives us space to grow. We are not stuck with an 800-pound gorilla.?

Vellayan holds a degree in civil engineering from IIT Madras. He also holds a masters in business administration from the University of Michigan, US. His professional experience includes a six-year stint with McKinsey and company, Chicago, and associations with 24/7 Customer Inc, Las Gatos and The Carlyle Group, San Francisco. He was the managing director of Laserwords, a leading provider of pre-press services to global publishers since 2005. He worked out of the US till it was sold out in 2010. He returned to India after almost 16 years in the US to formally join the family business. How was the transition? ?I was already working for the group in the US (Laserwords was promoted by the family). There is so much more opportunity in this country. How can anybody not get charged up,? he asks as we emerge back into heavy traffic and the concrete jungle.