'Prepare Good Shareholder Agreement': S Ravi's Word Of Advice For Startups

Sethurathnam Ravi (S Ravi), former chairman of the Bombay Stock Exchange and Founder and Managing Partner of Chartered Accountants (CAs) firm Ravi Rajan & Co, recently marked 34 years of their professional journey. In an interview with BW Businessworld, Ravi shares key milestones from this journey, his vast experience of being on the board of several companies and what mistakes startups should avoid for a structured and resilient growth.

Founded in 1989, Ravi Rajan & Co has an extensive experience of working with banks, FIs, NBFCs and other organisations providing financial assistance. Some key assignments in the banking and financial space include its appointment by the World Bank to provide technical assistance in setting up a Multi-donor Fund for CSR activities and the Reserve Bank of India - GST audit. 

Today it has 16 partners and a team of over 150 members, including professionals from different fields. It has offices in New Delhi, Mumbai, Bengaluru, Noida and Gurugram.

Dr. S Ravi

Ravi's areas of expertise include corporate finance and business restructuring and turnaround strategy, rehabilitation plans, mergers & acquisitions, takeovers, Spin-offs and negotiations of joint ventures, business valuation and pricing of takeover deals, investigation and business advisory services, and handling and addressing regulatory issues.

Excerpts: 

Congratulations on completing 34 years of your professional journey. If you had to pick some of the most significant milestones of this time, what would those be?

Traditionally accounting firms do your audits, taxation etc. But I did some good family settlements and something that was adding value to people. So, that was a game changer for me, or I was to pick up one of the milestones. There were a few prestigious assignments as well that I took, in terms of investigation, which today is very well known, but in early 2000, it was not there at all. So, I did that, and they were crucial investigations now called forensic. We also did different things, like helping with some mergers, valuations, and due diligence, so we were multifaceted in many ways. We harnessed our knowledge base. So, that was the key; a strong knowledge base is a crucial thing. 

You have been, and continue to be, on the board of several companies. If you could recall any instance of you steering the company in the right direction as a board member?

I was in one of the toughest banks called, UCO Bank, and it was going through a very troubled period. Even Dena Bank had a similar situation back then. I won’t say I was instrumental, but I played a big role in this revamping. There was a committee formed, and we made a lot of suggestions. There was a technical experts committee in Punjab Sindh Bank, which itself was going through a troubled time then. These suggestions, for example, were accepted by the government of India and were implemented. So, as a board member, I played my role without getting into too much of operational issues, but more on the policy level and steering it in the right direction.

How are you seeing corporate governance gain more importance and some changes in the ways companies are evolving on this count for the better?

Corporate governance is a new mantra because governance has been an issue. It is an issue because full-time management is involved in the day-to-day operations, and the independent directors are more on the oversight side. They can do whatever they can within themselves without being biased. That is what corporate governance is, dispassionately working for the company's interest. Following the Companies Act is not governance; it's much more than that. It is about making the right and sometimes hard decisions. For example, if the company has overstaffed, it should introduce Voluntary Retirement Service (VRS). This happened in Dena Bank and UCO Bank, and many other places. Those days accounting standards were also not at par with what we have today with IFRS etc.; it is a different thing altogether. So, the responsibility of the governance was just to do the right things.

What is your advice to the younger companies, startups of today that will be large organisations of tomorrow, on the areas they must focus for structured and resilient growth? 

Today you are very frequently seeing shareholder disagreements. These happen because they did not lay down the roles played by each other; they did not want to recognise the role of others. So, if one doesn't recognise the role of others, the company will perish in the long run. In these startup companies, the fundamentals, such as each person's role, must be very clear. That is the key. We have seen founders themselves losing their seats. This happens because your fundamentals are not clear. The business models will survive if you're competitive, have the head in technology, and, most importantly, capital. More important is recognising each other while getting the team together. That is my advice to all these new companies and startups to prepare a good shareholder agreement.

Do tell us more about your experiences in the likes of the Bombay Stock Exchange and how you see the role of such institutes change in business development for today's Indian economy?

The first role is to be a regulator. It is a platform basically, and there are a set of rules and regulations set by Sebi, and you have to see that the framework of all the market intermediaries is followed. It can then go into the SME listing, looking at other channels, for example, the distribution of mutual funds. So, there can be many rules that we can make on the developmental side. It also has the role of educating. Investor awareness and financial literacy are critical.

Your take on some of the recent developments in the equity market and its impact on the regulator’s image?

I will talk only based on what we have in the public and what has been written in various reports. If they are true, we should be asking how we are addressing it as a system. And if they are false, these types of reports should also be investigated, and the credibility of these whistleblowers should be authenticated.

We touched our all-time high GST collection at Rs 1.87 lakh crore. How do you see the role of CAs as an important pillar of India’s economic growth?

GST is a nascent Act, just five and a half years old. There were a lot of interpretation issues. CAs brought a lot of awareness to their clients and did a lot of hand-holding. Very few people recognise this. Even government departments needed clear views on certain things because they were also learning. Above that, there were basic issues of technology and the platform. So, the CAs have played a significant role and will continue to play, especially in the SME segment, where they can't afford very expensive CAs and consultants.

Three and a half decades is nearly akin to an era. Who are the people who have inspired you the most in this journey? Any that you look up to even today?

I have three on my list: Mr Narayanan Vaghul, a great banker who set up great institutions. You can look at Mr K.V. Kamath and Mr Narayan Murthy of Infosys and how they held Infosys over a period of time, gave away the management to professional people, and became a stakeholder. These three have been big inspirations for me.