Value Creation and the Role of the CFO in India

Leadership StrategiesLeadershipFinancial OfficersExecutive SearchC-Suite SuccessionTeam Effectiveness
min Article
January 25, 2023
8 min
Leadership StrategiesLeadershipFinancial OfficersExecutive SearchC-Suite SuccessionTeam Effectiveness
Executive summary
Companies that have an eye on profitability and a strong management team are likely to see success in the long term.



Russell Reynolds Associates hosted an in-person event with senior chief financial officers from a variety of industries. The discussion focused on the role of the CFO in high-growth companies in India, where founders have a single minded agenda of value creation. The discussion revolved around the following key questions:

  • Most organizations' approach towards value creation, especially with regards to IPOs
  • The makings of a successful IPO and common pitfalls to be aware of
  • The role of a CFO in value creation
  • The investor perspective on the role of the CFO in creating and sustaining value


Organizations' approach towards value creation

Companies today operate in a very different environment than they used to a few years ago. There is an exponential increase in PE/ VC investing.

Most organizations are grappling with a different set of goals between the founders and the investors. The investors have a five to seven year view on the company's growth and therefore gearing towards their exit agenda, their drivers are quite different from those of the founders, who typically have a much longer term view.

Most investors wanted to ride India's 2019-2020 growth wave. Despite the large number of IPOs during this time, this growth wave was temporary--as was the value most companies created during this time.

For companies aiming for IPOs, their values can only be maintained if there is sustained growth and execution after the listing. Companies that have an eye on profitability and a strong management team are likely to see success in the long term, resulting in a strong IPO performance.


The "four Ps" approach for evaluating an organization's value creation potential



Once the "Four Ps" are understood, a company's likelihood of becoming profitable in the long run greatly increases.

Agile planning has also become increasingly important. Being extremely rigid when planning for the future is dangerous and futile, especially when a company is still in its nascent stages. Changing plans often also creates a stressful environment for employees, which is detrimental to the company's performance. In order to ensure longevity, it is necessary to factor in flexibility when planning for the future.

The last but most important cog in the value creation wheel is customer retention. Many companies today focus on customer acquisition. In the era of demonstrating quick growth in order to boost valuation, many companies pay more attention to acquiring as many customers as possible in a short time span. This is however only a bubble, because without a strategy to retain the customers, it is almost impossible to sustain growth. Hence, true value is only created when customers are retained for the long haul, and robust retention strategies are in place.

A common pitfall companies face is when they enter into new domains and products simply to follow their market competitors. This can harm the value and innate purpose of the company if the core capabilities of the firm do not yet support these new ventures. Companies therefore need to be prudent and apply good judgement before launching new products/lines of business.


The makings of a successful IPO and some common pitfalls


The top reasons that help - or hinder - an IPO's success



As discussed previously, a successful IPO is one where sustainable growth is maintained long after the company goes public.

In the recent past, there has been a surge in capital consuming companies, due to the free and cheap cash flow globally. Such companies have not demonstrated their long-term profitability. The lack of a sustainable outlook and long term thinking have resulted in such companies having unsuccessful IPOs, as investors, especially those in India, are indexed towards skepticism.

IPOs can also be unsuccessful when the goal of the promoter/ senior management is to walk away with the cash without investing it in back in the business.

A major pitfall that companies should avoid is opting for an IPO simply because other firms in the industry are doing the same. If a company is a cash burner, investors may not have confidence in its long-term success. When such companies opt for IPOs due to the fear of missing out, this usually results in unsuccessful IPOs. New-age, fast-growing companies might become cash burners if they opt for debt very early on in their lifecycle. This choice is typically made when there is fear of the equity drying up fast. However, bringing in debt is only beneficial once the business model is efficient and sustainable. When companies bring in debt prematurely and go public soon afterwards, there is limited investor confidence in the company’s ability to perform in the long run.

It is therefore the CFO’s role to provide critical advice to the promoters about when to opt for debt.


Role of the CFO in value Creation

The CFO’s role today has changed from being a business partner alone –providing financial analysis and insights- to taking on a greater involvement in supporting and developing strategy as well as guiding key business initiatives. Talking about value creation, the CFO is not only guiding the success of an IPO but also charting the long term success of the organization in conjunction with the founders.

It has become evident that companies with sustainable business models also tend to undergo successful IPOs. When CFOs are able to successfully communicate a company's strong financial metrics to the market, it increases investor confidence, leading to a successful IPO. It is also critical that companies don't view IPOs as a single event that they need to make a success, as sustainability and further listing price improvements are equally important to the organization's financial health.

Often, in PE-backed companies, there is a power struggle between the firm and the founder, both of whom have differing goals. In such cases, the role of the CFO is of paramount importance, as the CFO thinks about the business objectives dispassionately and with a longer term view. Equally, s/he works towards balancing the "ask" of the founder and the Investor and builds alignment towards strategy in order to achieve the long term goals. In a world where there is an increasing number of PE backed firms, the CFO’s facilitator has become much more prominent and key to a company’s longevity.

CFOs also play a crucial role in advising promoters against opting for debt prematurely when unit economics are poor, as this can have a negative effect on the company's IPO, as well as its lifespan.

When CFOs are viewed as a "co-founder" and key part of the strategy team, rather than a business partner, the lines distinguishing a CFO from the CEO tend to blur and the CFO is seen as a key strategy contributor.

In order to create a robust business, the CFO plays a key part in allocating capital to the right areas, balancing objectives and rationalizing resources. Maintaining capital efficiency is therefore a key part in the CFO’s role, especially in non-discretionary businesses, such as the education space, where maintaining good unit economics is prerequisite.

Strategic thinking is becoming a key part of the CFO’s role today. Additionally, rationalizing goals with the promoter group/ PE firm and developing tactical solutions is an increasing part of the CFO's job. When the CFO is able to demonstrate their ability to hold the firm's strategy steady, the promoters and CEO become increasingly comfortable with the CFO owning a wider range of activities within the company.


The Russell Reynolds Associates' perspective:

The CFO's role continues to shift, due to the wide gamut of responsibilities they take on, as well as increasing demands from investors. At Russell Reynolds, we have seen CFO competencies evolve over time.




As CFOs begin to be viewed as key strategy contributors, rather than operators, the qualities they possess have started to span the entire Leadership SpanTM (to learn more about Russell Reynolds’ Leadership SpanTM, read our article on the science of C-suite success). Being both heroic and able to galvanize teams are key attributes of executive leaders; however, these qualities were not previously associated with CFOs. For example, being able to provide confidence to investors about company performance is a form of galvanizing and motivating people in the environment. In helping set strategy, CFOs are now viewed as spanning the model, being pragmatic and prudent when advising promoters while also being disruptive, as this quality is vital to survive in the new age.

Therefore, the innate CFO leadership DNA has also begun to evolve, as CFOs adapt to their larger remits and position as one of the key contributors to a company's achievements and growth. This translates to sustainable value creation and financial performance.




  • Sachin Rajan is a senior member of Russell Reynolds Associates' Healthcare and Private Capital sectors. He is based in Mumbai.
  • Vinita Katara is a senior member of Russell Reynolds Associates' Corporate Officers and Private Capital sectors. She is based in Mumbai.
  • Rahul Thapar is a member of the Russell Reynolds Associates' Financial Officers, Private Capital and Technology sectors. He is based in Mumbai.
  • Kayanush Patel is a member of the Russell Reynolds Associates' Research team for the Financial Officers practice. She is based in Mumbai


List of Attendees

Kaleeswaran Arunachalam - Global Chief Financial Officer, Eicher Motors
CV Ram - Chief Financial Officer, Pharmeasy
Girdhar Chitlangia - Entrepreneur in Residence, Samara Capital
Geiv Dubash - Chief Financial Officer, Zoomcar
Dalpat Raj Jain - Group Chief Financial Officer, Greaves Cotton Limited
Rajiv Pillai - Chief Financial Officer, Lighthouse Learning Private Limited
Narayan Barasia - Chief Financial Officer, SBFC Finance P. Limited