EP 019 - The Nation-builder CFO with Arvind Agarwal, CFO at PayU India

Strategy of Finance

Arvind Agarwal, CFO of PayU, shares his career journey and insights into the finance industry. He discusses the importance of having a vision and strategy, as well as the role of profitability in new-age businesses. Arvind also emphasizes the need for respect, recognition, and reward in team building and leadership. He highlights the impact of technology on the finance function and the evolving role of the CFO. Further, he discusses the role of automation in reconciliation, accounting, and invoicing, highlighting the need for technology to reduce costs and improve efficiency. He also shares insights on preparing for an IPO, emphasizing market readiness, business readiness, and internal readiness. Arvind emphasizes the importance of the CFO in steering a company towards an IPO and managing morale and stock price volatility as a public company. He provides advice for companies aspiring to go public and discusses the CEO-CFO relationship and fostering trust. Arvind also shares his predictions for the tech space in 2024. Overall, Arvind provides valuable insights into the finance industry and the skills required for success.

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Takeaways

• Having a vision is important, but it must be accompanied by a strategy to achieve it.
• Profitability should be a priority in new-age businesses, along with sustainable and responsible growth.
• Respect, recognition, and reward are key elements in team building and leadership.
• The role of the CFO has evolved to include strategic finance partnership and control ship.
• Technology has had a significant impact on the finance function, improving efficiency and accuracy. Automation plays a crucial role in streamlining processes such as reconciliation, accounting, and invoicing, reducing costs and improving efficiency.
• Preparing for an IPO requires market readiness, business readiness, and internal readiness, with the CFO playing a critical role in the process.
• Managing morale and stock price volatility is important for a public company, and communication, education, and focus are key in this regard.
• The CEO-CFO relationship is crucial, with the CFO being a strategic business partner and helping create value for the company.
• Companies aspiring to go public should have a clear vision for why they want to do an IPO and invest in building a strong finance team early on.
• The first 100 days as a CFO should focus on understanding the business model, knowing the company and its people, and assessing processes and governance.
• Balancing short-term wins and long-term goals is important for a CFO, with a focus on both low-hanging fruit and longer-term initiatives.
• The ideal place to retire for Arvind Agarwal is his hometown, Jaipur.
• In 2024, there may be a value correction for tech companies with exorbitant valuations, but there are still opportunities for tech businesses that focus on customer experience and value creation.

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Quotes

“Fundamentals of finance is the unit economics.”

“Chase an opportunity, but don't be opportunistic. Work in a mission mode and leave a legacy behind.”

“Ultimately you need to measure ROE, return on equity or return on capital employed. I think that's a true measure if you have to compare different business models, there's only one unifier which is ROE or ROCE. Other metrics apply differently in different businesses.”

“I think there are three things that needs to tick off (for a successful IPO). And the first thing is market being ready. The second thing is business being ready. And the third thing is your processes being ready.”

“Have a strong CFO on your side from day one.”

“The first 10 years were more of formative years and I did various things there also, but basically I didn't know which path I am headed to. I had a vision but not a strategy.”

“The vision that I had was very simple… I want to become CFO and I want to do an IPO.”

“(For an IPO), I think what CFOs need to do is to build strong finance team, quarterly reporting processes, board governance, and then ability to track the performance through very clearly defined measurable matrices that are auditable.”

“So first 10 years in infrastructure, then 10 years in telecom, then 5 years in e-commerce and now in financial services. So they are very different sectors. But then there is one thing in common. All of those companies where I worked were very high growth, tech driven and consumer facing organizations. And that's what excites me.”

“That career is never a straight line, it is always a zigzag. And you need to do lot more lateral movements and it's not necessarily a vertical growth that you will get.”

“The thing which was now coming to a positive inflection curve was e-commerce because there were four things that happened around the same time. The first thing was 4G which means affordable internet to every Indian. The second thing that happened was UPI. And as you know that in India, not too many people have credit cards. And only 5% people have credit cards. So UPI change the game. You can actually pay online through UPI. The third thing which happened around the same time, 2016, 2017 was GST. And before GST, it was State-Wise Texas. But because of GST, you could actually have one India pricing. So India became one market. And you don't need to accept different pricing for the same product across India. So that is a big enabler for e-commerce, I must say that. And the fourth thing was infrastructure. So even physical infrastructure improved and we could deliver things in three days anywhere in the country.”

“I learned people leadership and process excellence in Vodafone… but what I learned in Amazon was customer centricity and operational excellence. So there are a lot of mechanisms they have which make sure that in case of dilemma you choose a path which is right for customer, it is assumed that it will be good for shareholder also. And operational excellence which means that you keep improving every day so that you know you are better and better.”

“We are professional entrepreneurs building an enduring institution.”

“Retail business like Nykaa, I think EBITDA of 10% will be fantastic because the return on capital will be 30%.”

“I don't think anybody gets a license by being called a startup or new-age business to shy away from discussion on profitability. I think that's inherent in any business model. Otherwise, why do you call it business?”

“You need to identify the potential and the stronger aspect of the skill set in one individual and then harness that rather than focusing on the weak areas.”

“Look for behaviors and look for skills rather than a functional domain expertise when you do the hiring. That is the learning I have and I think it works.”

“The ability to experiment goes down dramatically once you are a listed company. If you want to experiment, continue to be private and there is enough private equity available.”

“CFO should take all the burden of IPO, such that business teams are not distracted from what they need to build and perform on them.”

“We make a mistake in thinking that IP is an exit event. It is not an exit event. It is actually an entry event. You're entering into a market where different sets of investors will come and judge you.”

“One should think of CFO as somebody who can help in creating value, not just unlock value.”

“You need to survive in short-term to thrive in long-term.”

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Where to find Arvind Agarwal:

LinkedIn: https://www.linkedin.com/in/arvindgagarwal/

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Where to find PayU:

LinkedIn: https://www.linkedin.com/company/payu/

Twitter: https://twitter.com/PayUindia

Website: https://corporate.payu.com/

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Where to find Rohit:

LinkedIn: https://www.linkedin.com/in/rohitagarwal001/

Twitter: https://twitter.com/podcast_SoF

Email: [e-mail]

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