In 2020, CG Power and Industrial Solutions, an Indian multinational in the motor, power systems, and railway industries, was on the brink of bankruptcy. Plagued by a host of challenges, the company clearly needed a transformation to survive. Under the leadership of Natarajan Srinivasan, CG Power experienced a remarkable turnaround. Once a company teetering on the brink of collapse, CG Power has now seen a significant rise in its stock price.
CG Power’s journey from bankruptcy to success is a story of resilience, strategic thinking, and strong leadership. Shivanshu Gupta, a senior partner at McKinsey, sat down with Srinivasan to hear how the former CEO and his team tackled the turnaround at CG Power. In the conversation, Srinivasan shared his journey at CG Power, provided his perspective on the future of the industry, and offered advice on managing through challenging times.
Shivanshu Gupta: What turnaround experience did you have prior to joining CG Power?
Natarajan Srinivasan: In the past 20 years, I’ve led a couple of turnarounds. In 2008 to 2010, the global financial meltdown affected India, and an Indian conglomerate needed help. In three years, my team and I collected about 70 percent of the money we had lent, downsized the organization, and brought the company back to profitability. This was seen as a very big turnaround at the time. Immediately afterward, many banks asked whether we could help them in their collection efforts.
My second turnaround experience happened in 2018, when a large state-run enterprise went under. I had just retired, but the government asked whether I could join the seven-member board they’d put in charge of the institution. I’m a little bit of a workaholic by nature, so I said I’d take the job. I was scared, and I didn’t know the depth of the company’s troubles. But it was a fantastic learning experience for me.
These two experiences taught me many things I used at CG Power. One thing I realized is that in any turnaround situation, you have to finalize your plan very quickly—within a month or so. Right or wrong, you have to come to some decision, and then you have to act. People will be looking at you and deciding whether there is hope, so they will expect you to act decisively and give clear signals.
Shivanshu Gupta: What was the situation like at CG Power when you came in?
Natarajan Srinivasan: Based on reports in the paper, all I knew was that CG Power was a sick company. I knew there was a turnaround job to do and that they were under pressure to bring in somebody to lead the company. They didn’t give me much time to decide whether to accept the role—hardly a week—so I took the plunge and agreed to do the job for two years.
In the first 15 or 20 days, we gathered data and went through the files. The process was exhausting. My blood pressure went up. I didn’t sleep. I thought I had made the biggest blunder of my life. I wondered whether I should resign, because there were so many issues, and after my whole professional career, everything I’d built, I didn’t want to end on a failure. But I gathered the courage to move forward.
The company had several problems. First, no bank or any other party was willing to lend to CG Power unless all previous loans were settled and the accounts were back in good standing.
Second, the factories were stopped. There were nine manufacturing locations, but because there was no money, production had come to a complete standstill in all of them.
Third, the accounts were unreliable and had to be reopened, reaudited, and recasted. In other words, there was no credible finance balance sheet. In fact, there was a directive from the court to have accounts from the past five years reopened and reaudited.
Fourth, the company faced ongoing investigations by the authorities. We needed to be constantly available to answer questions and provide all the required information.
Last, the pandemic led to movement restriction. Employees could not work in the factories, and morale was low. There was an exodus of people looking for other jobs.
Shivanshu Gupta: After you identified these problems, how did you set about tackling them?
Natarajan Srinivasan: One thing I learned in this assignment was that I should not become stressed, because when you are worried and tense, your mind won’t work. Every day, I would remind myself to handle stress without getting stressed. I also meditated a lot in the morning and evening.
With this thinking, I formulated some ground rules and an action plan for what I should do in my first 15 months. First, I had to stop the bleeding and take the company out of the ICU. Only then could I focus on the things I could do to turn the company around.
New promoters infused us with equity, and in that strong position, we secured a long-term loan. With that money, we negotiated with the secured lenders, and we committed to paying our vendors and other unsecured creditors. This process took two and a half months, and once it was settled, it gave the company some breathing space.
We had to navigate COVID-19 lockdown restrictions, but I was able to take the senior teams and travel to the plants. I made calls, organized vaccinations, and addressed town hall meetings in person and on video. I assured our people that if there was any problem, I was available 24/7, and they could call me. I also told our manufacturing teams that their job was only to produce and sell. I said, “You don’t have to worry about any legacy issues. If anything happens, send it to corporate, and we will take care of it.”
We also had to complete the recasting of accounts and get a valid balance sheet. I knew it wasn’t going to be easy until we completed recasting—if you don’t have a positive net worth or audited accounts, you’re ineligible to participate in tenders. But recasting was easier said than done.
We had big challenges because we had several accounts with companies outside India. There was also employee turnover, which was all the more complicated because of work-from-home mandates during the COVID-19 pandemic. To get through it, I made it clear to my team members that we would take care of them, and we had the auditing firms working around the clock. With this, we completed the recasting by October 2021. Finally, there were no more skeletons in the closet.
Shivanshu Gupta: Once you’d “cleared out the skeletons,” how did you pivot to focusing on growth?
Natarajan Srinivasan: In the beginning, I knew I would not be able to spend time on business, so I changed the delegation of authority. I empowered my business team to make more decisions, and I told them that their interest in the company was as important as mine. All those talks made them feel very excited, and the team gave me a very positive feeling in return. With more freedom, they came up with a business plan that doubled the turnover [from about 40 percent] to almost 80 percent of the company’s potential as well as a profit figure of about 500 crores.
I also requested that the procurement process be reviewed to make sure all our costs made sense. We implemented cleansheet costing and trained the team on procurement and sourcing strategy. We also learned lean-manufacturing techniques and spread Six Sigma training and practices throughout the company. These projects helped us save space, improve our workflow and productivity, and reduce our scrap.
For all these changes, we communicated extensively to get buy-in. We set up a website where all our findings were shared. This way, if one plant had good results, the other plants could learn from it. With this communication, we galvanized the team and got a large section of the entire company, especially people at the plants, involved.
Shivanshu Gupta: What advice would you share for other CEOs going through a turnaround?
Natarajan Srinivasan: In a turnaround, the CEO must have a mindset that’s different than what’s needed for growing a business. First, a turnaround happens in a short span of time. You must identify the core issues, finalize your plans, and then act very decisively and quickly.
Bandwidth cannot be a constraint. Everything is important and everything is urgent, so you have to work on multiple things simultaneously. You can’t say, “I will do this first; I will do that later,” because time will not wait for you.
You have to communicate very actively, telling people what is going to happen, how the company will turn around, what their roles will be, and what your expectations are.
The focus needs to be on building consensus in the culture. I was sent to work at CG Power alone. Because I didn’t have a team with me, I was expected to adjust to the situation and the culture. I went in with a very conscious approach and the attitude that their culture would be my culture. That helped us build a team through participation and clear guidelines.
The CEO’s personal working style is very, very important. Your leadership will be watched. I used to work long hours and reply to every email within four hours. If someone sent me an email at 4:00, I would reply by 4:15. That way, I was leading by example and inspiring people to think, “This guy is working so hard for us, so let us also work hard.”
These are the principles I used in the turnaround.
Shivanshu Gupta: What were the results of your work at CG Power?
Natarajan Srinivasan: After 80 years of existence, CG Power was almost on the verge of collapse. Its market capitalization was less than INR 10 billion at one point, but it came back: Today, it has grown to more than INR 900 billion, a significant jump.
This was not a question of simply reviving the company or turning it around. The way the company is built now will drive it into the future. In the turnaround, we created speed, a new culture, and a new approach to business.
Before I left, we initiated an expansion to double the size of our motor business, increasing our manufacturing from 100,000 to 200,000 motors per month. Similarly, for the transformer business, we had a goal to nearly double in size, from 17,000 MVAs [megavolt-amperes] to 33,000 MVAs. We also received government approval to set up an OSAT [outsourced semiconductor assembly and test] facility in the semiconductor space. The effect of all these expansions is that I expect the company to double in size in four years’ time.
This company has a big growth trajectory. The team is fully geared up. Nothing succeeds like success.
Shivanshu Gupta: As you look back on your time at CG Power, what are your thoughts on the industrial electronics sector and future areas of growth in India?
Natarajan Srinivasan: As a country, India is currently performing well in both manufacturing and electronics. A lot of money and capital is getting raised, and there is a lot of innovation at play. I think the growth momentum, which has picked up in the past two to five years, is likely to continue. For instance, about ten semiconductor plants are expected to come to India over the next four to five years. That in itself will give further impetus to downstream industries and other projects.
In addition to strong electronics and overall manufacturing, there’s a big opportunity with the clean-energy transition. Many companies are working on solar, wind, and green hydrogen. With this investment, I believe the Indian power sector will be booming for the next decade or more.
I also think more multinationals will set up R&D or design centers in India. This will take a lot of investment and a lot of trained workers. Schools are changing their curriculums to reflect this and catch up with the demand for talent. For example, Indian universities are adding two-year programs on semiconductor manufacturing and similar topics.
There are also a few areas for improvement. In terms of infrastructure, although a lot of work has been done, growth has been so strong that India has not been able to keep up. In addition to infrastructure and skills bottlenecks, many companies want reforms in the legal arena and more stability in the tax regime. These things have really improved, but I think if you want to attract more investments and become faster, they will have to continue improving.
