Naveen Jindal, Chairman and Managing Director of Jindal Steel and Power Ltd. Has been ranked as the best Indian CEO based on a study ranking the comprehensive performance of CEOs over a period of last 15 years, from 1995 to 2011.
The ranking is based on long term shareholder returns their company generated during the period of the study.
The CEO has been defined as the person holding the highest executive position in a specific listed company irrespective of whether he/she is a professional manager, a member of the founding family or the original founder/entrepreneur. The study covers individuals who started their jobs during the period 1995 to 2009 and that is why it does not cover very accomplished persons like Narayana Murthy and Azim Premji who took control of their companies before 1995.
The long term focus and analysis is timely as the Indian companies have been exposed to serious foreign competition only since the economic reforms of 1991 and that decade saw them improve their game significantly to grow stronger and grow rapidly in the 2000s.
Navin’s Jindal Steel and Power Ltd or JSPL has been rated as the most valuable steel company in India today with annual revenue of about Rupees 13,200 crores. An MBA from the University of Texas Dallas, Navin acquired control over the ailing Raigarh plant of the Jindal group when his father Om Prakash Jindal arranged a four-way split of his business empire amongst his four sons in 1998.
Navin Jindal’s remarkable turnaround of the Raigarh sponge iron mill through a backward integration strategy led JSPL to cheaply acquire access to valuable raw materials such as coal and iron ore at a time when competitors were paying much less attention to these inputs. This strategy insulated JSPL from price volatility in commodity markets, thus bringing down production costs and boosting profitability.
Buoyed by this success the company has now set decade-long targets of scaling up annual steel production six-fold to 20 million tons. They also plan to become large power producers by scaling up almost 15 times to deliver a generation capacity of 18 gigawatts of power. There is also a plan for significant investment in their iron ore mines in Bolivia.
Navin Jindal has delivered a staggering total shareholder return, or TSR of 13,784 per cent, increasing JPL’s market capitalization by Rupees 60,600 crores. On an average the top 50 CEOs delivered a total shareholder return of 3,051 per cent during their tenure in office.
Navin Jindal’s top ranking and the overall study reveals that the leaders who started their job when they were younger and had an MBA degree could improve their ranking significantly. Navin is now of 41 years of age and thus has had the twin advantage s of ‘education’ and ‘youth’.
In the last five financial years alone, as the global economic fortunes have swung violently, JSPL’s revenue has trebled, its average return on net worth has been about 25 per cent, and its operating margin has been between 37 to 40 per cent. The stock market has responded to Navin with fervor. JSPL with just 3 million tones of steel making capacity per year had a market capitalization of Rupees 47,000 crores on January 13th, while his brother Sajan Jindal’s company JSW which makes four times as much steel as JSPL had a market capitalization of only Rupees 14,229 crores.
Investors seem to like the fact that JSPL makes long products like rails and beams which are used in construction and are likely to remain in demand in India, which is building its infrastructure. Moreover JSPL make steel using sponge iron, which allows it to use cheap non-coking coal instead of the much costlier imported non-coking coal.
Navin is a very active businessman- politician and a second term member of the Lok Sabha from Kurukshetra. He is also an avid Polo player and keeps a stable of horses at different locations. He won a verdict from the Supreme Court allowing all the Indians to proudly fly our National Flag, the Tricolor on our premises.
Navin has successfully carried forward his business and political legacies and has carefully followed the fundamental business axioms of ‘first securing the raw material sources’, ‘focus on the costs’ and to produce a ‘good value added product mix’. Rest as they say is history.
Arun Vedhera
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