COVER STORY

CFO Mandate : Leading Through a Crisis

Anil Khandelwal, CFO,
Joint MD and ED, REEL

More than almost anything else, Covid’s impact will be felt in terms of liquidity and the consequent financial distress. Amidst all the chaos, the CFO will play a central role in stabilising the business and positioning it to thrive when conditions improve. The CFO must demonstrate strong leadership by optimising cash flows, planning a range of scenarios, communicating clearly and proactively with internal and external stakeholders, rationalising costs, improving efficiencies, adopting technology and taking strategic bets. At Ramky Enviro Engineers Limited (REEL), a 60% KKR owned Hyderabad-based waste management firm, which handles 65% of total Waste in India and one of the Asia’s biggest in this space, Finance – under the leadership of Anil Khandelwal, its CFO, Joint MD and ED – is not only helping to manage the crisis at hand, but is also building a strong foundation for the ‘next normal’.

Despite being in the essential services space, REEL faced operational disruptions during the lockdown. The impact became evident in Q1 FY21, which saw a 25-30% dip in revenues. However, the company is confident of getting back on track in Q2 and onwards. Under Mr Khandelwal’s watch, the Finance function has set up the first line of defence by ensuring a heightened focus on cash flows and shifting from the annual budgeting approach to a three-month rolling budgeting and cash-flow approach, with a focus on identifying cash-flow and EBITDA risks. Organisation-wide curbs have been imposed on spending. During a crisis, it is important to communicate clearly and proactively with internal and external stakeholders. Finance has ramped up the frequency and transparency of communication with employees, suppliers, customers, lenders and financial institutions, and regularly updates them on operational and other issues. At the same time, investors, Auditors, the Board and Audit Committee are proactively briefed on actions taken on liquidity, forecasts and other matters.

Employee health and well-being is paramount for REEL. To ensure workforce safety, the back-office was quickly virtualised. The Finance team worked from home efficiently, closing the books of accounts on time. Many initiatives were taken to keep employees engaged, including regular training sessions, one-on-one discussions and ‘fun connect’. Presently, 35-40% of the Finance staff is back in office. Going forward, the plan is to ensure that about half the team will permanently work from home. To that end, investments will be made in remote management productivity and monitoring tools.

To plan for the next normal, the Finance function has embarked on a journey to optimise all costs – both direct and indirect. Operational efficiencies, procurement terms and overheads are all being meticulously analysed. In the medium- to long-term, REEL aims to triple its top-line and bottom-line. To enable that, it is considering strategic bets, such as increasing its stake in other firms, and seeking M&A opportunities, including through strategic acquisitions. REEL will be going ahead with both its short- and its long-term Capex plans, valued at Rs 500 crores and ~Rs 3,500 crores, respectively.

In a candid conversation with CFO Connect, Anil Khandelwal, shared his insights on the CFO’s role in leading through a crisis.


  1. How has Covid-19 impacted your industry in general and REEL in specific?
  2. India’s largest waste to energy plant located at
    Bawana, Delhi

    The waste industry in India is highly fragmented, unorganised and in its infancy. The impact of Covid on the industry is much lower than other sectors, given the essential and emergency nature of the services. However, the sector has had its share of challenges in terms of workforce availability and their motivation to perform. Specifically in terms of the impact of the pandemic on REEL, there was some disruption in operations in the first few days, when we saw a dip in the waste generated. However, things improved quickly and we got the required support from the government and local authorities. Evidently, the Covid-related waste has gone up since May. Specifically, the waste generated by commercial establishments and industries is seeing a gradual uptick, not counting multiplexes, food joints, bars, etc. The waste now generated is close to 85-90% of the pre-Covid levels.

    Despite being in the essential services space, REEL had its share of challenges during the lockdown. The medium to long-term outlook remains good.

    We closed FY20 with a turnover of Rs 2,500 crores (including Rs 700 crores of revenue from overseas operations). Revenue and profitability in the first quarter were impacted by about 25-30%, but are expected to be near normal levels in July. We are confident to be back on track from Q2 and onwards. In spite of an impacted Q1, we are reasonably confident to grow the year by around 15-20%.

    We see a lot of opportunities to emerge in cross-section of the market including handling of Covid waste and sanitisation services.

  3. What challenges or, conversely, opportunities have emerged as a consequence of the crisis? Has REEL’s overall strategy been realigned or any goals reset?
  4. In such times, the key challenges include keeping the work environment safe, the workforce motivated, and ensuring optimal use of resources, including the availability of manpower – which is the main raw material for the business we are in. In fact, we see a lot of opportunities that will become available in a cross-section of the market, including the handling of Covid waste and sanitisation services, among others. Our medium- to long-term plan is to triple revenues and EBIDTA within four years by expanding our business both domestically and internationally.

    Covid-19 crisis will lead to a greater appreciation for the environment and will drive greater investments in environment, sanitisation and health space.

  5. Will Covid-19 crisis lead to a longer-term shift in the overall market for sanitation and safe waste disposal? Which specific sectors/areas do you see the greatest growth coming from?
  6. Covid-19 crisis will lead to a rethink of the entire economic development trajectory. There will be greater appreciation for the environment and sensitivity of the impact that businesses have on the same, leading to a better focus on investments in environment, sanitation and health. Waste Management will be a direct beneficiary. Significant opportunities will emerge in the municipal, bio medical waste and associated businesses. Further, overall focus on regulation and regulatory compliance will move the sector up.

    REEL’s workforce requirement for operations could get impacted if the pandemic prolongs or a vaccine gets delayed. Risk management including suppliers and customer liquidity is critical.

  7. What are some key risks that REEL faces? What role is Finance playing or expected to play in addressing those risks?
  8. If the pandemic continues or worsens, or if a potential vaccine does not come on time, REEL’s workforce requirement for operations could get impacted. The risks due to supply-chain disruption, though not significant, cannot be ruled out. In the recent lockdown, the speed of the banking sector, in particular the PSU banks, was slow, which impacted timely approvals of funding requirements. If this continues, the availability of liquidity for increased business requirements will get constrained.

    Finance will need to play a critical role and focus on liquidity by working closely with banks to enhance working capital limits and proactively ensuring cash surplus all the time (even at a cost). Additionally, Finance needs to monitor critical supplier bankruptcies and more importantly, ensure suppliers are paid on time and their critical performance parameters are reviewed vigorously. In these tough times, liquidity concerns of customers may also need to be factored in.

    The focus today is on preserving cash, rationalising costs, managing risks, communicating seamlessly with internal and external stakeholders and motivating the employees – big time.

  9. As a CFO, how have your priorities changed or shifted in the aftermath of Covid-19? What are your top business concerns today?
  10. My top business concerns include employee well-being, safety and survival. Other than that optimisation of liquidity, collections, supply chain and labour availability remain the top concerns. Broadly, there are macro-economic challenges around the inability of the corporations to pay in case subsidies are withdrawn or tax collections remain low.

    As a CFO, the priorities have changed in the following ways:

    • A heightened focus on cash flow
    • Shifting from the annual budgeting approach to a 3-month rolling budgeting and cash flow approach to identify cash flow and EBITDA risks
    • Implementing curbs on spending throughout the organisation
    • Communicating extensively with employees, suppliers, customers, lenders and financial institutions to update them on the operations and status of the company
    • Communicating regularly with investors, Auditors, the Board and the Audit Committee to proactively brief them on actions taken on liquidity, forecasts and other matters
    • Managing risks around supplies disruption and liquidity concern of customers

    We have enough cash buffers to keep us afloat for another three quarters.

  11. How are your cash buffers looking like? Did you tap into credit lines?
  12. At REEL, we have a strong capital structure which was further enhanced by KKR’s primary infusion of USD 100 million in 2019. REEL’s strategy as a growing company is to remain liquid with a focus on tapping into adequate working capital. It has paid well for us and we are confident that the present resources will keep us in good stead for another three quarters. We are also in advance stages to close additional WC lines both in India and overseas.

    The pandemic has given us more time and opportunities to explore restructuring parts of the business, process improvements and automation.

  13. Crises are often opportune times to restructure parts of the business that require transformation. What kind of measures are being undertaken at REEL?
  14. We were already exploring restructuring parts of the business by aligning business verticals within companies. The pandemic has given more time and focus to the issue. Cost and Capex optimisation measures have been developed, and goals are set to target higher efficiencies and lower per-unit procurement costs. Process improvement and automation initiatives, such as improved usage of SAP and other tools, are under implementation, while the process to implement additional modules is being finalised.

    We will be rationalising all costs – direct and indirect – though people costs are unlikely to be cut

  15. As part of cost rationalisation, are you cutting people costs? What other line items are being rationalised?
  16. People cost, fortunately, is not a candidate for a cut, though cost increases are being rationalised across the board. Since we are a growing organisation, any optimisation in manpower efficiencies will not result in lay-offs. We have massively embarked on a journey to optimise all costs – direct and indirect. Operational efficiencies, procurement terms and prices, and overheads, are all being meticulously analysed. We are confident to add significant savings.

    Going forward, close to half the Finance staff will work from home permanently.

  17. In terms of your Finance staff, what were productivity levels like during the lockdown? Were you able to close the books on time? What share of your team is currently back in office?
  18. To our surprise, productivity levels were, in fact, higher than normal. With work from home, the time spent on travel and the resultant fatigue added to working hours, leading to higher productivity. All meetings started and finished on time and added to improved productivity.

    In spite of REEL being a multi-location company with operations, subsidiaries and associates, both in India and abroad, as well as multiple auditors, the books were closed on time and the annual accounts were adopted on schedule in May by the Board. In fact, the Audit Committee was pleased with the quality of the work, including IFC and the adoption of the new accounting standards. We had no ‘emphasis of matter’ from the auditors, apart from the normal Covid disclosure.

    In terms of the current status, 35-40% of Finance staff are back in the office. Going forward, our plan is to ensure that 40-50% of the Finance workforce permanently work from home. The modalities to enable them to work effectively from a remote location and to monitor productivity is now under evaluation.

    To improve employee engagement, we have taken many initiatives, including regular training, one-on-one discussions, and ‘fun connect’.

  19. How are you keeping your team engaged? What are you focusing on?
  20. We have undertaken many initiatives to keep the team engaged. For instance, we are conducting regular training sessions – both subject matter and cross-functional, soft skills and leadership development – for which I am personally ensuring attendance. We are promoting the learning of SAP and other tools, including the promotion of good accounting practices and review of processes/MIS for improved bookkeeping. Lastly, the focus is on improving the quality and frequency of communication through structured team meetings, one-on-one discussions and initiatives like ‘coffee with management trainees’.

    We are actively looking for strategic bets for future growth and will be making investments as planned. Our AA Rating is a big tool for us.

  21. For most companies, the focus is entirely on survival and the ‘here and now’, but smart companies are taking calculated strategic bets for future growth. Is REEL considering any strategic moves at the moment?
  22. We had our operations running even during the lockdown as the company is in the essential services space. For us, survival meant ensuring high productivity and keeping costs in check while aiming to get back to normal revenues to circumvent the impact of fixed costs and an increase in welfare and other expenses. In the medium- to long-term, we aim to triple our topline and bottom line. For that, we have signed agreements in ventures overseas to increase our stake. We have also closed deals with banks in this pandemic time and are actively looking for M&A opportunities with a small size strategic acquisition expected to close soon. Our Capex/investment plan of close to Rs 3,500 crores in the next 4 years is on and even in the current fiscal year, we are on track to invest/spend over Rs 500 crores.

    We are confident that the our Rating of AA by India Ratings will be amply proved since business is robust with strong competitive advantage

    For a greater impact during such times of crisis, CFOs must demonstrate skills in change management, talent development, strategy execution and technology savviness.

  23. What three leadership skills do CFOs require during such uncertain times?
  24. CFOs can have a huge impact on change management by finding the problems that are holding the business back from reaching its full potential, diagnosing why these are occurring, and evaluating the scale of change that is required to solve them. Second, nurturing talent is an essential skill for any CFO. Third, CFOs should be able to effectively implement the mission, vision and strategy of the company. Lastly, CFOs should be tech-savvy and push for greater automation of key business processes and digital initiatives for remote working.

  25. According to you, what should Finance heads not do at this point of time?
  26. At this point in time, Finance leaders must avoid doing the following:

    • Follow a traditional approach to budgeting. Instead, replace it with zero-based budgeting.
    • Not focusing enough on efficiency, cost optimisation and austerity measures.
    • Take your eyes off growth. Ensure customer-centric and strategic Capex, particularly in projects that are likely to be operational in the next 12-18 months.
    • Lose sight of the mantra that ‘cash is king’.
    • Reduce the focus on training/automation/soft skills development and communication.


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