“AI Hype Must Cool Down!” — N. R. Narayana Murthy & Aditya Puri In Rare Joint Interview

Hello and welcome to this very special conversation on Moneycontrol. We're in conversation with Mr. N. R. Narayana Murthy, the founder of Infosys and Catamaran, and Aditya Puri, the former MD and CEO of HDFC Bank who's currently a senior adviser for Carlyle Asia. It's very unusual to get two titans of India Inc. together and we're very excited for this conversation. Thank you both very much. We are talking at the Indian Institute of Management Bengaluru which will hopefully breed many more corporate leaders and entrepreneurs. But I just want you know in my opening remarks there was so much to unpack from your fireside in terms of the qualities that entrepreneurs should have, qualities that a company's board must have. It's been a very exciting year for new age startups. In the last year we saw a lot of IPOs. Is IPO sort of the end game? What would your advice to entrepreneurs be?

See, the opportunity is phenomenal and it's only going to increase as AI comes in and as we need to do things to develop. And I think both Mr. Murthy and me said very clearly that you have to be clear on the basics. If you're going to set up something, set it up for the long run. Which means you have to understand what your purpose is, what your culture is, what your product fit is. Focus on profitability. You can't just say top line. Those days are gone. If you don't have bottom line, it doesn't work. And so if you keep these basic values and make sure you respect all stakeholders, I don't think you will have a problem and there's tremendous... No adjusted EBITDA and EBITA. That doesn't help. Who are you fooling? You either have profit, unit profit, and I think both Murthy and me concentrated on unit profit. If you have unit profit, you know how many units you need to sell when you will be profitable. So don't play around with that. Unit profitability leading you to break even and profit. If you say adjusted EBITDA, you're fooling yourself. At the end, the purpose of business is to have profit, create employment, grow, and be fair.

This actually plays into what you said. You said leaders should eat last in the food chain. But Mr. Puri, do you think that is pragmatic in this day and age? Because you hear about founder secondaries, you know, in the second stage of funding where they want liquidity. Companies are listing faster than ever before. And you know, there is also an argument that unless you really pay top dollar you won't attract good talent. So how does this, I mean, do you think it's pragmatic to have that point of view today?

No, I think it's totally pragmatic. See, when you listen to Murthy, sir, look at the broader thing. He's not saying everybody has to be paid the same. What he's saying is you will be paid along with your qualification and market value. He's just saying whatever you do, do it fairly. If you have to pay more because that's what the market is demanding, that's fine. But don't gratify yourself and leave the rest swimming. Be fair so that they be with you and you can't take all the benefits because you are not creating all of it.

Right. I also noticed you mentioning AI a fair bit on stage. And you know, someone asked you how do you identify bubbles and you said it doesn't take a lot of brilliance to figure out if there is a bubble or there's not. How do you see the impact of AI? Because there's a lot of concern on whether this will wipe out white collar jobs in India, especially in the services industry. It's been a huge source of employment and wealth creation for engineers.

I think, and partly based on our discussions we had last night, I think there is too much hype on AI and what it can do and how quickly it can do it. And correspondingly there's too much negativity in terms of how many jobs will be lost, etc. Will some jobs be lost? Yes. Will new jobs be created? Yes. So if you look at AI, it will have growth. It will probably need some reskilling. But it doesn't mean if you say 60% of the jobs will be replaced by AI there'll be 60% job losses. Nothing like that happens. So when you look at AI it has to come down from the hype what it is today. How it can make a return on investment for the people down below. If you see, I mean when you look at it today the biggest hiring by people is for prompters. What's the difference between a prompter and a fellow who helped you implement your software system? Then they have these context guys. What's the difference between those who brought in new version? Then you have the data scientist. So there will be some change. But I think this negativism on loss of jobs is way too far. Total replacement is not going to happen. So you will have what do you call, you can call it robotic in terms of machine learning which is rule-based. You will have agentic AI but the human is not going anywhere. It'll be a combination that will be delivered and even this whole thing about AI is as if it's going to happen tomorrow. It's going to take a decade or two. So keep that in mind but Mr. Murthy will be more equipped to answer that.

That's a hopeful and optimistic thing to say, sir. But Mr. Puri, do you see AI reshaping financial services as we've known it? I think Bajaj Finserv recently spoke about how AI is handling a majority of their customer queries. There is a lot of buzz around, you know, whether this will make lending more efficient or whether it will reach more people. Again, do you think it's too early or is there an opportunity here to build an AI-first bank or an AI-first fintech?

The last one I'll come to later but will it change? Of course it'll change. Will it revolutionize? Probably not. So what you're looking at is there are things that have been identified today. So, when you look at it for banking, it'll change the way marketing is done. It'll change the way preparation for customer calls is done. It'll change credit. It'll change fraud. It'll change certain processes. But all this will happen slowly. Some is already happening. Chase is one of the examples where you have a platform and as Mr. Murthy said, you have to learn how to do your job more efficiently and work harder. And the ultimate still remains the same. Whoever, whether he uses AI or he doesn't, he probably has to give the customer a better product, better user interface, less friction, and you can make it cheaper for the company. That's what it's supposed to do. And if you implement correctly, that's what it'll do.

Mr. Puri, since you mentioned bank, I can't help but ask you a couple of follow-up questions. I was warned not to ask anything about the budget. So... No budget, you don't ask. I won't. But a question on the broader banking sector as you see it today. I think one worry has been about deposit growth. If you can give us a sense of the banking sector. And secondly, do you think, you know, when it comes to innovation in financial services in India, UPI is celebrated a lot but it's sort of been celebrated for the last 10 years. Do you think there's been enough innovation on the credit side, on the lending side? For instance, a founder I spoke to today here said that he still can't get a home loan, you know, despite building a company that is probably valued at half a billion, he needs to show two calendar years of profitability. So, what else needs to happen on the credit and lending side from a banking perspective?

That's a very long question. So the fact of the matter is that banking is underpenetrated. Large portion of deposits remain in semi-urban and rural India and with the small businesses which you can get. So I don't think deposit is this business about moving to equity and mutual funds. For Christ's sake, 6% of India's population invests in the stock market. So that cannot be and it hasn't gone out of the bank. The only money that's gone out of the bank is the efficiency of the government which had large balances and which has come out. But I don't think there's shortage of money. I think we can work it out and if there is then maybe they will have to look at re-looking at their reserve requirements and the priority sector, etc. But it's an underpenetrated market looking for growth and you have to look at new areas. It was almost a given that the good corporates will go directly to the market. They have the same rating as you. And so if you stuck there then you have a problem. But if you move from good corporates who give you ancillary business, give you the right investment, you move to the right technology, you move to semi-urban small scale, you move to retail, you move to semi-urban and rural India, I think you are a great market. Yeah. And the point is that I don't know what your founder said that if he doesn't show to this thing. I told you I will give money when I'm sure I have to get it back. You want your deposit back? Yeah, of course. And then you let the bank do the credit.

Right. Last question to both of you. Mr. Murthy, you know, you described Mr. Puri as India's finest entrepreneur post independence. What's the one quality that you wish you could imbibe from him? Or the one thing that you have learned from him?

Lastly, Mr. Puri, you know, there used to be famous stories of you never keeping a mobile phone. Does that still continue to be the case?

No, now I don't know how to call. I know how to call the driver.

I don't know how you resist it, but anyway, on that note, thank you both very much for talking to us on the sidelines of this event at IIMB. Thank you. Thank you very much.