Vishal Goenka, CFO of Renaissance Services, explains how fiscal discipline keeps playing its vital role in the Renaissance strategy.

In Renaissance, our focus on efficiency and fiscal discipline shapes how our corporate culture creates value for our customers, clients and shareholders.
Economies of scale and market clout are no longer the formidable barriers to entry they once were. As our companies focus on their core specialties, the allocation of resources must favour our most distinctive capabilities: the things we do particularly well that enable us to outperform the competition.
Managed growth
In our business, exponential growth often requires new investment, so one of the most important factors for success is making sure that we have the most effective capital and debt structure in place.
During the past six years, Renaissance made over $1.5bn of new investment, but the ratio of debt to equity in our business has come down steadily over the past four (see the chart on page 83). Reducing this ratio is about reducing risk in the business and illustrates that the increasing additional investment has been matched by retaining balance sheet health.
Consolidating debt
During the last five years, we refinanced over $750mn of debt, and with every refinancing the company sought out the benefit of a better repayment profile and reduced costs. Most of the assets at Renaissance have lifespan of over 25 years, so refinancing is very important for our business to keep releasing trapped equity for the next round of investments to propel growth.
Diversification of finance sources is the key
A company that explores the full range of funding options available will find it can select the financing terms that fit its particular time and purpose. The Renaissance Group has raised funds from non-amortize internationally listed bonds, subordinate debt, Mandatory Convertible Bonds, private placement of equity and, of course, conventional funding from leading local, regional and international banks.
This creates a great balance between short-term and long-term funding options. When our subsidiary company, Topaz, raised non-amortized bonds of $350mn, they took the view that the relatively high finance cost was worthwhile because it would reduce the annual repayments and actually result in a stronger finance structure overall. This is because a ‘non-amortized’ bond is a bit like an ‘interest-only’ loan: you only repay the interest each year, with the principal repaid as a lump sum at the end of the term. The Topaz team knew that the lower annual repayments would free up significant equity each year, which could be redeployed to fuel growth, in this case through buying new vessels. The cost of this bond is much lower than the cost of capital of the company, and the benefit of the bond should be measured in terms of debt, equity… and growth.
In the Renaissance Group, we use our deep understanding of financials and liquidity to manage the way volatile prices and demand affect the company’s performance, both in countering potentially lethal threats and ensuring the availability of finance for countercyclical investments.
The market reacts
The proof of whether our fiscal discipline is working has to be found beyond our share price, and beyond our own accounts and ratios. We need to look at the tough independent scrutiny performed by the financial markets when a coherent and substantial individual investment opportunity presents itself.
The fact is that our businesses continues to attract investors, with US$75m invested by Standard Chartered into Topaz at the end of 2014, and in early 2015 we announced a further $75mn equity partnership had been formed, with prominent Omani banks, pension and sovereign funds investing alongside Renaissance in our flagship project at Duqm.
Renaissance has an excellent reputation for its management, its commitment to sustainability and a record of economic growth that is entwined with the growth of Oman itself. We remain tireless in refining our business model to deliver more for less, while maintaining the rigorous standards of safety and sustainability that our clients, customers and workforces expect.
Coupled to this, we have to be equally vigilant in reviewing our business finance structure regularly, to maintain our confidence that our strategies are properly funded and our costs of borrowing are properly managed.
The finance organization play a critical role in creating greater value in our company, ensuring that the company has a highly effective capital structure, setting expectations for investors – and then not surprising them! – and setting stretching goals for revenue and profitability that meet the company’s long-term aspirations.
As with all companies, we may experience short-term blips due to various external factors, but the core businesses of this company are poised for sustained growth over a long period of time.
Efficiency and fiscal discipline are the twin cores that drive our business.
The main tool is No!
As a CFO I say ‘No’ a lot. But the CFO is not the accountant in green eyeshades, picking the company’s best ideas apart; you work with other business leaders to find the best answers for the customers and for the company. I would say the core function of my job is to articulate a constructive position that helps people find the right strategic focus for their idea, transforming ‘No’ into a sophisticated ‘Yes’.
Walking the tightrope between supporting individual businesses and making the right decisions for the overall enterprise is a delicate balancing act: you must have natural integrity, so that people will trust your decisions. A CFO has to be well-equipped to help business leaders see their divisions in terms of financial performance and as a contributor to the company’s broader strategic portfolio. You have to look at the business cross-functionally, and only then can you unearth the big opportunities to do something better for customers.
In business, you don’t accept limitations – you find ways to surpass limits. You learn to accept that there will not always be a 100 percent guaranteed strategy, and so sometimes you go with a gut feeling. But that is when you need your CFO.