Vast experience makes Sudip Bandyopadhyay stand out in a crowd of CEOs. The Director & CEO of Reliance Money, Anil Dhirubhai Ambani Group, Bandyopadhyay has brought maturity and stability to the company with his experience.
Handling the ambitious foray of Reliance-ADA Group into the broking and distribution business, Bandyopadhyay has shown to the world how a company can win over the clients with efficient service. Reliance Money has launched a comprehensive financial portal enabling customers to carry out on-line trading and investment activities in a secure, cost-effective and convenient manner.
He is also handling the company's foray into gold coin retailing, money changing and money transfer business. In an interview with Commodity Market Associate Editor, Bandyopadhyay reveals his opinions on various aspects of the trade.
First of all congratulations for having emerged as the top brokerage house in Starcom Worldwide's India Investor Survey 2007. The study shows that you got this for cost effectiveness offered to online trading customers. What is cost effectiveness?
Thank you. I will explain to you the cost effectiveness system vis-à-vis telecom industry. You see when mobile phone was launched in India 10 years ago outgoing was Rs 35 per call and incoming was Rs 16 a call. People used to say that don't give your mobile phone number to everyone because you will incur a huge bill as incoming is also heavily charged. Post-Christ (We call it ever since Reliance entered the telephone business) things started changing in telephone industry. The rates were slashed and things started getting better for consumers.
Today, my driver has a phone, my maid has a phone and my 12-year-old son is aspiring to have a phone. The customer base changed when pricing changed and we learnt that from telecom industry. So this is what we call as cost effectiveness.
In India, very few people invest in financial market. Is that a sign of an emerging economy?
In India there are 330 million bank accounts. There are 30 million unique mutual fund folios. In mutual fund sector, this growth has come in the last 10 years. Today there are 5.85 million demat accounts and this figure has been more or less same for many years.
The Sensex has come from 3,000 to 17,000 but number of people in the business is not increasing. When PAN was made compulsory, another 2 million backed out who were doing illegal trading. So there is a huge scope for market expansion into areas where nobody is tapping.
I will give you an example, your parents and my parents. They were only interested in investing in Post Office and National Savings Certificate. It is only now some of them have started moving to mutual fund. That too they are doing because some of the fixed incomes are being taxed by the government. If you invest say Rs 3 lakhs in Post Office you will get Rs 5 lakh plus after six years. Now if you take inflation into account then your Rs 3 lakh is depleting. If you had invested in equity or mutual fund then your money would have grown tremendously.
But most Indians don't want to take risks because they fear that their money will be lost?
You see from our grandfather to our father's time things didn't change till late 80s. After that till late 80s there was rapid change. Now we are part of a global market and we all have to think differently. This applies to everyone in every part of the world. The social security structure is collapsing. Everywhere in the world, the government is realising this fact. And it is the reality of the world.
There are some Communist countries like Cuba and North Korea that do give social security, isn't it?
I will put it this way. Anything you control artificially will not last. You have to let natural forces play a part. The world has changed today and you have to face that reality. You don't have a choice and one has to track down his investments on day to day basis. There is no choice. Look at China, how they changed. I feel India should move that way.
At the end of the day, however there is no denying that there is very low penetration?
You see the problem here is that broking companies are making lot of money in metros and mini metros. Out of 5.8 million, demat accounts in India there are only one million that are actively operating. They make enough money and therefore they don't go to other centres. None is bothered to go to C, D and E centres. If you see eastern parts of the country there is huge opportunity as there is bulk of population over there. They operate through chit funds which we call 'Cheat' funds (laughs). They end up cheating.
So why don't you go?
We are going there. At present, we have 3,247 outlets in 727 cities and towns of India. India has 5,645 tehsils and we want to be in 5165 of them in future.
But is it not true that people from A cities too don't want to move on to B cities or C cities and therefore there is no growth happening across India?
You see it will happen once we set up huge infrastructure. Today if you take example of Mumbai then it takes one hour to reach from suburban area of Ghatkopar to Nariman Point. Tomorrow if you give great infrastructure for people in Pune to reach Mumbai in one hour's time then people won't mind traveling from Pune to Mumbai everyday rather than traveling from Ghatkopar to Nariman Point.
Private equity firms have suddenly detected that broking firms are the best place to invest? What could be the reason for this? Seven broking firms have been recipients of around $270 million in investments by private equity firms during the first six months of the current year in India?
There is a huge scope for expansion here. We should have a growth of around 10 per cent and it is a good thing. This sector was not penetrated earlier but now it is. But I am sure there are other sectors too that private equity is looking at.
It is a known fact that a large number of illegal exchanges, also known as dabba trading, exists in various parts of the country. It is not safe for the retail investors in this market and yet why do you think the people are attracted towards illegal exchanges?
You see people divide their risk at many places. They want to play safe with some money and then put some in places which are risky. They don't mind putting in money where they are told they will get 30 per cent of returns. It works sometimes and does not work. People take a chance. Also, the fact that organised financial players have not reached many places so they are trying their luck with these illegal exchanges.
What is the future of commodity market in India?
It is great. It has phenomenal growth and I would say we can have 500 per cent growth. India is the largest consumer of most of the commodities and one of the top consumers and producers in the world. So, it is a challenge for organised player to bring new people in the market.
It will happen but it will take a lot of work. Today, if you say someone buy potato on commodity exchange he will laugh at you. At the same time if you tell him buy an X company share, he will go for it because there is an awareness level in equity market. Today the people who trade in equity market mostly are speculators and there are only I think one lakh people who trade in this market.
You have recently launched mobile financial platform. Is it just a value added service or beyond that?
VAS is one of the growing potentials in mobile space. Today everyone has a mobile in hand. It is a service that we want to provide to consumers. There is a huge amount of work involved in this. The government rules don't allow you to trade but you can track market. It requires huge work and there is no revenue in it. We only want to spread the awareness.
My father told me that Britons used to give ready tea at railway platforms to promote tea. They are the people who popularised tea in India. They did that because they wanted to be in tea business. Till 19th century the Indians never used to take tea.
You have ventured in may businesses over the past few months, spanning from stock and commodity broking, money transfer, money changing, credit card, gold coin retail and distribution of various financial products like IPOs, mutual funds, insurance policies and offshore investment products. What part of the pie in the financial services sector are you aiming at?
We are trying to become one shop stop. We are not a bank but we are doing everything related to financial services. You can come to us with anything and we will deliver.
Recently you said you expect to breakeven in fiscal 07-08. Does that stand true even now?
Yes I stand by that statement. We are in multiple businesses and that gives an edge. My cost is my manpower only. We have 1,250 employees now and we will grow to 3,000 employees in near future.
Did the Reliance brand name help you consolidate in the business?
Of course, let's say that if I go in small places there will be a queue outside to invest with us. It is a social status that matters to people in such places to be associated with Reliance. In places like Bhor (Western Ghats of Maharashtra) where we have recently, set up shop there is good amount of business. We are venturing into territory in which no one has been earlier.
Where do you see Reliance Money five years from now?
We will be number one financial service player in the country. In fact, we want to achieve that goal much earlier than that.
