Destimoney's strategy factored in its weakness: Sudip Bandyopadhya

Sudip Bandyopadhya is managing director and CEO of full service financial organisation Destimoney Securities, promoted by private equity firm New Silk Route. A chartered and cost accountant, Bandyopadhya tarted his career at Levers, went on to become the head of treasury and investments at ITC, after which he was instrumental in establishing Reliance Money, which he helped expand in India and abroad, before setting up Destimoney in 2011.

Dalal Street magazine featured Bandyopadhya on the cover as 'India's Biggest Financial Broker'. He frequently appears on ET Now, CNBC, Doordarshan, and Zee Business on the Indian financial markets and government policies on finance, apart from being a columnist with The Economic Times. He talks to Swetha Amit about what sets Destimoney apart from its counterparts, its business models and their future plans.

How was the idea of Destimoney born and how did you implement it?
The idea came right after my stint at Reliance. When I joined Reliance, I set up the entire retail financial services right from scratch. The company didn't have licenses then and I was the first employee. So after creating the largest retail financial services,  I thought the time was right to do something where I didn't have the crutch of a brand or a large corporate house, and that's how we started looking at doing something.

Of course to do anything we needed money, so we were looking for an investor.  At that time, New Silk Route came in and offered me this opportunity. They had the platform, licenses, and some people, which worked to our advantage. That's how we decided to take the plunge and come on board with Destimoney.
You have managed to emerge as one of the leading full service financial organisations in the country within three years. How would you describe your journey so far?
I started my career with Levers, spent 15-16 years in ITC and then in Reliance. Most of us at Destimoney have a reasonably well-rounded experience.

We created Destimoney in 2011. The last three years starting from 2011 to now were the worst years for the financial services industry.  Yet we were the only company, which continued to grow despite this lean period. In fact we have grown from zero to where we are now. The reason for that is that we managed to identify two-three things and tried to handle them in an appropriate manner - (a) we knew that we didn't have a brand; (b) We knew that we didn't have an open cheque book, which you have in ITC, Levers or Reliance; and (c) There was no market tailwind.

Realising these three things, we made our strategy accordingly and we did reasonable well which again I would attribute to the following reasons:

• There were a few things happening in the market and we caught the trend early enough. As you know, globally the options and futures market is very weak. But in India, it used to be very small. In 2011 also, the option part was only 5-10 per cent. Now the options have become 85-90 per cent.
  
  We had anticipated this in 2011 itself. So we positioned our company in that fashion and worked on this by giving our customers, options strategy. Now that has got both advantage and disadvantage. The advantage is that if you know what you are doing, it's a great product. The disadvantage is that the income is miniscule compared to a delivery trade. But we built our organisation accordingly.
  
  Our traditional brokers who were well established in the market were structured in a different manner. They were based on the delivery trade which used to be 80-90 per cent. Now that has become 5-10 per cent. So the dynamics of the industry has changed. I used to say that even when the market becomes very good, this trend is not going to change. Options will continue to remain 85-90 per cent only. This is what is exactly happening now.  This was one reason for us doing well.
  
• Another reason why we did reasonably well was that we were aware of our three constraints being money, brand and no tailwind. So we built our business on the back of franchisee network and today we have 28 branches and 1,800 franchise locations. In case of a franchisee, we are not putting any money in it. The guy is my franchisee. If he earns and does good business, I get a share out of this without  having spent a single rupee on that. That's how we have built ourselves.
  
  We built it in an era when the market was bad and we consciously did that.  For me it's an incremental income as we have the company, licenses and online platform. Whatever incremental income comes is good to me and I am not paying anything extra for that.  So these are the kind of well thought out strategies which we have used and it has worked well for us.

How have your previous stints with financial services companies like Reliance Money, and your experience at treasury in ITC influenced your role with regards to Destimoney?
It influenced my role to a great extent because of the learning that you get in a large conglomerate like ITC. I used to handle treasury and investments and was on the investment side, capital market and money market for 15 years. So it gave me an excellent insight on how the market functions and operates from the other side because I was on the buying side.

In our language, we say, if you are investing money, you are on the buying side. And today I am on the sales side. Having been on the buying side for 15 years you know what the buy side wants. You can tailor-make your offering to that. In both Reliance and Destimoney I took advantage of that insight. When you are on the sales side, you can position your offering, your schemes, and structures to cater to the customer in the right manner.
With regards to Reliance, I would say it's a 'once-in-a-lifetime' experience. I got an opportunity to build something from scratch here. Reliance thinks big always and encourages you to do the same. So your vision changes to something bigger. That was a great learning curve. Besides that I also got a lot of freedom and a golden opportunity to create something from scratch.

When you join an established company which has been there for years, you join, grow, do well and learn a lot of things.   But when you create something from scratch it's a different experience altogether. You get the chance to mould the company according to your ideas, thoughts, vision and one learns a lot by doing that.

However, one thing you realise is the fact that nobody is indispensible after a point in time in the larger organisation.  On the other hand, when you create something, it's a completely different responsibility. At some stage in life you realise that it's better to be a big fish in a small pond than a small fish in the big pond.

Presently you are running a unique product in commodities called 'Tortoise'. Could you tell us more about it?
We create multiple structures to which we assign these names. So let me explain this in detail. Most of the market players and competitors tend to give you advice on what stock to buy. We realise that there is a limitation in that because most of the people are not so savvy and clued on to the market. It's very difficult for them to implement such advice and benefit out of that.

So we thought of creating a structure and giving it to them, which will help them in execution. Let me give you an example.  For instance I might suggest that you buy a company's stock at Rs100 and put a sell order at 105 and put a stop loss at 98. This way you have created a box. So you know you will make money and that you will not lose beyond a point. The maximum loss you will have is Rs2 in this case.

Once we understand your risk appetite, we will advise you accordingly. So we create a box for you as a trading strategy. 'Tortoise' is a name which we have given as we emphasise on a slow and gradual build up in trading of stocks rather than a fast-paced and speedy process.  We recommend that you first do a small trade, then go for a slightly bigger trade and keep moving up slowly. That's how we work.

Destimoney and Dhanlaxmi bank have tied up to provide an integrated 3-in-1 account called "Dhan4u". Could you elaborate on that?

In our space, there are banks which have broking outfits. For instance ICICI has ICICI Direct; HDFC bank has HDFC Securities, etc. In most cases, people may have a bank account but not a broking account. It's so much more convenient if a person's bank account is linked with a broking account as they can do the trade seamlessly.

Since Destimoney is not a bank, I realised that I had to do something to bridge that gap. So I tied up with Dhanlaxmi bank and we created a platform in Dhanlaxmi Bank, which is a trading platform called 'Dhan4u'. So if you are a Dhanlaxmi bank customer, you have a platform in Dhanlaxmi bank itself and if you open the website you get Dhan4u. It's a trading platform, which is white-labelled. The back-end is provided by us, so you can seamlessly go and trade.

Since we are not a bank, I am trying to overcome that drawback by tying up with banks and creating such platforms. That's what Dhan4u is all about. Simultaneously, I am also working on tying up with other banks.

There have been talks about New Silk Route proposing to sell its stake in Destimoney for Rs1200 crore. Will the entire business be sold or will the sale be restricted only to the housing finance business? And how will this affect the business of Destimoney with regards to Net worth and asset value?

The sale will be restricted only to the 'housing finance' business.  New Silk Route is a private equity firm with a time horizon of ten years.  They have completed seven years now, so they have to start exiting. Their company has performed very well and at some stage they have to exit. So they are looking at exiting the housing finance business. However there is no move on exiting our part of business. In fact we are planning to raise some more money in our company.

Their exit won't affect our business as the structure is different. We are a holding company, they have an investment of 49 per cent in Punjab National Bank Housing Finance and they are investors in our company as well. So the holding company, which is called Destimoney Enterprises has an investment there and in our company as well. Only that investment will be sold.

What according to you are the factors to be kept in mind with regards to portfolio management? And what is the difference between designing financial solutions for individual clients and organizations?  

As a fund manager there are a lot of things, which one needs to look at and as a customer, there are different set of things.   A fund manager should ideally have different schemes to cater to different needs of investors. For a portfolio manager, the critical thing is to understand the risk profile of an investor and accordingly recommend a particular scheme, which meets with the risk profile of the investor.

There needs to be a different portfolio depending on investor based on whether he is aggressive, passive or risk aversive.

With regards to an investor's approach, we believe that an investor should know what they are looking for. They have to put the money in a fund that matches their risk profile. For instance if you are a low risk taker, you could consider putting your money in a balanced fund.

Designing solutions for individuals and organisations is completely different. For individuals, you need to understand the person's requirement, his objectives, risk profile, income, and savings and advise him accordingly. With regards to an organisation, the needs are different. The most important thing to consider here is how long the money is available and the cash flow of the organisation. Then you accordingly start building your portfolio.

How do you see the status of the Indian market post the new government and its growth in comparison to other emerging markets?
I think there is a lot of optimism. If you speak to anybody across the spectrum, they are optimistic and that gets reflected in the market valuation. Modi is doing some right things and good things. While, we have heard the wish list and manifestos, we just need to see them getting implemented.  That's going to be crucial as people are watching. When expectations are low from something things are very different. But with such high expectations, one needs to ensure that they deliver all those expectations else the disappointment will also be high.

The market has given thumbs up to the Modi government, policies statements, and manifestos, etc. If some amount of delivery happens, then the market will zoom.  .

With a few companie,s which are embroiled in a scam, how does it impact its shareholders and market equity?'
The moment the company gets into a scam, it affects the shareholders, as share prices start crashing. To avoid such a scenario, it is extremely important to first check the pedigree of the company, its credibility and the track record of the promoters. One cannot compromise on this aspect.

For instance, if you are investing in a marriage you tend to check the pedigree of that alliance. Similarly when you are putting in money to worth, check the pedigree first, and then check its business, followed by prospect and then the industry. One should always check the intentions as intentions behind should always be good.

What makes Destimoney stand out in comparison to its counterparts like Edelweiss, Cholamandalam and Religare?
If you look at Edelweiss, Religare or even Chola to an extent, the business models are different. Religare and Edelweiss are fund-based businesses and they are NBFCs. While 5 per cent of their income is fee-based, 95 per cent comes from their lending business.  Chola of course has moved away from fee-base business to a large extent.

However, being NBFCs, they are competing with a bank. For instance, if you want a loan for property or gold, you can go to a bank as well as these above companies.

Destimoney on the other hand is not into the lending business. We are more of a fee based business and do not focus on lending.

Lastly, what are your future plans? Where does one see Destimoney five years down the line?
There are two things we are focusing on. One is that the broking industry is in for an upswing. So we are trying to position ourselves right so that we can reap the benefit of that upswing. We want to grow the broking business in a big way. The other thing we are focusing now is the commodity space. We are really working hard to get a large commodity lending book and at present creating a fund-raising for that. That will be the next big business for Destimoney.

Five years down the line we will be looking at an IPO opportunity. Now that we have an office in Dubai, we want to look at opening branches in Singapore, London and New York at some stage.

If global financial markets in three or four places are covered, we can cover both the inward and outward flows. However we are focused on India, as we understand India and prefer to be in the Indian market.

So even when we are in London and Dubai, we want to focus on India business. We can either get people from India to invest in these geographies or people from there to invest in India.