Magazine article Ivey Business Journal Online

An Indian Entrepreneur Uses Outside-the-Box Thinking to Establish a Niche in Financial Services

Magazine article Ivey Business Journal Online

An Indian Entrepreneur Uses Outside-the-Box Thinking to Establish a Niche in Financial Services

Article excerpt

Geographical, cultural and linguistic diversity were mere obstacles to be overcome for this Indian entrepreneur, whose resourcefulness and outside-the-box thinking launched a financial services firm that exploited an inviting-though-overlooked (and profitable) niche. In his own words, he describes how he did it.

One paise, which is one hundredth of an Indian rupee, used to be the lowest-value coin in circulation in India. The paise was discontinued about two decades ago, after the Indian currency had begun to lose its value . Today, one-paise coins are neither in circulation nor can they be used to buy anything. Beggars also won't accept such coins.

Nevertheless, two businesses in India continue to offer services at price points that start at one paise, though both - Telecom and Equity Brokering - are on the brink of disaster. Per-minute call charges and per-trade brokerage charges are sometime as low as one paise. This unviable and uneconomical revenue recovery has brought both of these sectors to the verge of collapse.

But while the current situation was challenging, the massive under-penetration offered enticing prospects. Destimoney's own assessment suggested that there was an opportunity to target appropriate niches and build a sustainable business, block-by-block, in the financial services space. This article will describe how we did it.


In January 2011, after taking charge of Destimoney, which provided equity brokering services to its clients, we started exploring multiple options to make the business more viable and sustainable. We knew that there were formidable challenges, but at the same time we saw opportunities that were not being exploited. The capital markets were in the midst of an unprecedented downturn and volumes were fast shrinking. As well, retail investors had deserted the market. Global markets, with the looming crisis in Europe and the uncertain financial environment in the United States, were not helping in any manner.

With the abysmally low brokerage income, it was obvious that we would have to think outside the box to survive. We considered our options and arrived at a few conclusions. Destimoney, which was predominantly funded by private equity, had limited access to additional funding. Thus, we had to keep our costs under control. At the same time, we had to grow the business if we were to survive. Market conditions and volatility had driven away retail and risk-averse investors and we had to, by default, focus on High Net Worth Individuals (HNI) and traders. Delivery volumes in markets were coming down and even in the derivative space, only the low yielding "option segment" was showing worthwhile growth.

Rather than build our own distribution network, a costly and time-consuming proposition in a country with such a widely dispersed population, we made a conscious call to create a pan-India, large franchise network. The advantage was multifold. Franchisees joined us as partners without any incremental cost to ourselves. They would bring in their clients while we would provide our infrastructure to execute trades. We would share the income, something that helped us scale up the business in a cost-effective manner. We also used our infrastructure to earn incremental income and expand the business without incremental cost or risk to Destimoney. Franchisees, who were self motivated, brought in HNI clients and traders, which maximized their revenue and in turn facilitated our growth.


Our business model was also a reason for our success. Apart from the fact that it is a large country, India is also a country with multiple languages and cultures. Almost every one of the 28 states and 6 territories has a different language and culture. To reach out to such a diversified potential customer base required local knowledge and language skills. While such a requirement can be met by hiring people from across the country and setting up branches, such a strategy is time consuming and fraught with the risk of failure. …

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