New Delhi: Not many people in the world of financial services are willing to see an upside to the decline in Indian stock markets, but Nitin Jain is. “It had always bothered me that investment services in this country were all driven by equity and managed by equity market experts,” Jain says. “Now is the time to hammer the message home, about the importance of exposure to many different markets, because people are willing to listen.”
For Jain, the timing has, in a way, been fortuitous: The market has borne out his emphasis on diversity just as he has sought to put it into practice independently. Last June, Jain, 40, quit his job as managing director and CEO of ICICI Securities’ primary dealership to start his own financial services firm, Decuple Finsec Pvt. Ltd.
Scheduled to be launched in May, the Mumbai-based Decuple will offer high net-worth individuals the diverse portfolio management services that Jain champions; it will also trade in equity, debt, commodities and currency markets, and engage with debt capital markets. “In three-five years, we also hope to get into the private equity and venture capital space, but that’s a very long-term plan,” Jain says.
Tough get going: Nitin Jain.
Decuple is, as of now, solely Jain’s baby. “I hope to get some partners in over a period of time, as well as outside funding,” Jain says. “But considering the state of the capital markets, we don’t intend to rely on finding that funding for at least the first year. So I’ve got to be fully prepared to fund Decuple for that first year. And we’ve got to keep our ambitions small until we sense a better capital environment.”
The capital hasn’t dried up entirely, but it has certainly become more selective. “Financial services is still an area of investment focus for us,” says Bejul Somaia, managing director of Lightspeed Advisory Services India Pvt. Ltd, a venture firm that invests from a global fund of $800 million (Rs3,896 crore). “But what we are seeing in terms of deal flow is not so much new, independent start-ups but new businesses from established players, that could be spun out into companies.”
Over its first year of operation, Jain is looking to capitalize $3-5 million, or Rs15-25 crore. “We’ll probably start with $1 million and then go ahead from there,” Jain says. “There’s no point in over-capitalizing from Day 1. For a financial services firm, the biggest challenge is to find capital and then leverage that. In fact, that’s why I would presume that not many people would think of starting a business in this area now.”
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Vijay Anand, chief organizer of Proto.in, a start-up showcase event, agrees with Jain, having seen a marked silence of activity in the financial services start-up space over the last few months. “It just isn’t a good time to start something,” he says. “People are trying to figure out how to do financial services in rural India—there’s a lot of interest in that—but not at all so much in the urban context.”
The times, Jain admits, are bad, and his clients will be more demanding now than in a booming economy. “Everybody will be looking for bigger bang out of the buck, and cost consciousness is very high right now,” he says. “But that’s one area where a start-up firm is at an advantage, because we can stretch ourselves. We don’t need to depend on one particular thing to keep revenues up month after month.”
Despite the difficulty of finding capital, Jain can see multiple advantages to the timing of his new venture. “Talent is one. I think the availability of people is far greater than it would have been, say, one or two years ago,” he says.
“There are talented second-tier guys who have lost their jobs, and there are first-tier guys who are looking for a move.”
But isn’t it more difficult, during a slowdown, to convince people to give up jobs in established companies and move to a start-up? “I think it’s the opposite,” Jain says. “When times were good, people weren’t willing to give up those jobs. Now there is some dissatisfaction at doing the same thing over and over again. Of course, the reputation of the new firm would matter; its business model would matter.”
Decuple will start operations with a 20-strong staff, although Jain hopes to grow this to 50-70 within a year. “The slowdown also curtails costs in the sense that salary expectations are lower,” Jain says. In the financial services industry, he estimates that salary demands are lower, on an average, by 25% when compared to a year ago. “Portfolio management is always an area of opportunity, whatever the state of the markets,” he says.
The Reserve Bank of India is processing Decuple’s application to operate as a non-banking financial company, or NBFC, but Jain does not see any heightened scrutiny of applications delaying his launch. “I think it should be routine, really,” he says. “The scrutiny is more for corporate-sponsored NBFCs, especially for foreign corporations.”
Jain believes that the best businesses get seeded during downturns. “Expectations are lower, business plans are far more robust, and the foundations of a good company will get laid exactly during such times,” he says. “There may be more entrepreneurs during a boom economy, but it doesn’t mean that a downturn has no scope for opportunity at all.”
Namitha Jagadeesh contributed to this story.
This is the seventh in a series about entrepreneurs starting business during the economic slowdown. Next: Silicon Valley veterans track cattle and machinery