Nirmal Jain: The man who revolutionised stock transactions

Anirudh Dutta, CLSA said,"When you interact with him professionally, he is a man in a hurry; a man who is pretty very blunt. He is a man who can probably sound harsh. But at the core of him, he is a very soft guy. I have seen him even in the most difficult of situations, behaving very fairly with people who probably hadn't behaved the same way with him."

Passionate, aggressive and a great decision maker - that's how most people define Nirmal Jain. Today Nirmal may head Rs 3,500 crore company but like most success stories, he too had his hard times. During the dot-com bust he went without a salary for nearly a year-and-half trying to keep his company afloat. But then again it has been said that tough times never last, tough people do - and last he did. The fortunes of the online business changed and the rising tide carried India Infoline with it. The company's e-broking platform found many takers and with it took the company to dizzying heights.

Nirmal Jain believed in taking in risks as it is in his blood - a family of businessmen. He said that after working with Hindustan Unilever, he got the atmosphere and environment that was entrepreneurial. Jain believes that he could scale up this business because of his experience at Lever. "So, I knew the importance of putting in place systems, processes, audit and all those things."

Here is a verbatim transcript of the interview with Nirmal Jain on CNBC TV18. Also see the accompanying video. 

Q: Even when you did your IPO three years back, did you ever consider that the business or your market cap would reach this kind of scale?

A: To be very honest, no. At the time we did the IPO we didn't know that the CLSA team would join and at what pace our market would grow. There was no idea at all.

Q: Did you pinch yourself when your market cap reached Rs 11,000 crore just a few months back?

Jain: No, because I don't look at market share or market cap in that manner. My shareholding is more or less locked-in till I do this business. The market price keeps going up and down. So, I don't pinch myself when it either goes up or comes down.

Q: What gives you more satisfaction, the fact that you are able to create a business of scale or the fact that you are creating a lot of wealth for yourself and your shareholders?

Jain: I think creating wealth for my shareholders or myself is very incidental. I don't think I am at all concerned with that at this point. What I want to build is a business that is respected, generates employment and which is viewed with respect by all constituents.

Q: Have you ever set those kinds of long-term targets for yourself that you want to be a USD 5 billion company in five years or 10 years time?

Jain: Never actually. I take each day as it comes. You asked me if I was thinking about it when the company went public. If you go back 10 or 13 years in time when the business started, I had no dreams whatsoever whether this company would ever go public and what kind of wealth or what kind of market cap it will be.

Having seen this market for 20 years - I know how fragile market cap can be. As long as there is a satisfaction of building the business, I am not concerned about market cap.

Q: Let us talk a little bit about how your mental framework is as an entrepreneur. Would you define yourself as a risk taker?

Jain: Yes I am a risk taker. I come from a family of businessmen. My family has always seen entrepreneurs. 

Q: You never thought that you would get into the family business because you followed a different route. You worked for Lever for a while - you were a technocrat for a while. Why didn't you get into a business from a family of risk takers that you come from?

Jain: Our family business is essentially a small business. When I did my Chartered Accountancy and went to IIM-Ahmedabad to do my MBA I realised large corporates and the scale is a different ball game and it will require experience. So, I thought I would get into a large corporate - a reputed company - for some time and learn something there. I thought I would maybe stay there for a year or so.

But when I got into Hindustan Lever I realised it is a great company. Every individual there works like an owner. The atmosphere and environment that is created is quite entrepreneurial. When I look back, I am surprised I spent five years because when I got into the company I would have given myself a year or so.

If I have to look at my own business, when it started I did not know where it would go. But I could scale it up because I spent five years at Lever, which helped me a lot. So, I knew the importance of putting in place systems, processes, audit and all those things. It happened naturally to me because I had spent five years there.

Q: Would you classify yourself as a very hands-on entrepreneur or can you delegate and move away?

Jain: I delegate most of the things. But I meet people at the ground level with the same ease that I meet with my VPs or Senior VPs. I travel, talk to branches, talk to critical staff, or sales executives, or people who have joined in new. That gives me a lot of insight into the business. But if I have to implement something, I normally try to go to the hierarchy so that people don't get startled. But if I have picked up something at the ground level, I would talk to the hierarchy and get it implemented. But most of the things are now delegated. 

Q: Are you a cool relaxed kind of a guy or are you a completely paranoid kind of a guy? Do smallest things upset you and you get into a state of frenzy?

Jain: Over a period I have evolved into a much more relaxed person because when I started my company, I was much younger, may be in my early 30s. I was a lot more paranoid about small things going wrong. But with experience I have learnt and may be the process is on but I am a lot more relaxed as compared to what I was say, 10-years ago.

Q: Even so, what would you say is your biggest flaw as an entrepreneur? If you were introspect and ask yourself about how you could become a better entrepreneur - what would those one or two key things be?

Jain: In dot-com euphoria, although you would have read about things in textbooks, you still get carried away. We wanted to do too many things and probably we wasted a lot of time there. When one is driven by sort of valuation on investment rather than return on investment. So those were the days when we made a lot of mistakes. Again, building a good team, it took a lot of time.

We had to wait for the currency, for us to attract people. But may be I was not very good initially at getting, may be the size of the business also would have allowed. But I would get into the nitty-gritty's a lot more initially with the way people manage their time, the way people manage relationships with people in a business like ours.

One has to maintain relationship with regulators and with people who are who's who in the financial world. You had to meet them. You had to socialize. I don't think I am too good at these things. I am not that kind of a personality who would go out.

Q: Are you an introvert?

Jain: Not really. With my friends, with my relatives, with my employees I am very extrovert. But I am not a Page 3 kind of a personality or not even on those lines, who would go out and socialize - drink, eat, dine-wine and meet and make friends. I do not spend time too much on those things.

Q: Do you think has that even come in the way of business success?

Jain: No, there are pros and cons of everything. When you do this there may be positives. It is very difficult for me to evaluate and say whether that would have taken me somewhere else. But no individual can have everything. The positive side of it is that at least I can mix with my people, employees much better. I have time for them. Whether those positives outweigh the flipside of it? It is very difficult to assess.

Q: But are you a people's person or you would not describe yourself as a people's person?

Jain: I would describe myself as a people's person. Venkat, my partner and I - both of us have been quite easy to meet and people also find it very easy to come meet us. It is quite an open culture that way.

Q: What is your strength that you think as an entrepreneur - candidly? Even if it sounds immodest say it.

Jain: The ability to manage people; the ability to attract. We are now a 15,000 people company. It was just about 15-people company less than 10-years ago. So this kind of growth would not have come unless of the ability to not only manage people, it is basically to make them feel part of the team. The two-words that drives our company is our owner-mindset. So people join in, they feel as if it is their own company.

Q: You spoke about 15,000 people but the biggest amount of attention came around those four people from CLSA when you brought them on. Did you think about that decision a lot because you gave away a fairly significant chunk of your equity to get those four in or were you thinking about the big leap to institutional which you had to make at some point?

Jain: There are many things that people don't know about how this happened and what happened actually. In fact this decision took almost a year. So the first time I started was almost a year back. I had known all these people for more than 10-years. In fact, Bharat Parajia who is the leader of the team, we studied together in college, so I would have known him for more than 20-years.

After that we heard that many other people have tried this - just poach a team by giving equity or money. But that is a biggest mistake. I knew these four guys for more than 10-years and some of them were know for 15-20 years. 

Q: So there was a question of comfort?

Jain: The kind of trust and comfort was very different and we would have been talking to each other almost every month as friends. So we knew and it was sort of a complementary fit that happened and still it took so much of time because they were also thinking and we were also thinking. It was not a question of 15% equity alone. It was also whether the cultural synergy will gel with each other or not because the organisation that I had built was very different from where they were coming from. The biggest and the most important thing is that there was mutual trust and mutual respect.

Q: But what did you do to convince them because it was a big leap for them to leave CLSA and to come into your fold?

Jain:  They were hitting a glass ceiling there because they had built institutional business there and there was no way to go because their organisation won't go public. So there it will never be converted into wealth for them. It would not get into retail business, so they were hitting a glass ceiling. I could see that because I was very close to them.

So to some extent I could also take advantage to that because I could convince them that you are all in the early 40s now. So what will you do for the next 20-years because you cannot be doing this. It is too boring and it is hardly challenging. CLSA was not a world bracket bank. It was not a great name. It is almost a parentage of a bankrupt French bank.

So what these guys built in 10-12 years to be leader in foreign broking was great. But what were they getting in return? All of them were fed-up with salary income, incentives and bonuses. They were not creating wealth. They were not creating something that they can feel their own and be proud of it. So we said that we have a much bigger canvas here and you can do not only institutional but you can be part of the think tank, part of strategy for all the businesses and we can do many more things.

We can go global - it would be a lot more challenging. What really attracted them was not the money or the wealth part alone but autonomy and also challenge of creating a much bigger business.

Q: Do you think it can be done though because institutional typically has been the domain of JP Morgans, Morgan Stanleys, CLSAs of the world? Can you make a big dent in the institutional broking business with an Indian brand name?

Jain: We have already done that. I would say that we would be already amongst the top three. Our market share in institutional business would be anywhere between 5-7%. So this question one-year ago was a big gamble because then we were discussing this. On the one hand we had to keep this information very confidential because it was very sensitive and on the other hand when you are taking such a big decision you need to consult somebody to tell you whether it would work or not. So that way it was a big gamble for us.

But I am really happy that one-year later this has actually happened. Today we deal with more than 200 FIIs - so almost practically all the FIIs are trading with us. All the mutual funds are doing business with us. We had a hypothesis that the business is driven not by name but by quality of research and relationship.