Early days
Armed with an MBA in marketing and finance, Hitesh Kakkad joined his family business of oil refining to take the enterprise to the next level. However, luck didn’t favour him. The refining business suffered due to a slowdown. Eventually, his family had to wind up the business.
Brush with commodity broking
Hitesh started contemplating what he should do next. When he was exploring ideas for his new venture, a business acquaintance asked him to try his hands at commodity broking, where he had some experience. Hitesh liked the idea and started as a sub-broker of Multi Commodity Exchange (MCX) in 2002. Naïve in sub-broking, Hitesh could not sustain the venture due to client defaults on margin payments. Debt piled up as he could not recover this margin money from clients. Eventually, he ended up repaying the money to the broker from his own pocket. Saddled with losses, he had to give up his sub-broking license in commodities.
This setback didn’t deter him. Hitesh subsequently became a sub-broker in equities.
Turning point
In the meanwhile, he got married to Anuya in 2005, a trained chartered accountant. Anuya used to work for Jain Irrigation at that time. The husband wife duo then decided to apply their expertise in Hitesh’s sub broking business. Anuya’s number crunching skill coupled with Hitesh’s marketing and sales experience helped them gain ground.
Besides direct equity, they were also offering mutual funds to clients but passively. “We used to sell MFs only when clients asked for it. We were sub-brokers in MFs,” recalls Hitesh.
They were drawn to mutual funds after attending an AMC training meet in Jalgaon. They learned to avoid NFOs, focus on product suitability and the benefits of debt funds vis-à-vis traditional bank deposits. The training piqued their curiosity for MFs which led them to take up direct empanelment with AMCs. Debt funds fascinated him so much that they started propagating them to all clients, without taking into consideration the wafer-thin incentives on such products. “Even my retail clients actively invest in debt funds. Some of them ask us to park their surplus cash in MFs for a few weeks,” says Hitesh.
Soon after they shifted gears towards MFs, SEBI banned entry loads. The clampdown on this upfront incentive led them to divert to other products like life insurance, bonds and direct equity. “That was my biggest mistake. My growth slowed down as I did not focus on MFs,” says Hitesh. In 2008, his AUA in mutual funds was a modest Rs 57 lakh.
When the regulator announced an incentive for B15 distributors in 2012 and the market started rallying Hitesh realized that he should give serious attention to MFs. They liked the professional fund management in MFs and realized how much effort they were putting in analyzing companies and predicting the next big winners. By expanding their team and putting in place the infrastructure, they began to move their direct equity investors to mutual funds. Also, their AUA book kept increasing as they actively sought referrals from existing clients.
While the company is scaling up, they are not choosy about client wallet share. Doctors, businessmen, compounders, courier delivery guys and housekeeping workers – all are his clients. In fact, they consciously try to bring blue collar workers to invest in mutual funds.
Going digital
A crucial part of their turnaround strategy has been adoption of technology. They started using the e-stamping facility provided by CAMS through FundsNet which allowed them to punch in transactions faster and well before the 3 pm cut off for submitting applications. FinNet is another software which they used extensively to route online transactions. During this time, SEBI asked stock exchanges to provide limited membership to MF distributors for routing transactions through the bourses. Following this diktat, NSE built its NSE MF II platform. Since Hitesh has been an extensive user of technology, he was among the distributors who did pilot tests for this platform.
He has moved 90% of his clients on NSE’s MF platform so far! “With the help of technology, we can do four times more work than we did in the past with the same team strength,” observes Hitesh.
Hitesh is currently using a software which allows him to open client accounts (even first time MF investors) on three platforms at one go – MF Utility, NSE and BSE within 8 minutes! Client data is punched on this software only once manually which is automatically pushed to MF Utility, NSE and BSE MF platforms through Application Program Interface (API) while KYC is completed through biometric Aadhar based KYC. Here’s how his AUA grew by adopting technology – Rs 35 crore (2015), Rs 42 crore (2016), and Rs 72 crore (2017).
His firm also uses technology in other functions like client service and communication. For instance, all client queries/requests are put in a system which sets reminders to revert to clients in a defined turnaround time.
Expansion
Hitesh’s focus on technology and client service has put his company’s growth on fast track. His team spends most of the time catering to referrals, leaving no time to penetrate in rural towns. To cater to the growing demand, Hitesh and Anuya plan to expand thier team and move to a bigger office.
Looking at their growth, Rs 100 crore AUA is not far away.
