Meanwhile, Sundararaman Ramamurthy, MD & CEO, BSE says, ” There are a lot of participants in the market who have been there for a very-very long time. You just go and listen to them and understand what they want you to do for the betterment of market and it works.”
So, what is your association as a family with Bombay Stock Exchange?
Hemendra M Kothari: Well, my great-grandfather, I should give credit that he started somewhere in 1866 and then he was one of the founder member and director and first vice president of the Bombay Stock Exchange.
The stock exchange started somewhere in 75 and I see the certificate in 78. But anyway, the question is there is a history for us. My great-grandfather, my grandfather, my father and myself, we were president of the stock exchange.
So, it is a place where I think of how our own family wealth and prosperity was there because of Bombay Stock Exchange.
When I joined, there was a bank nationalization. There was forward trading which got banned. And in spite of that, I was lucky to make every year more money than before.
So that was a situation when also the emergency came. There was a war, there was restrictions on various kind of trading. So, anyway, the stock exchange has gone from what I used to see and today has multi-fold expansion on shareholders.
I think that is the biggest plus point for the capital market formation.
Stock exchange, whether it is Bombay Stock Exchange or National Stock Exchange, it definitely gives a lot of interest to the world. I recollect in 1984, I started talking about getting foreign investors and two years it took me to get first approval to create a country fund.
DSP and Merrill Lynch joined hands to raise money and two years to explain to government and not to bring them down, but to explain what is PE and why equity and not fixed income only.
I think those are the nostalgic days when we had to work hard to get foreign investor approval. 1991 was of course a year where Manmohan Singh liberalised from various restrictions on the size of the enterprise, even we had to take approval.
So, from there onwards we have seen India moving forward fast on industrialisation. And 1992 I think they allowed the foreign investors to come and invest directly over here.
And we have seen raising of GDR, ADR in USA. So, the picture changed and the size of the organisation in India also changed.
I remember taking Mr Kamath to raising money for ICICI and various companies from TCS onwards to Birla companies and Reliance.
So, I am glad that I am today here in Stock Exchange which has made a difference to Indian investors in India and to some extent globally.
You have seen the twist and the turns. You spoke about the emergency era, you talked about nationalization of the banks, then you had the South Asian crisis, TMT boom and bust, 2008 crisis. But throughout your time you have kept the faith in the Indian stock markets. At times of turbulence and uncertainty, can you tell our viewers that how have you kept yourself calm and why have you kept yourself calm and why have you not panicked?
Hemendra M Kothari: Maybe I was over conservative, that could be the reason. Though being a stock broker, we never did any forward trading and so we did not take risk. We focused on only pure broking and then later on in 1975 started investment banking company called DSP Financial Services. And I was a dreamer and started looking for foreign companies, how can they come to India. We raised for many companies. We had tied up in 1984 with the German Bank 1983, 1984 Merrill Lynch, Swiss Bank Corporation today which is UBS, French Ex-Im Bank, BFC in those days and IBJ Japanese Bank.
So, I had a different I would say experience and I was lucky to be there at the right time and I was very lucky to get right people in the organisation, so that was the reason to some extent you can say my success and our company’s success. So, I am glad to have all these years of good fortune with me.
There is BSE of the past, there is BSE of the present, and then BSE of the future. What should we start with?
Sundararaman Ramamurthy: Whatever your viewers would love to hear.
The past and the future is what viewers would like to understand and the present for BSE under your leadership has been nothing short of incredible. I mean, BSE itself has become a multi-bagger stock now. From the COVID low of about Rs sub-300, it is now nearing Rs 3000. A lot of attribution is going to your leadership, that you have changed the things. You have really got the motions into play for BSE. What is that one incremental change which you have done at BSE that the energy levels are back, excitement is back, shareholders are happy?
Sundararaman Ramamurthy: So, you might have seen the Mahabharat serial, which always used to start with mai samay hoon. So, if somebody were to make a serial, mai BSE hoon. I think it will cover all these great things that have happened.
And you will see a lot of lessons to be learned, a lot of principles to be done, a lot of dos and a lot of don’ts. When I joined BSE probably around 15 months back, clearly there was a lot of legacy as you started with, a lot of nostalgia, a lot of history.
But I came here to make the future to whatever extent I can in the limited time that I have.
Two principles which takes you through ages have been nicely narrated by the two great doyens, with whom I have today the pleasure and the greatness of sharing the same dais, which I am very honoured and humbled about.
One of them talked about corporate governance and two, they talked about risk taking within the limits, not over risk taking. The third thing which I thought is very important for me to change things was, listen to the voice of customers.
People like me come and go. People like this history have been there for a long time. There are a lot of participants in the market who have been there for a very-very long time. You just go and listen to them and understand what they want you to do for the betterment of market and it works. Voice of customer works, that is the only thing which I think I am trying to do because of which today BSE is starting to grow in a good way.
Mr Mistry alluded to a very important corporate number, market share and BSE was always compared with the other exchange when it comes to market share. They were losing their relevance, if I may use the word, but they are getting their market share back. They are getting their profit back. Which is that wheel you were able to turn that everything is moving in the right direction, both in terms of profit, market share and also the future business?
Sundararaman Ramamurthy: So, if you look at it, exchange is a high fixed cost game. So, the fixed cost to some extent was already put in place in terms of various things like technology, people, all were in place.
So, there have to be users to this. When users come in and they start using this high fixed cost model, then it starts giving you revenue.
For people to come, there should be something as a USP for you to offer because of which they can come. So, for that you have to listen to them to find out what they want.
The way the Indian markets have grown over a period of time, derivatives have started playing a very important role in attracting volume, not in derivatives alone, in all the other segments around it.
One of the very reasons for BSE losing market share was its absence totally in derivatives. When it is not in derivatives, many participants do not come here to do derivatives. Post interoperability, if they are going to some exchange for doing something, they would like to continue with the same exchange for everything there instead of putting another set of expenditure and infrastructure at their end to connect to both the exchanges and get any benefit.
If you are able to attack the derivatives piece and bring something which makes sense for the market, when the market participants come, they put their infrastructure and once they have put, they would like to milk it as much as they could, then they will start using my other segments.
So, that is how the Sensex contract and Bankex contract were born and with that more and more people started coming in and when more and more people started coming in, they started looking at cash market as well, so the volumes are growing there.
It is not that we have reached, there is a long way to go. Today the institutional presence in equities market, which is not dependent on derivatives, is still absent.
When you look at domestic institutions, they generally give you a typical type of reply when you go, which needs to be attacked separately.
When you go to foreign participants, they say, I do not mind trading, but I want a single contract note. I cannot for a same order receive from two different exchange two contract notes, because I require a single VWAP. We are working with everybody concerned, every stakeholder in this. If such resolutions happen, then even more you will be able to see traction in cash market.
Mutual fund, we are doing well, we will continue to do well because we are putting a lot of energy there. Derivatives, we are growing, we have to do more to grow in the right way there.
So, if I can become that samay right now, we are in 2024, but hypothetically if we are celebrating the BSE Day 2030. If I am samay, what will I say?
Sundararaman Ramamurthy: Dekhiya, kal ko kisi ne dekha nahi hai, aap kal ki baat bhi nahi kar rahe hai. You are talking 2030, which is five years down the lane. We can only dream and it is very essential to dream. As Mr Kothari rightly said only dreamers achieve something. So, let us dream something. We will certainly expect the market, the economy, the prosperity, all at a very different level, that is one thing which every one of us will even today be able to foresee because the way the country has been growing in the recent past with the amount of political stability, with the amount of regulatory keenness in ensuring the growth of market and the amount of effort which MIIs are ready to put along with the regulators to make that happen, they have been stupendous.
What I would like to see, therefore, five years down the lane is just not equity and equity asset classes alone, I would like to see a major development in terms of corporate bonds, government bonds, derivatives products associated with them.
These are all today looking to be a slightly longer-term situation despite the fact we have been trying for a long time.
There has to be a proper interest rate curve across all price points with actively traded securities across all price points.
The corporate bonds also should be active along all the entire curve so that it is very easy for me to quantify and assess the corporate risk from that. There are multitudes of products today which are traded across the globe. We probably do not have many of them.
Equity is still less than 10%.
Sundararaman Ramamurthy: Absolutely. So, it has to grow a lot. So, there are multitudes of areas where we will see prosperity growing and that is what I would like to see in 2030.
2024 to 2030, you have seen there was a time when steel companies were the market leaders, cement became a market leader, IT became a market leader, financials became a market leader, AI is becoming a market leader. Where do you think the puck would move?
Hemendra M Kothari: First of all, let me just tell you, the time when I was there, the number of shareholders were less than one crore across India. The issues were coming of around 10-15 crores. 20 crores or something was considered huge to sell and today we are talking about thousands of crores.
Vodafone 20,000 crores.
Hemendra M Kothari: 20,000 crores. See, look at that. So, the question which is there is things are changing very fast and I think we are growing into kind of growth path with more investors getting educated and more proper compliance also which is driving the market into proper way as he has mentioned and more and more people become ethical and compliance based business. I think what we will see is a sea change. We are at the threshold of growth. I have never been so bullish about next 10 years than ever before.
Yeh dobara boliye sir.
Hemendra M Kothari: I have never been so bullish over the next 10 years than today because we have seen already there are new industrialists, new business people, new venture capitalists. In the next 5 to 10 years, you will see them becoming bigger with AI coming in, with technology driving India, I think I see a lot of bright future for the country and government realising that has kept the policies like that and I hope in future also the policies are friendly for the business, that is all I can say.