The Hindu Business Line : Handholding women investors

He runs one of the country's bigger broking outfits and other financial services centre and yet he has never invested in equity. "At first I didn't have the money, and when we started making money in Geojit Financial Services, we were expanding, so whatever earnings we made were ploughed back into the company. I have investment in real estate, but not in equity," is the surprising confession of C.J. George, Managing Director of the company.

As the chief of a listed company, he feels that "as a broking outfit, we have to be fair and neutral; to be honest, I don't even look at the Sensex! Those days when I was in the market, I knew the closing rates of almost all the shares, but not today. If I trade, people are watching; our senior managers too have long-term investments but don't trade in stocks. I've introduced this culture."

The man who has built up a network of 275 offices (including four overseas) with 2.5 lakh clients, studied in a Malayalam-medium school in a small village, 60 km from Kochi. His father was an agriculturist. He was also a communist and "in my student days I was associated with the SFI", he responds with a smile to your comment on his capitalistic pursuits.

After completing his M.Com in 1980 from a Kerala university, George went to Delhi University where he joined the LLB course. During his second semester — in 1983 — he saw an advertisement from the brokerage firm Batliwala and Karani (now HSBC Securities) seeking a trainee research analyst. He applied and got the job in January 1984, was transferred in June to Kochi, and joined Kochi University for a Ph.D on the stock markets. "I did serious research for one year. That was the time (1985) when there was a boom in the stock market." In November 1986 when the Kochi Stock Exchange announced new memberships, at the suggestion of a colleague he too applied, though he was not too keen. "It just cost Rs 2,000 and on the last day I borrowed that money and submitted my application. But subsequently I was unhappy with a certain situation in the office and thought I would quit and return to the University."

But one of his friends, who was a foreign exchange broker said: `Look, I have a teleprinter and a hotline to Mumbai for my foreign exchange business; the same can be used for equity trading too. I also have an office, so why can't we start a broking office?"

How it began

The two of them started Geojit. "His name was Ranajit and Geo-jit is a combination of our names. But in 1992, after the Harshad Mehta scam, business slumped and he wanted to concentrate on foreign exchange, so I took over the firm," says George.

He ran it as sole proprietor but in 1995 when NSE started giving memberships out of Mumbai, he thought of applying. The membership fee was Rs 1 crore and George approached the Kerala State Industrial Development Corporation (KSIDC), seeking a joint venture. "They said they had never promoted any service industry, and that too a stock broking and financial service company!" But the consultant it appointed said there was space in Kerala for a credible financial service intermediary, which could give professional service to clients.

The result was a joint venture in which KSIDC took a 24 per cent stake, which came down with capital expansion. On Geojit's association with KSIDC, George says, "It has been very supportive and has brought in credibility." In 1995 when Geojit needed capital to expand, it came out with a small IPO to raise Rs 95 lakh. "That was the last leg of the IPO boom; our IPO was oversubscribed eight times from Kerala itself and we listed in the regional exchanges. Till 2000 we decided to concentrate on Kerala as it was a market we knew very well. By the time the NSDL (National Securities Depository Limited) came in 1997, ours was one of the first applications to become a DP (Depository Participant)," he recalls.

Relating an interesting story, he says that so keen was Geojit to promote the DP culture, that in 1998 when ICICI Bank came out with an IPO, "55 per cent of the total demat allotment was for Geojit clients." He also convinced a bank in Kerala to apply for the shares in demat form and it opened an account with Geojit and got allotment too. "After a few months when it wanted to sell 50,000 ICICI Bank shares, there were no buyers for demat shares!"

Feeling morally responsible, George went from pillar to post in search of a buyer and when he found one, "they wanted a 10 per cent discount; it was sheer madness! Today there are no buyers for shares in physical form." Finally Geojit bought the demat shares, rematerialised them into physical certificates and sold them in the market.

Retail participation

On the Indian equity market not having yet attracted larger retail participation, George is confident that the habit of investing in equity is bound to catch up in the country. "When I travel abroad, I find there is so much of interest and confidence in the India story. In fact foreigners have more confidence in us than we have in ourselves."

He is confident that the equity culture will attract more retail investors. "Unlike the past, when there was reasonably good interest in investing in banks, NBFCs, etc, interest rates are down today and equity returns very good... for the first time in the memorable past we're seeing low interest rate, low inflation and an active stock market. So this will invite a large number of people. Today we have only 3-4 million equity investors; that has to grow to something like 50 million investors, and I think this will happen in the next five years."

On the possibility of a scam happening... as has happened in bull markets of the past, George says, "Our securities market infrastructure is among the best in the world; as also our regulatory infrastructure. But scams happen everywhere and human ingenuity will beat the systems. But we as investors should be careful. We should invest only in quality, understand the risk, ignore rumours and beware of speculation and `tips'. Buying something at 10 a.m., selling at 11 and buying something else; this is dangerous"

He also thinks equity investors should be happy with a 12-15 per cent return. "More is possible, as now, but expecting such returns all the time is dangerous and we should tell people that what they are getting now is abnormal."

Invest at a young age

To popularise the equity culture among youngsters, "we're going to schools and colleges. We're not looking at their investment at this period. But they should know about equity and why they should save. If they start saving at the age of 20, around 55 or so when they retire, they'll get about Rs one crore... and they'll look back and get shocked! All it takes is Rs 100 every month and today's youngsters spend that money so easily."

George adds that Geojit also wants to promote equity investment among women and has opened its first `women only' trading branch in Kochi. "We have many successful women investors and feel that homemakers whose children are in school do have time on their hands to look at equity. Women as a group are cautious and when we discussed this project internally, there were reservations that a lot of small trades will happen. But as a culture we want to encourage long-term investment in women. And every Saturday we'll have a training session; how to pick a stock, what is the risk involved; if you lose money, if you have a service deficiency, what recourse do you have, etc. Next on the cards are women's branches in Mumbai and Chennai."

His dream for the future is "to make Geojit the most respectable financial services company". Towards this goal, he says that during the last 10 years, "as we've grown as a company, we've always worked for investors and paid and delivered in time so people have confidence in the system. A serious crime in a brokerage is delay in payout or settlement... it erodes confidence in the system. And, whenever we've made money, we've reduced brokerage."

George points out that on May 17, 2004, known as Black Monday in equity parlance, "the amount we lost was only Rs 17,500. That's because we're strict on margins and the bulk of our clients are investors and not day traders. They came in, bought, took delivery and made money. Normally we don't give a direction to investors. But for the first time in our history, at 2 p.m. we went officially on the terminals and asked our customers to buy, telling them the market will recover, as it did."

So how does he relax?

"Oh, I'm always relaxed, with the organisation professionally run and work highly delegated, even if I'm not here for months, it will run smoothly."

But what he enjoys the most are relaxed weekends at his village where his mother lives. "My wife, who teaches Statistics at the Kochi University, and I go there and do a little farming which is really relaxing."

On Mondays it is back to Kochi... with a car stacked with vegetables, rice, coconuts, etc, grown on the farm.

Response may be sent to rasheeda@thehindu.co.in

Picture by H. Vibhu

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