• Opportunities

Coming from a family that was into the business of stationery and notebooks, a young Rashesh Shah met with obvious disapproval from his family when he joined the Indian Institute of Management at Ahmedabad. In fact, Shah had never intended to become a player in the financial sector, let alone set up one of India’s most successful financial services companies, Edelweiss.

“It was more by design than by decision that I turned entrepreneur,” Shah admits. It was during his stint at ICICI, after graduating from IIM, that his view on entrepreneurship changed. “At ICICI, I worked with a lot of people and got a real perspective on entrepreneurs. They were not the type of people who I always believed were involved in underhand dealings. They were an honest, optimistic lot—the kind who always saw the glass half full. And above all, they are creators of jobs and organizations,” Shah says, citing IT giant Infosys as an exemplary case.

When Shah set up Edelweiss in 1996 with Venkat Ramaswamy, his colleague from ICICI, the markets had opened up, leading to an upswing in the capital markets with the insurgence of new entrepreneurs. Shah considered this an opportune moment to leap into the fray—and a financial services firm fit the bill to the tee. “If the number of entrepreneurs was growing, it was a good time to open a business that would bridge the gap between banks/financers and entrepreneurs,” he reasons. The venture was self-funded; both Shah and Ramaswamy borrowed money from their fathers.

However, the bearish market was just around the bend. With no one willing to join a small startup that couldn’t match market range salaries, take off wasn’t easy. The duo did the footwork themselves—right from standing in queue to getting a landline connection to writing information memoranda, and even hand-delivering letters to clients.

It has been a topsy-turvy ride for this Rs. 900.5-crore company. Not one to give up, Shah attributes this to his and the company’s focus on execution. “Execution is a lot harder than strategizing and planning. It is also important to be adequately capitalized, keep costs low and utilize the opportunities that abound in the financial market, even during bad times,” he advises. Edelweiss currently has an equity base worth Rs. 2,500 crore.

Shah likes to stay ahead of the competition and the industry. And he does so by keeping his aspirations alive even after years of success. “Companies are built on aspirations, not on assets,” he says. “In India, people [tend to have] small aspirations. A lot of times the aspiration fizzles out in the early stages of a company, once they have tasted moderate success. To succeed, one needs to stay hungry all the time.”

Over the last seven years, Edelweiss has grown steadily at an average rate of 80 percent. “Historically, we grew at twice the industry growth rate. Going forward, we expect to grow at 40 to 50 percent—that is, one and a half times that of the expected industry growth rate,” Shah explains.

How does he manage to do this? By pursuing multiple growth avenues in adjacent markets. Till 2000, Edelweiss focused only on investment banking. By 2003, its services included treasury and institutional equity services. The portfolio had soared to a total of eight financial service offerings by 2008, including wholesale financing, asset management, wealth management, insurance broking, private client broking and institutional equities.

“Experimentation is very important, especially [when done] in a cost-effective manner,” says Shah. “It is important to find out the next big thing, to find out what works and what doesn’t. But never spend ahead of the curve and incur losses. One should not spend Rs. 40-50 crore only to find out that the market is not ripe enough for a product.”

Shah’s penchant for building an organization borders on obsession. “Everyone wants to drive the car, but nobody wants to build the engine,” he puts it into perspective. He is especially obsessed with the backend responsibilities of building an organization. He nurtures a sense of ownership among his employees and keeps communication channels open across levels. Almost 800 of his 1,700 people enterprise have stock in the company. He feels giving ESOPS helps in building a sense of ownership, which in turn translates into more dedication to the organization.

This systematic and methodical CEO of Edelweiss is also driven by client satisfaction. In fact, he believes listening to the client lies at the root of keeping them happy. “People, especially Indians, tend to hard-sell their products without listening to the needs of the customer,” Shah elaborates. “It is important to be honest about what you can deliver to a client, even at the cost of losing a few of them. Letting your clients know what you won’t do is much more important than telling them what you will. A startup actually has more advantage in this respect over bigger corporations, as they have the ability to better focus on deliverables, as the offerings are smaller.”

In a nutshell, Shah’s key to success is his ability to “join the dots in a hazy world.” He explains, “Everything is vague when you are trying to figure out what works and what doesn’t. If you have the ability to join the dots and gain better clarity, [things] work well for you. Aspire for the long term and plan for the short term.”

Despite his dedication to work (he is in office by 8:30 am and usually stays till 7:30 pm; his day begins at 5:30 am and he retires at 11:30 pm), Shah enjoys his morning jogs and works out thrice a week at the gym. Friday nights are movie nights with the family. He loves playing tennis and is a somewhat voracious reader. He feels what keeps him going is the need to constantly grow and learn new things.

The CEO signs off by revealing a little secret: he had never planned out his life. While in college, he had wanted to study operations research in the U.S. after completing his BSc. in Statistics from the University of Mumbai. He then worked with Lintas as an advertising intern during his first year in management school. Finally, he veered into the financial zone when he visited a friend who was interning with a bank. Little wonder, then, that his advice to everyone is to take life a little less seriously and to be humorous.

WISE UP:
• Be clear about your off erings to clients and don’t over promise
• Meet the needs of the client
• Companies are not built on assets, but on aspirations
• Aspire for the long term and plan for the short
• Pursue multiple growth opportunities
• Recession is a great time to start a business, but not to scale up
• Build a sense of ownership within your employees
• Execution more important than just strategy

HIGH FIVE:
EDELWEISS HAS BEEN ON A ROLL. THE FOLLOWING FIGURES ARE AN INDICATION.

193% Revenue growth of Edelweiss in FY 2008
18 Number of Indian cities where Edelweiss offers private client broking
1,700 Number of employees in 2008
110 Number of times Edelweiss’ initial public issue was oversubscribed
10 Number of private equity investors in Edelweiss

©Entrepreneur September 2009

Tags:
Edelweiss, financers, financial, ICICI, IIM Ahmedabad, Infosys, Rashesh Shah, sector, smetv, startup, Venkat Ramaswamy