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Making India Wealthier | Atul Shinghal @ Scripbox
320 Plays2 years ago
One of the pioneering fintechs in the wealth management space, Scripbox started over a decade ago. Atul talks about his journey of building two highly impactful startups in the last decade. He built up Scripbox as the leading HNI wealth management fintech in India, and Probe Information as a leading B2B SaaS tool used by most banks and NBFCs in India.
Know about:-
- Report writing on private companies
- Wealth manager with a digital DNA
- Pricing strategy
- Marketing playbook
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Transcript
Introduction to Atul Shingal and Scriptbox
00:00:00
Speaker
Hi, my name is Atur Shingal. I am the founder and CEO of Scriptbox.
00:00:16
Speaker
Economists are predicting that India will be a $5 trillion economy in the next three years, which marks an incredible milestone in our post-independence journey. This explosion in the GDP will also lead to more wealthy Indians, and this creates some amazing opportunities in the wealth management sector. One
Atul's Entrepreneurial Journey and Ventures
00:00:35
Speaker
of the pioneering fintechs in wealth management space is Scriptbox, which was started over a decade ago by the guest of this episode, Atul Shingal.
00:00:43
Speaker
In this episode of the Founder Thesis Podcast, Atul tells your host Akshay Tath about his journey of building not one but two highly impactful start-ups in the last decade. He built up Scriptbox as the leading H&I wealth management fintech in India and probe information as a leading B2B SaaS tool that was used by most banks and NBFCs in India. Stay tuned and subscribe to the Founder Thesis Podcast on any audio streaming platform to hear how disruptive founders are leveraging the India story to build massive businesses.
00:01:21
Speaker
The beauty of Standard Chartered, I was in the card division. We were completely like a non-bank. Everybody around us was Wipro or Blowplast or Asian Pains. It's a very different pedigree. And we were hungry, we were growing.
Banking and Financial Innovations in South Africa
00:01:31
Speaker
We had a phenomenal year in 99, 2000. I have the pride of having launched the first card in India, which could be used globally. This is before your time, you guys are young. Until 1998, you couldn't use your credit card abroad.
00:01:43
Speaker
If you had to use foreign currency to get it endorsed or your passport. So we went to work with the RBI. I was in Bombay. We launched the first global card. Then opportunity came knocking from a company called Capital One, which is just a great company from the US. They were doing some great work, had heard good things about them, and they were looking to set up an India. So they hired a bunch of us middle managers.
00:02:00
Speaker
This is in 2000. Unfortunately or fortunately that decision to stay in India or set up in India was pulled. They pulled the back story there but some other time and they somehow because they felt I knew something or didn't know something. I was actually posted to South Africa as part of a joint venture Capital One had with a group called Old Mutual there. So I ended up in South Africa via the UK. The technical story was that South Africa with its own economy decided that
00:02:25
Speaker
You couldn't hire out of India. What was so special about the work permit rules? Why couldn't you hire local talent? Why should you get from India? So I had to be shipped to the UK, work in the UK for a year where the workload is easier and then get an internal transfer. I spent seven glorious years in South Africa with a group. I learned a lot about joint ventures and how they work and how they don't work. The JV broke up very quickly.
00:02:44
Speaker
We had the American young, full of energy, very number-driven. We had a slightly old-world banking setup in South Africa. The JV didn't work out. The business did well. This was a full-fledged bank, or it was like an India-sale focus on lending? The largest bank in Africa. 25,000 employees, highly profitable, called NetBank.
00:03:05
Speaker
I ran the Amex card portfolio. So I've done the whole super prime lending to subprime. Moved from American Express cards to micro lending. So this whole noise about buy now, pay later, we were doing in 2004, 2005. I was the MD of one of the divisions called consumer credit, which was point of sale lending, but to what I would call the underprivileged or low-income group. Did that for a year. And this was like a Bajaj Finsel kind of a model, like appliances.
00:03:31
Speaker
Exactly same. Exactly. You could buy a television or refrigerator. My claim to fame was to actually grow the company 10x in a seven month period, which in lending is not necessarily always the best. Though we did it very well. We were Capital One guys, so we did it very well. I'll tell you the story. It's actually quite a fascinating story. So we used to do all this lending, which is for point of sale. So we had partnerships with various furniture chains and the retailers, white goods, etc.
00:03:57
Speaker
We also had a product within that for used cars. So you could borrow from a dealer when you were buying a car used cars. But somehow the rule also said in the credit policy, you couldn't fund a car which was older than five years.
00:04:09
Speaker
I said this makes no logical sense because a used car, especially in the income bracket viewer, they can't afford. And South Africa has got very hip cars. South Africa is very proud of its cars. Most people's cars are more expensive than their homes. So BMWs, Mercedes, Audi, etc. So for a relatively poor man, though he was ambitious of getting a good car, he couldn't afford a car. So this was a badly designed product and purely on credit policy. So it was a cut and paste credit policy from a previous regime. So I asked the guys why this five year rule?
00:04:34
Speaker
I said, anyway, this is unsecured lending because if the guy goes, if the guy doesn't pay you back, you're not going to collect the car from a, from one of the townships. You have
Impact of Financial Crisis and Return to India
00:04:43
Speaker
to do it as unsecured lending, literally. So there's an asset attached to it, but it's largely unsecured lending. So I removed the five-year as a test. We removed the five-year cap.
00:04:50
Speaker
We did an experiment on only 200 dealers. Our volumes went up 10X. So one of our biggest successes are failures because in lending, to handle those volumes is very difficult. So we had to cap it very quickly because we hit our numbers. But it was a beautiful business. You were lending 100. You were getting a 5% discount. So you were dispersing only 95% to the dealer because the dealer gave you a 5% discount. You added some admin fee. So you are making so much money.
00:05:12
Speaker
Anyhow, so that was another story is that if you just look at policy at a fundamental level as you build businesses, you realize some of those have no logic. They've just got written and people follow them blindly. So those are all of those success stories. Maybe I did well there. So they kicked me upstairs, some four levels. So what happened from a career perspective was that I was telling you, you asked about Nedbank where I joined. So actually the joint venture was with a larger financial services group called Old Mutual.
00:05:36
Speaker
Old Mutual has a presence in India through that Kotak Gold Mutual Insurance JV. But in South Africa, Old Mutual is the largest and the biggest franchise of financial services. They own the largest life insurance and asset management company. They used to own the largest bank or net bank. And they used to own the largest general insurance company called Mutual in Federal.
00:05:53
Speaker
My boss, who was the regional director for Africa, who had all these companies reporting into him with 25,000-30,000 employees each, had built out a business called Smile and Egg. The UK has a penchant for funny names for their businesses. I don't know if there's a business called Nutmeg, which just got sold to JP Morgan in the space here in Sprig Boss. So the origin of these internet banks was Smile, Egg, if some random names. So he had built out a business called Smile. So he was very keen on internet. And this is 2004-2005. There's like really early days.
00:06:23
Speaker
So he said, Atul, do you think we can build up this, put out a job set aspect that we want to do this. We want to build out a direct to consumer business layer, which will be like a customer experience layer on top of these three businesses. I applied for the job. Anyway, there was nothing to do. And I got it. And suddenly they had these three CEOs in their ties and suits and the fourth guy in a t-shirt. And I was all of 35 those days in a different world.
00:06:46
Speaker
They had 25,000 employees. I had two employees, myself and a program manager. Anyhow, to cut a long story short, we started working on it on the idea, learned very quickly that online and digital are different. So online is a channel. Digital is a way of life. Digital is science, math, data, technology, online, all of that rolled into one.
00:07:03
Speaker
And I remember going to the home loan department, and I hope this is set in good taste, and they were the most efficient. I mean, Netbank had a phenomenally efficient home loan business. And I think that turnaround time was 15 days from when you applied to when you got the loan, which was like very efficient. India hasn't got a similar if you apply to HDFC or something. And I said, no, I want to approve in 15 minutes.
00:07:21
Speaker
So I said, forget about being in the same page. We're not in the same library. Forget about the same book and same aisle or whatever, because we're talking about different languages. So anyhow, to cut a long story short, I went back to the board and asked for $200 million. And this is in 2005. I'm asking for $200 million to build this full-stack insurance and insurance, life insurance, full-stack bank, a retail bank, and a full-stack generally insurance company, all rolled into one, including the middleware, including the customer experience layer. Maybe the storytelling was good, and they bought into it.
00:07:48
Speaker
And they actually wrote a $200 million check, which we put into a bank. The other clever thing I did was I actually set up the business in a place called Durban. If you know South Africa, everything is headquartered either in Johannesburg or Cape Town. And that's where the old material is headquartered in Cape Town. The other two businesses are Joburg. I said, boss, these guys are going to just, I'm too small. So I went away and I've always had this belief that set up places where you can have captive talent. We set up a business in Durban, built out something phenomenal.
00:08:11
Speaker
had 250 people on the ground, built a contact center, which I still think wins all the awards in Africa for the best contact center ever built. But unfortunately, by the time we were about 40-50 days from Goli, the financial crisis was at the thick, the 2007 crisis, because the $200 million was to build the business, to lend off our balance sheet and to run the home loan book and the personal loans book. We had to borrow abroad. We had a line of sight from a couple of UK banks for $5 billion.
00:08:34
Speaker
at LIBOR plus 20. Great team, youngsters, full of energy, emerging market, new age technologies. This will be phenomenal. We had shaken hands. This is in July, August of 20th, 2007. I remember having the same conversation in November of 2007. A young team, unknown, third world country, don't know this technology. God knows what is going to happen. I went from $5 billion to $500 at LIBOR plus 200. So it became unviable to do the business. So plus 200 is basis points, LIBOR plus? Basis points, yeah.
00:09:02
Speaker
It became unaffordable for the customers. I was wondering, LIBOR plus 20 sounded very high. Okay, got it. LIBOR plus 200, 20 basis points, LIBOR plus 200 basis points. So suddenly
Probe's Evolution and Success
00:09:11
Speaker
our cost of borrowing went up hugely. So I said, and we checked around, we looked at the last 50, 70 years of back testing of the yield curves. This is not going away in a hurry. At least I analysis said that I told the board that, see, this is no use. You've got such a strong team. There's no use.
00:09:25
Speaker
twiddling our thumbs for the next one and a half, two years. I would suggest we mothball this and we'll come back to it in a few bit of time. One of the hardest decisions in my life was standing up in front of 250 people and telling them it was an open office. This is the beauty of it. I was talking about the contact center. We converted an abandoned casino into a contact center.
00:09:42
Speaker
The beauty of a casino is it doesn't have any pillars, so you can see everything. So we had 70,000 square feet, 70,000 square feet of open space, just a beautiful contact center. And we announced, I think everybody cried that day because they sort of felt that lost a part of their lives because it was so passionate as to what we were building. And yeah, so became foreclosed and fancy free. But the insurance business could have still made money. Like why shut it down?
00:10:05
Speaker
Yeah, so we sold that little part to the mutual and federal business. And I had become, obviously, I had blown up $100 million and I had one CD to show for it and the contact center. So I was sort of personal non grata, I think so. So I told the company I'd like to move. And they were just looking at India. Remember 2003 to 2007 was like the runaway days for the Indian markets. So there was a plan to come into India on the asset management side.
00:10:26
Speaker
So I said, okay, I'll do that for you. I understand how to, I understand India. I don't understand asset management and I know I understand how to build businesses. So we came to India in mid 2008. It was phenomenal. I was that time overpaid and underpaid like I am now. So I was a foreign expat in my own country. Came back to set up the wealth management company, the asset management company, and a PMS. We had appointed CEOs for these three businesses or looking to appoint CEOs. I'd applied to SEBI for an AMC license. I'm a lucky guy. And what brand new or old mutual was the brand new?
00:10:54
Speaker
Old mutual, old mutual, greenfield, old mutual, completely. So if you look back in my LinkedIn profile, you'll see old mutual corporate services. It set that company up. I'm a lucky guy. Lehman Brothers happened after we had set up a company. So I said, boss, this is going nowhere in Hadi. The markets had crashed. So I told the company that I think I'll take a break. They gave me some gardening leave and I took a year sabbatical here.
00:11:14
Speaker
This is 2009. March to late 2009, about nine months. Traveled the country. Spent a lot of time in my parents. Walked my children to the school every day. It was like really good. But then my wife got antsy. You had got married while you were in South Africa? No, I got married much earlier. I got married in 1995. So we got married in 1995. We have two lovely daughters. My wife is a designer. So yeah, she's traveled with me everywhere. We had a lovely lifestyle. South Africa lifestyle is gorgeous.
00:11:41
Speaker
If anybody's not been out, I'm like a big champion of South Africa tourism. You have to holiday there. You live in these big houses. The house in Durban was on the golf estate. So my front lawn was the 18th fairway. And hence I'm a keen golfer. But it came back to India. And I think after playing a lot of golf and in that 2009 traveling, I think back end of 2009, my wife told me, Kibos, what are you up to? Not even 40 years old. The maids are getting worried that nobody pay their salaries because all you do is meet friends and travel or play golf.
00:12:09
Speaker
Axel Partners, which is, I think, one of the best venture capital firm in India, have some friends there. They were kind enough to allow me to start spending some time with them and started looking at that ecosystem of entrepreneurship. Flipkart, it just got funded, met Sachin and Bini once. A couple of other deals were happening. I just loved the ecosystem. And I said, hey, this looks like something I'd done. In a sense, I'd done two startups. It happened to be corporate money, but I had the independence. I had the confidence that I could do something.
00:12:34
Speaker
So after about spending four or five months at Excel, I got together with a dear friend of mine, Ravi Shankar, we are batchmen from IAM Bangalore, have just been very dear friends from the very beginning. He had a small boutique equity research company of his own called Pro Equity Research, five, six people in the company. And he said, I told him, hey, this looks scalable. I know how to build stuff.
The Growth and Challenges of Scriptbox
00:12:53
Speaker
You have this boutique business.
00:12:54
Speaker
You're also a fund manager. He also has a PMS of his own. I said, hey, should he put some money into this and try to grow this? And like those days, BPO had fizzled out, KPO or knowledge process outsourcing was just happening. I said, there's something, let's go to Excel and tell them that we could scale this business. We put some money into it. We could take the equity research abroad. We had customers that time from this thing.
00:13:12
Speaker
went to Excel, they were kind enough to put money behind us. And that's the inside story. So I'm an accidental entrepreneur, started Probe. And yeah, Probe is today, I think, the most used information platform in India, in all banks. It's called Probe 42. What does that mean, information platform?
00:13:28
Speaker
So you were doing equity research, which means you must have been getting these multiple page research reports on equities. You're a genius, Akshay. You're the right prompt for this. Yes, we were. So we were doing that for listed companies, which is what everybody does. So we said then somehow, when I was setting up old mutual, I figured out
00:13:46
Speaker
at the asset management company. I wanted to understand the ecosystem. So I asked Ravi because he had the equity research company. He'd tell me a little bit more about all the data we were getting from McKinsey. Everybody else was the amphidata. How much, how big are the companies and how much are you on? But the insights, what are the expense statements, who was spending, how much, where was the money going? What are the, we couldn't find out. But when we dug around that time, and I think Accel also had asked for a couple of information on companies, which are private limited companies. We had figured out at Pro that there was data available through the MCA. Legally, legitimately, you could actually get information on all private companies in India.
00:14:16
Speaker
So we pivoted Pro. It was called Pro Equity Research, the name of the company, to becoming report writing on private companies. So we did exactly what we did for public companies, for private companies, and the richness of data surprised us. And our customers, all the venture capital firms, all the PE firms that we had built up a 40-45 man team, chart accountants, CFAs, they loved it. They could dig around a company, go deep into it. So say you're investing in Flipkart.
00:14:38
Speaker
You want to know about InfiBeam, you want to know about Snapdeal, you want to know about Mintra. So basically, if you want to understand one company, or you say you want to invest in Maruti, Volkswagen and Hyundai, and all of this were private limited companies. So we were giving everybody that information in an equity research report. So this is an 8, 9, 10 page report. As we are building this out, an interesting use case emerged from the banks. So banks used to use the same report.
00:15:02
Speaker
they should talk to a charter continent for giving out before they gave loans or credit to any of these private living committees, they had a similar MCA check in the reports. So we start giving these reports to the banks. And we realized that because we were a manual driven company, and I'm not a techy techy, but understand how to use technology, we realize that all our technology investment
00:15:21
Speaker
had gone into making our analysts more efficient, helping them write reports faster, better, neater. We pivoted the company to a true digital company to make the information available to our customers. So we went from, I remember our peak volumes in July to 2015, we should write about, we should cover about thousand companies a month, which is
00:15:38
Speaker
much larger than all of BKC and everybody put together. We were still doing large volumes. We pivoted the company to a self-serve platform. We digitized the entire process into small bite-sized chunks, built deep expertise. And Probe 42 is a resultant platform. That's another backstory on the 42. If you read Douglas Adams, 42 is the answer to like universe and everything. So we said the same thing. We have the answer, we don't know your question. You can figure out, you can ask any question, we have the answer. That's the story behind Probe 42. A comparable site would be say like a Crunchbase, which also has data.
00:16:08
Speaker
Consume is more focused on startups and funding news. Yeah, so we are about 100x the size of anybody else. From a revenue perspective, we'll be. So our seminal moment of pride was we saw a couple of CVs of bankers, and they said we are qualified to use probe. So when somebody writes that on their CV, you know you build something to last.
00:16:26
Speaker
So that gave us goosebumps. I said, I've done my life's mission. I've built something which will withstand the test of time. So that business is highly profitable and does well. And I think... You built like the Bloomberg terminal of India in a way. Absolutely. Exactly. Exactly. It's got a retail version also of it. So that's done very well. But that comes the script box story. One question on probe first.
00:16:45
Speaker
What was the pricing strategy? How did you monetize it? Was it on number of companies that a bank accesses or a customer accesses? Was it access based or was it fixed annual or what was it like? Brilliant, brilliant. So we did the research, right? You could have gone down the license route per seat. You could have gone down a fixed fee for the bank. We realized no, there is always negotiating. We said pay as you go. For every company you look at, we will pay you. So it's like a taximeter.
00:17:11
Speaker
If you look at the company, you pay for it. If you don't, so be it. And then there are some rules around how long you can have the asset. It's like a rental. You look at a company, you can use it for the next one year. And it's worked out beautifully for us. There's no confusion around how many users, how many licenses. It's open architecture. Anybody can create an ID and use it. And we'll keep collecting fee on it. So yeah, that was a unique pricing strategy we followed where we made it a pay-per-use model. And you took a friend like there to load a wallet. That was it. Or they would get a bill at the end of the period.
00:17:41
Speaker
both models. It's a prepaid and a postpaid model. So largely in the bigger banks, it's a postpaid model. If you're a single user, it's a prepaid model. And this is like human intelligence here. It's not just a collision of data. There are real analysts who are preparing reports on each company covered.
00:17:57
Speaker
There is a little bit of human intelligence. The data in India is very dirty. So there are three levels of cleanup. One is balance sheets don't balance. You have to balance them. People will write in millions in one year, in crores in next year, in lakh in third year. So there's a deep amount of data cleansing. So there's a huge value in that. Then there is a name matching. So what happens is that you'll be called probe somewhere, probe equity research somewhere, probe information somewhere, probe 42 somewhere.
00:18:21
Speaker
How do you link the court case in NCLT versus the court case in Trivandrum versus your GST filing versus you've taken upload. So there's something called charges in India. When you borrow from a bank, you create a charge. Now we have a data. We've got something called a bank master. We've teamed up bank names. I think we've got 635 variants for state bank of India, SBI, S.B.I, state bank of India, state bank of India, state bank of India, and they're all the same thing.
00:18:47
Speaker
So we're actually able to clean up data. Thirdly, there's some intelligence, obviously matching which company does what to what. So we don't classify companies by what is the official classification. That's mentioned. But we actually go and look at the company's website, we look at the AOA, we look at what the company does, we digitize that. So we have our own, which helps you do a peer matching much, much easier.
00:19:07
Speaker
bunch of things which we do for cleansing because for us scale is important. I was telling you thousand companies a month. I think today we do 10,000 a day. Same on the same like for like basis. So part of digitization. When company report contains like the financial performance over the years that like the financial trends, the legal issues which a company might be facing, stuff like that.
00:19:28
Speaker
Anything to do with compliance, credit rating, GST, any court case across 750 courts. It used to have BIFR data, which is no longer relevant on the compliance set, but that there should be a board of financial reconstruction. This is a precursor to the NCLT. Any defaulters which the banks have different. So all of that is digitized. Any credit rating which has happened, then shareholders, directors, how much you're holding, any funding, what are the pricing of the funding,
00:19:54
Speaker
Financials, obviously, like you said, related party transactions, then structure of the company, who's the shareholder, which is the ultimate beneficiary, website, phone number, and most importantly, cross-directorship. So if Akshay is a director in three companies, you can look at Akshay in company A, and if you click on Akshay's name, you'll know his other companies. When did he become a director? When did he design? So is it a male or female, right, in the director's thing? So you're going to figure out who the female director is. And all of this has got a search capability.
00:20:23
Speaker
So you can go and search for companies set up in the last 10 years. You can search for companies set up in the PIN code. So a retail banker can use it. He goes and types his PIN code 5600888 and says, OK, companies in the pharma space in this area. And he says, OK, these are 20 companies I can target. So it becomes useful for target. That's why I said Pro 42.
00:20:41
Speaker
You can use it for anti-money laundering. So what happens is that you suddenly get a 10 crore of cheque in the bank guy's bank account. Okay, let me go look at the company who broke 42. His balance sheet is 1 lakh. And he's got a revenue of some 20 lakhs. He said, hey, what happened here? So anti-money laundering uses it. People use it for targeting. People use it for credit appraisal. People use it also for follow-ups. So what happens is that I have pitched, loan is a loan. So ICICI bank is pitched, EDUC bank is picked. Somebody's got the loan. I didn't get it.
00:21:07
Speaker
So three, two months later, I'll go and figure out, okay, who got the loan? What pricing did you get it at all? So it's how you use a system. It's very intelligent or it's very dumb. And how many companies in the universe? Total number of companies it covers. So any company ever registered. So the day the company just has tomorrow morning, it's on the platform.
00:21:23
Speaker
I think 15 lakh or 18 lakh active or whatever. So every company ever registered comes on the platform next morning, including LLP. So it's fully digitized. What is the revenue like for Pro? What kind of top line does it do? Probably about 55, 60 crores, 60 crores per year. It's a good company. It's a well-run company. Let's talk about from Pro to script box. Like what made you, you were already running Pro full-time. So what made you want to attempt a second startup?
00:21:50
Speaker
So 2011-2012, what happened is that, so we had three co-founders at Scriptbox. Ravi, myself at Pro, and we got in Sanjeev, who was the tech person. Shrooto, who was on the board of Pro, the man with the Midas touch, Shrooto Mitra from Excel. He's always a big fan of B2C, and Pro was obviously a B2B enterprise business, that time not very digital.
00:22:09
Speaker
A couple of companies in the US had got funded, Betterment, Wealthfront, Motif, and he sent the data to us. He said, Atul, this looks interesting. You said you were setting up an AMC, you seem to know that. You had set up a digital bank in South Africa, so you seem to know that category well. Ravi, you're a fund manager. Why don't you look at this opportunity? Do you think this has got legs?
00:22:26
Speaker
And enterprise businesses are slow to build. They take some time as we are. And we sort of felt we could do it. So we went back to Subrata with a proposal. I said we can do this for India. We can build a digital wealth manager in India. Sanjeev, who's a senior from us, of mine from IAM, Bangalore, is quite an expert on wealth tech.
00:22:41
Speaker
setting up old mutual and I was setting up the wealth business so that time I'd spoken to him to understand the landscape and I was quite impressed and I said hey so we reached out and I think he also he had another startup and you think about what next it was serendipity we got together in a room I remember that whiteboard we were working on and the idea was exactly the simple
00:22:58
Speaker
How do we bring the power of digital to bring, make this thing simple? This is too complex. And we went back to Excel and said, Hey, we can do this. We need some funding. They said, okay, go get started. We'll fund you. Scriptbox is a genuine garage startup. It started in the garage of probe. Probe was in our office, which was a converted house and actually the division of probe. So it was a hundred percent owned by probe called probe well services to begin with. Then it became bigger than any of us. And we spun it out of the separate company where it funded separately. It was a large, exciting opportunity. We knew the domain. We felt passionate about it and we thought we could do it.
00:23:28
Speaker
went to market with only four funds. We did our research. And so the logic we had is that youngsters were not getting any good advice. So the 2009, 2010 crisis was still the hangover, still around. People were talking to us saying, no, no, equity is not for me. It's too confusing. And this is scary. And the regulations on the financial advisor had changed quite a bit. NFOs had gone away. There was a lot of turmoil in the distribution side. So new fund offerings. So there was a time in 2008, 2009, if you bought an NFO, the upfront commission was 6%. So a lot of NFOs got launched.
00:23:58
Speaker
was cleaning up. The resultant of that regulator cleanup was that there were fewer participants and there was not enough money to serve somebody who was investing 5,000, 10,000 rupees. Who could they go to? They had to go to an uncle who will tell him to buy an LIC policy or some neighbor or somebody who will punt our stock. I said, no, this has got to be cleaned up. So we set up on the mission to say, how do we clean this up?
00:24:17
Speaker
We tried to understand the underlying assets. We looked at 850 schemes at that time. The equity schemes, they were five and a half, they were 8,000 mutual funds that time available from 40 providers, XYZ, long-term advantage, growth, thematic, schematic fund. You don't even know where to start, or you had a mint top 50. You're investing 10,000 rupees. How do you know which one to pick? So when we looked at the 850 schemes in equity, so our logic was we're getting started investing equity, and with an equity mutual fund, because direct equity, you don't understand.
00:24:43
Speaker
equity mutual fund then come to the script box. We know the best funds to invest in. The 850 schemes had 243 stocks under them and 50 concentrations. I said, boss, you can diversify by picking four funds. Our analysis, we looked, I come from Capital One, Probe understood numbers. We still have, we still run indices for the US markets then. So put it all together and we created
00:25:00
Speaker
a basket of four funds. And believe it or not, I mean, there was ICIC at that time, funds at that time, but they were basically converting offline processes to online. They were not digital in their nature. They were not bringing the power of science method and all that together. And we launched with four funds called the Long-Term Wealth Portfolio for early savers, 20,000 rupees, first investment, 10,000 rupees, SIP, did very well. People loved the simplicity. The fillet started to forget it, annual rebalancing. As our customers grew with that,
00:25:28
Speaker
We added a short term for money because you want to buy a phone or a car or whatever. Then we added an emergency corpus because you need to keep some money aside. Then we added tax saving funds. So I kept expanding our basket of offerings for our customers. By 2015, your question earlier started to haunt us. Hey, Atul, you're the CEO of two companies. What are you really up to when you're killing yourself and is it best for the businesses? And we were raising funds. So I stepped aside.
00:25:50
Speaker
We brought in a team to lead ScriptBox 2016-2019. Ashok did a good job. I was busy with Probe. We were converting Probe from a report writing company to a platform, going from a thousand to ten thousand a day, a thousand a month to now twenty thousand a day. So
Scriptbox's Strategic Shifts and Acquisitions
00:26:04
Speaker
that journey had begun and I was very busy. Decided to stay on with Probe. And yeah, but unfortunately what happened with ScriptBox also in parallel was that the market moved very quickly.
00:26:13
Speaker
It's phenomenally good. So the whole premise of simplicity, ease, transparency, which we had brought to the category, also we got the e-commerce mindset coming to it. And the e-commerce was all about cashback, free discounting, which is not really true for wealth management. Wealth management is a long-term, pristine purity business. You take a long-term view, but for whatever reasons, and this is not sour grapes, but they did a great job. They democratized the entire category of investments.
00:26:40
Speaker
And fast followers, great competitors brought in, at that time, direct funds had become regular. There are regular funds in direct funds. There's a commission to the distributor. There are direct funds. There is obviously a slightly lower price for the end user, but you're supposed to pay a fee to the advisor. So they brought a zero fee model with a direct fund, which we didn't understand. We couldn't for our life of ourselves get around a zero revenue model business.
00:27:00
Speaker
We felt you have to have a revenue model. Otherwise, how will you build a business? But people did what they had to do. And some of our growth mojo didn't happen as fast as you would have wanted. So good, bad, or ugly. I don't know which one I am ugly. I am definitely, but good, bad, I'm not sure about. So I came back in 2020, said, Hey, this requires doubling down to get our strategy sorted out. God has been kind. We have grown five X in the last two years, strategies played out well. Okay. Before, before we talk about the 2020 return, I want to talk about the initial, so I had some questions around the launch.
00:27:29
Speaker
Were there those payment gateway rails in place when you started that people could pay through a payment gateway to you for the investing? No, you had to set up an E-mandate, you had to set up a SIP mandate, etc. So there was convenience. There was definitely not as good as now. Billdesk existed and CC Avenue existed. So Billdesk did a good job. Tech processor did a good job of setting up our payment gateway. So that was a big convenience for our customers. Yeah, how did that SIP work? What did the customer have to do so that it's done automatically?
00:27:57
Speaker
So, they had to set up a recurring investment that was called an E-mandate that you could debit tax amount from their account. So, suppose you were investing 10,000 and you have four funds. So, two and a half thousand rupees would go into each AMC directly from your bank account to the AMC. So, when you signed up, you set up those mandates with us and those we implemented at the bank end and then it worked like a charm.
00:28:15
Speaker
Obviously, it's got much better now. There's eNatch. I'm not an expert on payments. I have to get somebody else in to talk about it. We've got UPI. Today, the customer can choose any payment mechanism, can switch between mechanisms, because customers do either SIP or a one-time investment. And you get two types of one-time investment. Some is lumpy. I got a bonus. I put money aside. I get something from my inheritance. I put money aside. Or suddenly, I've saved up money I put aside. Then there are people who do not do an SIP or a monthly investment, but they will invest monthly on their own.
00:28:40
Speaker
So they'll watch the market and then they'll put in there. So we had all kinds of behavior. So that's the story. And payment gateway starts anywhere from 0% to 2%. No, we've got a fixed fee. We got a 5 rupee, 10 rupee. And anyway, the mutual fund companies are very supportive of some of those charges. And how did the auto rebalancing happen? Did the customer need to click something or was it done automatically? Yeah. So you've gone to auto rebalancing. See, the entire premise is that we will recommend to you what you should buy.
00:29:07
Speaker
And on an annual basis, we'll now on a quarterly basis, we'll tell you what to get in and get out of. It's like a jam jar. So in first year, you had four funds. Then our scorecards tell us that in the next one year, we think this is going to happen. And typically one fund will fall out and new fund will come in. So your SIPs on the fourth fund will stop and SIPs on the fifth fund will start. So now you're doing an A, B, C, E.
00:29:27
Speaker
in from a month 13. And at some point in time, remember those days, there was no long-term capital gains. So you could get out of D and get into a new fund after a year. So some of those rules had to be changed and you keep balancing depending on the asset allocation. So now suppose the customer has got only equity portfolio, different answer. We've got equity plus data, it's a different answer. But all of this is algorithm driven. There's no human intervention, but we'll prompt the customer to say, we are now recommending this action.
00:29:50
Speaker
And we'll send them a nudge, we'll send them a SMS, we'll send them an email reminder to make sure customers follow the recommendation. But the customer has to take the press the button. And you were doing it through the regular plan, not the direct plan, because your social revenue was at 2% commission. Not 2%. I wish it was 2%. That is closer to about 85 bibs in a blended basis. So slightly higher than they could. We've never negotiated because our funds are selected algorithmically, they're completely unbiased. So irrespective of the commission, they come onto the platform.
00:30:18
Speaker
But we do tell our friends in the mutual fund industry that be kind to us, give us best in class. We are big enough to demand that. By 2020, when you came, what was the size of ScriptBox? How many investors were using it? What were the assets and the management? So assets and management were about 1150 crores, about 1250, then it corrected to about 1150 crores. We had about five and a half thousand now, probably 12,000, 15,000 by June. The number of customers that time was only about 62, 65,000. We are about 75 to 80,000 now.
00:30:47
Speaker
I want to understand what you did. This is what you inherited when you came back. So, what did you do? What was the game plan? So, game plan was a good hard look at where we were in our journey. We said, hey, what are our customers telling us? Customers have been, we have to thank our script, our customers. They've loved what we do. They're hugely loyal. Our attention rates are close to 95%, which in this category, the industry average is 60-65%. And this includes offline. Online, I don't even know what the numbers are. Now, we spoke to our customers, did a lot of research as a Busy B's guys who are really good. And we spoke to Guru and those guys. They spoke to our customers.
00:31:16
Speaker
And the constant refrain was, guys, you've done a great job of these four funds, these four buckets, but I've grown up, I've got children, think about more holistic, have you really understood? So we realized our share of wallet while was interesting, we were not really deep in our customers' minds. So we said, okay, let's double down. Let's do more with our existing customers. So what is wealth management? Wealth management is spending time understanding your customer requirements.
00:31:38
Speaker
creating a portfolio, executing and reviewing it. We were doing the creating a portfolio, but it is generic. We were executing it obviously very well and reviewing it on an annual basis. So we now said, no, let's do this more deeply. Let's spend more time understanding our customers. So we launched a portfolio audit where you can bring your existing investment to anybody. We'll ingest your ECA statement, digitize it, visualize it, and analyze it and tell you what to do.
00:32:00
Speaker
So what happens is that if you're an investor, cams or whatever will give you your holding statement every month. But it's a PDF with lots of numbers, you can understand nothing of it. And it could be or it could be. So we said, hey, customers understand what to do with it. I've got the standard question anybody asks you is, Atul, this is good what you do, but what do I do with the money I already have? They want a second opinion.
00:32:19
Speaker
So we said, okay, second opinion, give customers second opinion, give customers consolidation of their holdings across multiple providers. So basically built deeper rails into the customer to understand them better. We expanded our portfolios earlier. We were saying four funds in equity. We expanded that to 16 depending on the customer needs, added small cap, added more variety, added international equity to our portfolios, added gold to our portfolio. So expanded the depth of what you're offering and start quarterly reviewing it. So we said, because the customer's money had become more serious, you had to do more with them.
00:32:49
Speaker
had we launched something called the Global Education Fund for people who wanted to send their kids abroad. We added international equity as an asset class where you could through as to Stockile, you could use LRS money to invest in stocks abroad. So what is LRS money? It's a liberalized remittance scheme. So if you want to invest in dollars abroad directly, you want to buy Apple or Amazon or whatever Facebook or whatever the various alphabet or whatever it is, you need access to that. So you need to build the rails for that.
00:33:17
Speaker
So we helped, we partnered with somebody called Stack, StockL to build those rails. We launched insurance, life insurance. We are about to launch health insurance. So basically did a lot more with existing customers. And that's paid out very well on a like for like basis that has grown 3X. But as you know, the market has done all over the place. Secondly, the average amount of customers investing through Scriptbox has tripled basically. Yes. Yes. Wow. Amazing. Okay.
00:33:40
Speaker
The second strategy we played out, which is in the making, is that we started targeting customers of a higher ticket size. So earlier, we used to target early savers. So we used to nearly 70% of our customers did their KYC with us. That means they were first time investors in the market because they came through us.
00:33:55
Speaker
Now 80-85% of our customers are existing investors. So they have now experienced the category and are looking for a better outcome. So our average ticket size in the first month is nearly a lakh. I think the industry category is 2000 rupees. So just a very different profile of customers coming to Scriptbox, word of mouth, brand positioning. So as a brand, we stand for your, what should I say, Maji as I call it in Hindi. I'm your boatman. I will take you across troubled waters, across calm waters, across a pond or a river or a lake, depending on where you want to go. I will tell you this thing to do and I'll be with your side.
00:34:24
Speaker
So that's my role, I'm your coach. We've done that, we'll help you understand what you should do with your money, we'll help you invest it, we'll help you review it, and we'll do it at the family level. So that's essentially, and that's attracted a certain profile of customers. The third strategy which has worked out very well is that, see, what's also happened is that there are many industries. So financialization of assets has happened. People have moved from real estate and gold to financial assets. Digitization has happened. People, especially COVID, drove people to digitization. And consolidation is happening. People are saying smaller players get together and build a bigger business.
00:34:54
Speaker
So we've taken advantage of all three. So on the consolidation side, we found some like-minded people who believe that there's a better outcome for everybody if we get together. So you've done nine transactions now and probably a few more. It's a great win for all three parties. Customers get a better upgraded experience because it's digital. It's backed by a 10-man research team rather than a one-man research team. It's more holistic. There is a bunch of products. It's 24-7 availability. You don't have to call anybody. You can if you choose to.
00:35:20
Speaker
So a combination of an omni-channel model where you get a better outcome, you've got access to a relationship manager when you want it. So there's a, and there's succession planning, right? You're now attached to the brand, which has got a hundred-year life than a single person. There's a win-win for the customer. There's a win for the onboarding partner. Rather than buy a backend system, some CRM, some mobile app, you're getting a full stack digital solution, which is test to the test of time. You're becoming part of a bigger brand. Your customers have succession planning because a lot of people who build businesses are getting slightly older. Their children don't want to do this. They want to do something else.
00:35:49
Speaker
So what happens to the business, what happens to the customers? So scriptbox is a great outcome for those people. These transactions, you're talking about acquiring wealth advisors, like the more traditional offline wealth advisors. Yes. Yes. Yes. Okay. Okay. Like a smaller version of, say, Anand Rati. Anand Rati, of course, is very big, but like smaller players in that similar space, you have been.
00:36:12
Speaker
So they built out great businesses. These guys are really good at what they do. They've got their customer interest in mind. Obviously, we do a huge filter on values, ethics alignment. And yeah, in a curated manner, we are able to talk to the right partners and make them part of the Scribox family. You don't need an offline presence, right? These would be offline businesses with a physical office and a lot of people doing account management. You don't need people on the ground to talk to people. See, anytime your money becomes beyond 50 lakhs a crore, you need that comfort of a human being.
00:36:40
Speaker
But as long as the human being is using digital processes to deliver greater value to you, you're not designing his portfolio there, you have a portfolio already designed and your role is more chai pei charcha, your role is more empathy, your role is more being available to the customer for assurances, then you can do a great job of combining human touch with a digital plan. So we say we are a wealth manager with a digital DNA.
00:37:01
Speaker
So at the heart, we're digital. We believe in automation. We believe in standardization. We believe in scale. We believe in processes. But people are important. So it's like an Uber driver versus a Meru, right? So Uber, still, you need a driver to drive the car. He's got to be clean. He's got to be neat. He's got to be polite. He's got to drive the car very well. But the entire other process is digital. Where are you going? How much will it cost you? How long will it take? Ordering it when you need it. So all that convenience combined with the human touch is what ScriptBox is all about. Okay. Give me examples of the kind of players you've acquired.
00:37:31
Speaker
So there are a couple of people in Madras. Mr. Aiken and I has joined us. There's a company called SciSecurities, which has joined us. There's a company called Plutus, from Gudukan, who has joined us. There's a company called Money. What kind of size would these companies be? Like, how many investors?
00:37:46
Speaker
300 to 500 crores is a sweet spot, about 300 to 500 families is the same, about 400 to 1000 families localised very strong. So somebody in Chandigarh, somebody in Gurgaon, somebody in North Delhi. So these would be like, essentially HNI focus. Yeah, 25 to 25 lakh pluses. See, but you get that whole 80-20 rule here, actually, that you get a long tail. And our beauty is that we are actually able to revive the long tail and do a lot more with them. So then investors get transferred to a script box books in a way like
00:38:14
Speaker
Yeah, so it's a four-stage process. We onboard the customers onto the scriptbox platform, tell them how to use it. But obviously, the IFA is there. We do a transition of trust of the IFA. See, the IFA will be partners, but it makes the independent financial advisor, the wealth advisor. So that's what their technical name is. They could be a, they're largely mutual fund distributors, but they're actually an advisor. This is something odd about the Indian regulation that advisors are called distributors and distributors. Distributors behave like advisors, and so-called RIAs become free distributors, bizarreness of the Indian ecosystem.
00:38:42
Speaker
We need to transition their trust. They need to believe in us. Our processes, our customer outcomes, our reporting methodologies, etc. The most important leg is the transition of trust of the customer. They need to believe in the brand. They need to believe in the methodology. They need to, while the account is alive,
00:38:57
Speaker
Is it the right portfolio? How often do we review it? So that transition of trust, we've got a very strong team. They talk to customers, they understand their concerns. I do a webinar. I'm available all the time to talk to people. So basically, do a lot there. And we are hopeful that once all of this happens, they grow, as we've shown in the VAD. Yeah, the books which are matured, some of them have doubled there and doubled fast in the script because they've unleashed so much potential suddenly.
00:39:19
Speaker
It's cash acquisitions or cash in stock? A bit of both. It's cash plus stock. Cash plus stock. They have to believe in the future of skip box. Otherwise, they're not interested. So they have to believe there's a longer term out. Our model
Future Plans and Industry Positioning of Scriptbox
00:39:30
Speaker
is also maturing. It's not that we knew what we had a cookie-cutter plan. As partners come on, we also learned over the last six quarters what works, what's best for both parties. So long as these are...
00:39:40
Speaker
We are building a 100-year institution. I am not building a business which is around Ratuloh Sanjeev. We clearly always say we are building a 100-year institution which stands beyond us. We are just, we are the custodians currently, but hopefully they'll be bigger and better people than us, who will do a better job than us.
00:39:55
Speaker
So this is the reason for that you raised 21 million recently. Yeah, for the consolidation play largely. Okay. Very interesting. I think this is like that extremely under the radar strategy that you've picked up. I am sure there are a lot of opportunities to consolidate these offline players and create a large consolidated wealth management business. Okay. That's amazing.
00:40:17
Speaker
As I always say, without sounding bigger than our boots, I think the country, we owe it to the country because we do a very ethical, very good job of long-term wealth creation. We believe that the more people we can serve, it's good for the country. And I genuinely mean it. When my father, God bless his soul, when I looked at some of the portfolio you had, it hurt me. It used to hurt me.
00:40:36
Speaker
He was a good-meaning man, and I'm sure the people who were serving him were well-meaning, but it just didn't stand the test of time. So I feel that if we can bring our practices to a larger audience, it's good for everybody. How do you do customer acquisition? Is it through performance marketing, or is it through these offline acquisitions? There's obviously one big channel, but overall, I want to understand what is your... And you also mentioned how you've changed your target to look at
00:40:59
Speaker
high-end income, how does that happen? So this, though it's an IFA consolidation or it's actually customer acquisition because we're getting customers with existing wealth and it's a word of mouth industry. Remember that if you are happy with us, you'll tell five friends. And it's like I always say, my dream dinner party test is that if I'm in a party and people don't know who I am, then somebody tells me you should invest in a script box.
00:41:19
Speaker
That day I know I've built a great business. Unfortunately, because I'm on television, like for probe 42, you would exactly say something similar happens in an event. No, but there's word of mouth. So we get, we do performance marketing, uh, strawberry in her team, the whole marketing team was very active in terms of creating a brand persona, which builds confidence in our customers that we're doing the right by their money. So we use obviously digital marketing channels. We use, we use.
00:41:42
Speaker
performance marketing, word of mouth continues to be strong. We don't have an offline sales capabilities. We don't go out knocking on doors. We don't make outbound calls. The costs will be prohibitive to use that channel. Also against our brand, we have a brand credo that will never irritate you. So we will never ask you the same information twice. We will not make an outbound call for sales. So we are quite clear on that. So we sponsored a couple of golf tournaments because we are here and we made a commitment that we will not call you. You tell us what time to reach out. We'll meet you. Otherwise, we'll not take a list and start
00:42:10
Speaker
That's just not part of our strategy or our personality. Let's see, we're also learning actually the journey is we reinvented ourselves in the last two years. Hopefully the next three to five, we can build something of meaningful size for our customers. Are you planning like top of the line spend? Say celebrity endorsements, sponsoring IPL, stuff like that, because trust building is like challenged to solve here. So that could be a way to
00:42:33
Speaker
So we will do above the line, we will do over the line, but in a very systematic manner. In the press announcement, we've tied up with Vector and Tilt as our marketing team. Joe and his team are phenomenally good, Joe George. So we're working with them to figure out the right strategy for ourselves in terms of the brand build out. Whether we do above the line, whether we do a lot more digital is something Manu and his team will decide. I'm not the expert. All I can say is that at least the work we are doing now in terms of our Twitter, in terms of our money shorts, in terms of the
00:42:59
Speaker
Positioning ourselves as old age, wisdom, new age, wealth management for somebody who's here by your side, I think we're doing a good job. And also size big at size here. If you are about 20,000 crores of AUM, the next 20,000 crores become that much easier. And what is the headcount now of Scribbox? 250-260 people on the payroll.
00:43:17
Speaker
What is the split? Like how many people in which? Third for pure engineering product design. A third would be customer facing. So people in the contact center. So we always had a contact center even from day one and with no IVR. So when you call us, we will pick up the phone and we've added obviously relationship managers for customers with higher ticket size. Customers will come from the IFA channels, have a relationship manager. So that's about a third of our people.
00:43:39
Speaker
And that includes fund operations, bank account changes, any of that stuff. And about a third is obviously overheads like me. So marketing and finance and HR and corporate development. So that would be a good split, a third, a third, a third. Tell me about the competitive landscape. Who are the other players in this? And like you said, you are at five and a half thousand assets under management. So what are their AUMs like in this space of digital wealth management? I know ET money is one, but I think they do direct plans. They don't
00:44:09
Speaker
So it's very difficult to tell Akshay. So we're looking for the information, but it's very difficult to find because everybody else is in a direct place. So the proxy of winning things on this out is how much AMPHE commission you made. But if you don't have a revenue model, you can claim your... A lot of people, what they do is they will... I told you about this E-CAS statement. I've taken your E-CAS statement, I've digitized it.
00:44:26
Speaker
A lot of people will say that, oh, that customer, he's invested a thousand rupees with me, but actually he's got a crore, but that crore is mine. So what people are reporting, what numbers are we really don't know and I'm not being facetious. But if I looked at Funds India at about 7,000 crores, I fell securities at about 6,000-7,000 crores. Anybody who's built customers is regular with their customers and we would be in the largest players in that space.
00:44:48
Speaker
See, there are transaction players like Grow and ET money and PayT money who are also doing stock discount broking, who are also doing mutual fund access, etc. Difficult to tell what their numbers are in a credible way. They're not exactly like in that wealth space. Not at all. They're in the, I would say, investment slash access to investment space. And that's their positioning, right? Of India Karega Invest, which is basically saying that everybody's, which is a fine thing, but it's empirically proven that 95% of traders lose money. So that's the reality of
00:45:18
Speaker
those businesses. The other pieces around, see, who's going to lose if you're going to win? It's the banks. They're clunky systems. So our customers are going to come from either offline players or going to come from banks. Yeah, they're good at what they do. But for somebody, see, who do we target? We're targeting between people between, say, 15 lakh, 25 lakhs to 2 crores, 5 crores. Above 5 crores, the big boys like ASK and Anand Ratiya are active. Below 15 lakhs, you're not serious about wealth. You're still figuring out, you're doing crypto, you're doing some trading. See, our sense is about 1x.
00:45:47
Speaker
your annual salary is when you start thinking, OK, I'm not serious about money. And that's when the money becomes slightly meaningful. And that's when we kick it. And then we are systematic, long term with you by our side. And I'm not going to call you on 28 and tell you, sir, there is one lakh rupee lying in your account, buy an FD, or send success discount, or depending on whatever my target is from my product manager, I'll get that pressure. We don't do that.
00:46:08
Speaker
So our relationship managers don't carry targets. So they're not incentivized in a year. Is that the tax saving investment? Is that like a big contributor? I know a lot of people, early investors, especially younger people, invest. It used to be about three, four years ago, no longer. I don't know.
00:46:26
Speaker
So it used to be a big push. We used to do a lot of work in that space. I remember running a campaign and then realize that for our target audience, people, this is just one more option. You have so many other options for tax saving. So we offer it to our customer. They're our customer, but I don't think it's a me. It's material to our strategy. And that brings us to the end of this conversation.
00:46:43
Speaker
I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at ad at the podium dot in. That's ad at t h e p o d i u m dot in.