`In the next year or so, we expect to have 50,000 customers trading online'

`In the next year or so, we expect to have 50,000 customers trading online'

MARCH 19: It is still early days for the internet and more so for web-broking in India. But the field has already become fiercely competitive. Hardly a few months have passed since the Securities and Board of India (SEBI) allowed online trading, than a court battle has broken out between two major players, Investsmart India Ltd and ICICI. Investmart India, promoted by IL&FS, has sued ICICI for registering a domain name similar to its website (investsmartindia.com) a few days after it started internet trading. In this interview with N SHIVAPRIYA, Investsmart managing director HEMANG RAJA speaks about the company's plans for the internet and where web-broking is headed.

Investsmart was among the first to introduce online trading. Have you transacted any business so far?
We have two options on our site. You can register as a customer to access information or register to access all our services including online trading. So far, we have got 10,000 registrations of which 4,000 are only for online trading. But as per SEBI and National Stock Exchange stipulations, we have to do a one-time agreement with the customers and explain the implications.We have appointed direct sales agents to handle this one-time process, but in the interim, we have given passwords to 25 existing customers to make sure the system continues to function. By March end, we will have 250 customers trading online, out of the 4,500 who are already transacting through our retail outlets.

What is your target for March 2001?
In the next 12 to 18 months, we expect to have approximately 50,000 customers trading online. It is a very modest target. By March 2001, we also plan to have 45 to 50 retail outlets in country. So far, we have opened 14 outlets in all major cities. Out of these, eight are profit-making and in the next two months, four more will start making money. Every outlet will be connected in a CUG (closed user group). Charles Schwab, the number one online trader, has 264 branches all over the US. In India, particularly, people like to see a face behind the screen. We will have V-SATS only in large markets like Chennai, Calcutta, Mumbai, Delhi, Bangalore, Pune and Hyderabad. In other cities like Jaipur, Udaipur, Coimbatore, Cochin and Agra we will have 64 KBPS leased lines connected to the regional node, which will then be connected to the central server. Every Shoppers' Stop outlet will also have one retail investment mart.

As per the business case we have worked out, every online trading customer will have a minimum limit of Rs 5 lakh to Rs 10 lakh and a maximum limit of Rs 1 crore plus.

What is the investment involved in setting up this infrastructure?
We have recently brought in new equity investors in the company. ORIX has agreed to buy 25 per cent and the K Raheja group has taken 10 per cent. Our current capital is Rs 18 crore. By March end, our net worth will be about Rs 50 crore. These funds will essentially be used to improvise our website and expand our branch network. We feel this corpus will be enough to finance all our plans for the next 12 to 18 months. We will look at listing in the future, but not now.

Has there been any precedent for disputes on similar domain names?
There has been one dispute regarding domain names in Indian courts that I know of. The court has not granted us an ad-interim relief because it was of the view that the fact of there being a pre-existing site with the domain name investmart.com should have been mentioned in the plaint. The appeal is coming up for hearing within the next 10 days. Whatever rumours are circulating, they can continue till the hearing. We are taking all measures to protect our organisation. We have discussed the issue extensively at our board meeting on Thursday.

How will you fight competition (HDFC, ICICI) which can offer services like banking under the same umbrella?
We have tied up with HDFC Bank for our online trading customers. We will tie up with five or six more banks, so the customer can choose which bank he can deal with. Every online trading service, will not have a bank out of 45, only six are likely to have a bank. If Ford, GM (General Motors), Chrysler can come together and form a portal, then really, nobody is a friend or enemy. Don't be surprised if we tie-up with ICICI Bank.

Also, the opportunity is so large that there is room for everybody. We will introduce something new on our site every month. This month, we are planning alerts which can be received on the cellphone.

Will we see price wars?
In the times to come, yes. But not in the immediate future for three to five months, at least. By December 2000-March 2001, there will definitely be price cuts. By September 2000, I expect at least 20-25 online trading service providers. Every large brokerage house in India will have an online trading service. Even those not in brokerage, will start a brokerage business. In US, you have 75 online trading services.

What is the profile of the customers you have registered?
In the first 100 registrations, we got three applications from the US. But players will have to take requisite approvals before offering the service in other countries. We also have to understand the US law. Registrations have also come in from small places like Agartala. Since these places don't have facilities like broking houses, they are very keen on online investing. In Mumbai, the guy next-door is a broker.

Basically, there are three types of customers who opt for online trading. One category is large, high networth customers who want to trade in anonymity they know what to buy, sell, when to exit, when to enter. The second category is existing customers who like to buy shares on their own and have access to internet but don't have the time to call up traders to find out prices and place orders. They want to spend 20 minutes a day, see their portfolio and finalise their investments. Their portfolio size could vary from Rs 5 lakh to Rs 50 lakh. The third type is day traders. They will be the major customers on the internet. For these customers, we will also open internet kiosks in every city.