Nirmal Jain Stay....

IT'S ALL ABOUT THE HONEY
Nirmal shut down his information services business in 1999 and put all his eggs
in the internetbaskey. His gamble paid off and today India Infoline is one of the country's
biggest TRADING platforms.
Nirmal Jain (PGP 1989), India Infoline
Chapter introduction
Everyone knows entrepreneurship is about risk. But how much
risk are you willing to take? This is a question Nirmal Jain had to
answer in the year 2000. He was willing to risk everything he
owned to save his company -- India Infoline.
It was only a few months after the Gujarat earthquake, when one
evening Nirmal and his partner Venkat thought out aloud, "Even
if we lose everything, we should walk out of this and start
something else or take a job. And we should think we survived
an earthquake. At least we saved our lives!"
As it turned out, India Infoline survived and prospered. And how!
I arrive at the NSE complex in Goregaon for our interview, only to find I am at the 'wrongoffice'.
There are several India Infoline offices in the same location. "Yeah it's confusing at times. You
see, at one point we used to operate out of one small office. But now we've outgrown even the
two larger offices we have here..." grins Harshad Apte, Nirmal's close associate.
Being in the right place at the right time is a crucial ingredient for success in any enterprise. I
am in the right place but it's not the right time for an in depth interview as Nirmal needs to
attend an AGM in less than 45 minutes! But life is about making the best of any and every
situation so without further ado, we plunge right in.
Excerpt
Opportunity is about putting two and two together. Around 1991, with liberalization, the
IndianFINANCIAL services sector started attracting foreign capital. It was clear that the
sector was poised for exponential growth.
"Having a strong academic background as well as a mindset for FINANCIAL services I thought
I'll get into this." But he was clear that he eventually wanted to be an entrepreneur. So instead of
joining a foreign bank or FII he joined hands with two brokers, Motilal Oswal and Ramdev
Agrawal, and set up an equity research outfit called Inquire in March 1994.
After a year and a half Nirmal decided he was ready to start something on his own. That
something was 'Probity Research and Services Pvt Ltd'.
"Probity literally means integrity or honesty or independence. And is also an acronym for probe
in equity which was our business -- analysis, INVESTMENT analysis." The company's star
product was 'Probity 200' which tracked the top 200 listed companies.
This made sense because these 200 companies account for about 90% of volumes and portfolio
holdings. So there was a ready MARKET for the information, not only with brokers but
corporate, banks and FIIs. Probity also started doing sector reports. At around the same time, a
company started by two IIM seniors, INFAC, was already doing industry research but they had
left out a few sectors like oil and gas, FMCG, IT and pharma. Probity filled this gap and its
reports got well accepted.
Right from 1995 (when Probity was set up) till 1999, STOCK MARKETS were not doing too
well. "The business could have done much better in a good economic environment," muses
Nirmal. "But in a way it was good also because we learnt how to manage the bad time and go
through the down cycle which probably helped us later."
The year 1999 was a turning point. In fact, turning point is too mild a word for the direction
Probity would take. It was a complete change of direction. A wild gamble: all or nothing.
"The internet was becoming very popular, US media was talking of internet all the time.
Someone came up with the crazy idea that if we put up all our research free on the web, instead
of 250 clients we will have half a million clients. We literally implemented that idea and killed
our earlier business model. We put up all our research free on our website."
In 1999, India Infoline had about a crore of revenue, Rs 10-20 lakhs profit. A call was made to
give it all up. Forgoing revenue is fine, but what about costs? Those remain, and in fact, one had
to INVEST in technology as well. So money had to be raised from friends and an angel
investor.
R Venkataraman, an IIM Bangalore graduate with experience at ICICI, Barclays and GE private
equity also joined the company as a co-promoter.
Despite early technical glitches the India Infoline website became popular. The content it served
was unique and otherwise not available. Soon enough, the company attracted the attention of
VCs. CDC Ventures (now known as Actis) INVESTED $1 million.
Around this time the team reached one important conclusion.
"We realised that media selling and information services is not a business model which is
scalable beyond a point. It won't be able to generate revenues despite the hype being created in
those days about Yahoo! etc."
India Infoline therefore decided to forward integrate into transaction services. The company
began working on an internet based TRADING model. The idea was to develop something
pioneering in-house but that actually took three years to happen. In the meanwhile, they
decided to buy technology off the shelf.
In March 2000, India Infoline raised another $5 million from Intel capital and some other
investors. Soon after that STOCK MARKETS and NASDAQ in particular crashed. The dotcom
bubble had burst and the company found itself in a crisis.
"We had set up many business lines, employed people, but there was no capital. VCs and PEs
kept saying they would give us MONEY but it took 16 months to get a small amount of
additional capital."
Both Nirmal and Venkat pooled in everything they owned, Rs 3 crore, in order to keep
going. "We had to scale back and shift from 'growth' to 'survival' mode from 2001 to 2003-04."
"We did everything possible..."
ALSO READ
'With entrepreneurship you can't afford a big ego'
This IIM grad opted to be his own boss
Stay Hungry Stay Foolish is published by CIIE (Centre for Innovation, Incubation and
Entrepreneurship),

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IT'S ALL ABOUT THE HONEY

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