Ashish Kumar Chauhan, India’s financial derivatives wizard is the MD & CEO of Bombay Stock Exchange (BSE) and one of the founders of the National Stock Exchange (NSE). In an exclusive interview to Corporate Citizen, he speaks on the amazing growth of our techno savvy stock exchanges, the bright financial future of our country and insight into prospects of our economy
"After the Harshad Mehta scam, the government decided to step up, as, because of want of automation, brokers were controlling the Stock Exchange and acting against interest of investors"
Ashish Kumar Chauhan is the MD & CEO of BSE (Bombay Stock Exchange), the first stock exchange of Asia. He is one of the founders of India's National Stock Exchange (NSE) where he worked from 1992 to 2000. He is best known as the father of modern financial derivatives in India due to his work at NSE. He was instrumental in setting up India's first fully automated screen based trading system and first commercial satellite communications network. He also created several path-breaking frameworks including Nifty index and NSE certifications in financial markets. He has also worked as the President and Chief Information Officer of Reliance Group and was also the CEO of the cricket team, Mumbai Indians, in its formative years. He also handled additional responsibilities as the Head, Corporate Communications for Reliance Group from 2005 – 2006.
He joined the BSE as Deputy CEO in 2009 and was appointed as CEO in 2012. He is credited with reviving BSE including making it the fastest Exchange in the World with less than 6 microseconds response time, introduction of Mobile Trading for the first time in India, state of-the-art online real-time surveillance system, introduction of several market-leading products like SME, Currencies, Mutual Funds, Corporate Bonds distribution, Offer for Sale, Offer to Buy and so on. He was also instrumental in setting up India's First international exchange `India International Exchange’ in January 2017 at Gandhinagar, Gift City. He has successfully completed the IPO of BSE which was pending for over 10 years. BSE IPO was oversubscribed 51 times with close to 12 lakh applications in January 2017.
The 1980s and 1990s were some exciting times. I learnt of portfolio analysis and finances and was quite well versed in them. When I joined IDBI in 1991, as Project Finance Officer, the finance department did the main function of IDBI. My responsibility was to largely do the loan sanction work of power projects as well as some electronic projects. I was fortunate enough to visit several power plants and electronic factories across the country. Being an engineer, I could relate to them.
My earliest learning experience was to type out communication/correspondence by myself– this, despite having stenographers as they just wouldn’t work. So I had to work overtime and also do my own filing. Then I had to give overtime to peons, because I worked late. Being techno-savvy, I could work on computerized spread sheets and make online changes very rapidly. I had the reputation of being the most knowledgeable person in the department which helped me to get selected for the National Stock Exchange (NSC).
As my colleagues and I had an understanding of finance, many of us started dealing in stocks and of course invested a lot of money, despite not having our own money. As the prices moved down, we ended up losing a lot of money, which was a big shock to us. The finance, in reality, hit me differently as we had no idea of such ups and downs. So it was shocking. Then we had to work hard for the next one year to repay the debts. It was a tough time. Of course my salary increased after confirmation of my job, from RS.3,000 to RS.7,000 so I could pay off the debts faster. Nonetheless, it was an eye-opener on how the Indian Stock Market works.
"Sometimes, things just fall into place. The success of NSE was purely by accident. It was a large experiment which became so successful that well known stock exchanges in the world became automated after NSC. It was a trend-setter"
Sometimes, it is sheer serendipity and things just fall in place. The success of NSE was purely by accident. It was a large experiment which became so successful that well known stock exchanges in the world became automated after NSC. It was a trend-setter.
After the Harshad Mehta scam, the government decided to step up a new action. It came to a conclusion that because of want of automation, brokers are controlling the exchange and acting against the interest of investors. So the government decided to set up a new model stock exchange. It directed the IDBI which was the apex development bank those days to create a model. There were five people who had already had some experience in stock markets who were selected, but one of them dropped out. I was just new into the organization, about a-year-old, so I was selected in his place. I guess they considered me due to my experience in the field of mechanical engineering and IT and moreover my knowledge of making spreadsheets. The trust that technology will work was in itself a great support and confidence booster. However, it required a lot of information and most of my learning came from reading books and experimenting, rather than anyone teaching me. People had not set up such large projects before. We relied on our common sense and innovation.
I served the NSC until the year 2000. I set up the initial technology, network, screen-based reading, Nifty Index, listings, derivatives, equities and, margining on daily basis. I was the only Gujarati in the team, which helped, as those days the notices were in Gujarati. Also, whatever I had learnt in B.Tech helped me. My work involved taking the data and feeding it into the computer. Those days computers were quite a new thing and my laboratory having had the latest computers, I learnt how to do real-time computing.
In the year 2000, there was a good demand for technology. Post -Y2K- there was a lot of e-commerce activity. That inspired me to start my own e-commerce venture. Before that I was trying to get a job in the World Bank. As my family was in the USA, there was pressure on me to move there. I applied for a job in World Bank and was called for an interview. However, while I was in Washington, I got a call from Reliance, offering to fund me for my enterprise. So I decided that if I did not get the World Bank offer, I would think about taking the Reliance job. The World Bank job did not materialize. That's when I started my own venture called exchangenet.com. It provided b2b commerce engine for different businesses. We started exchanges for steel, paper and petrochemicals. In 2001, e-commerce industry slumped. That's when Reliance also stopped funding. So the team which was with me started working for other projects of Reliance which is now known as Reliance Communications. So we were recruited as employees for that project. And many of us had exposure into transaction processing and telecom. Later, I was made the head of IT for Reliance Communications and soon after for Reliance Industries. I also ran Public Relations for Reliance for some time. I was also given the additional responsibility of heading Mumbai Indians, when the IPL team came into the picture
My will to work on any job brought in many job offers with varied backgrounds and I was open to work with no hesitation. So at the last moment if there was any troubleshooting to be done I was called to salvage the situation. So that's how I handled most of the opportunities that came my way. I do not look at any work as a predefined activity.
The Mumbai Indians Cricket Team was handed over to me just three days before the tournament. I not only had to manage the cricket team but look after the ticket sales, security, food, the cleanliness, advertisements, merchandise and so on. I was the boss of every department but I had to also worry about the money being spent and collected. It was more like a new business and so there were new challenges.
Till the time you have aspirations, you'll get new work. If you don't get additional work, you'll stagnate. So, take any work that comes your way and pursue it with your heart. If any mundane work comes your way, do it to the best of your ability and you are bound to do it well. And when you do it well, take pride in your work. The biggest issue with most of the youngsters is that they consider their work as their job and so don't want to take pride in it. I have sold IPL tickets on the roads and have been caught by police calling it black marketing.
As a CEO, how will you make your team successful? You have to try to maximize your revenue. If someone says, after doing IIT, launching NSC with 3,000 people reporting to me, that selling tickets is not your job, then you are missing out a new experience. I learnt a lot by just selling tickets. The matches could be either at Wankhede or DY Patil Stadium. So, printing different tickets every time, looking after the needs of the crowd as they have expectations after paying for the tickets, looking after the exits; controlling an emergency situation and so on was a great experience. For the crowd, we made it an experience on the lines of a movie theatre. For this, you have to do a lot of innovation. Besides providing better facilities, our aim was to make it attractive especially for women to watch the matches. We wanted to make it a family experience and achieved that too. For that, your bosses have to have faith in you that you'll handle the situation. At the same time, you have to respect their expertise and also take everyone along and move forward. How to spend less money and create more buzz was also one of our main objectives.
"Till the time you have aspirations, you’ll get new work. If you don’t get additional work, you’ll stagnate. So, take any work that comes your way and pursue it with your heart...and you are bound to do it well"
- Ashish Kumar Chauhan to young corporate managers
When BSE was corporatized, it was searching for a technology firm, because NSE had it. So if they had a stock broker-related technology firm, they would be able to compete better. The firm which we had set up had become large enough. We were to sell it out (my wife owned most of the shares), but when the BSE decided to buy it, they put a condition that I had to work with them for at least a year. So I came to BSE as a deputy CEO. Then I came and settled down well so I finally was there for more than eight years. Any business or exchange has to figure out what role it has to play in the society. And BSE has been an investment exchange. It has the backing of technology. We had to work on lot of areas.
Any business has an element of competition. But being regulators, a large part of our job involves cooperation. So everyday you've to touch base on various manipulations that are happening in the day-to-day operations; on when to start the market and when to close it; discuss together on holidays and margins and so on. Therefore, almost 95% of the work is about cooperation and 5% is about competition. Competition creates controversy and people think that we are always fighting. But largely, behind the scenes, it’s mostly cooperation.
That question was asked to me recently at my talk in MIT, USA. The question was whether Indian banking system is on the verge of collapse because of the PNB scandal and if so, when will it collapse? I answered that the scale of the scandal is small vis-à-vis the size of the Indian banking system. Giving an example, I explained to them that if you have some money in your pocket which gets picked, do you become bankrupt? At the same time the person who picks the pocket needs to be caught and brought to justice and your money has to be recovered. Similarly, the person who dupes the Indian banking system will be caught and brought to justice. But that does not mean that the whole industry will collapse just because of some few thousand-crore rupee scam. In our minds this is a large amount. Our Indian banking system is worth one lakh crore rupees. In a year, with 12% interest per annum, the system receives an interest of 12 lakh crore rupees per annum and one lakh crore rupees, monthly, and in three days it will recover RS.1,000 crore just by interest; keeping aside the principal. On the other side, if the bank is paying you 4% of savings and charges 12%, that means it charges 8% extra. So they are also assuming that even if one of 12 borrowers default, they will be okay.
The Harshad Mehta scam was a broking scam. And to some extent a banking scam and so reforms were required in the banking system also. Banks also participated in the portfolio management scheme. There were loopholes. But the broking system got such a bad name, it got completely cleaned up. These years saw tremendous progress in regulations related to stock market. But the same years did not see many changes in the banking system. To some extent even the way the Board for Industrial and Financial Reconstruction (BIFR) was run, was causing a hurdle in the ways in which the banks could recover the money. It was being delayed and banks were helpless. So, if these acts could have been cleaned up, the banking industry would have been reformed. Recently, we did the needful and I think we have now done a good job, so things should look up. Demonetization, bankruptcy code and GST norms have strengthened the hands of the banks to recover that money. And if we had done this long back, we wouldn't have got into the pile of back debts.
Nirav Modi is a very small case compared to the back debt the system is presently saddled with, but even that is not large enough for the entire banking system to collapse. The Indian banking system is the most robust. Once the backlog is cleaned the situation will become easy. And the benefits will be passed on to the consumers.
"Nirav Modi is a very small case compared to the back debt the system is presently saddled with, but even that is not large enough for the entire banking system to collapse. The Indian banking system is the most robust. Once the backlog is cleaned the situation will become easy"
These reforms are very difficult to achieve socially and are also hard in terms of implementation. They are some of the deepest reforms the Indian society has ever undertaken. Both have been implemented reasonably well. It will give you good benefits in the long run. The way I look at it, as India is becoming a capital of soft infrastructure of the world. No country has what we have. People are looking up to us. We are not aware of our progress though. We are still thinking that we have done a bad job. Once the society understands that it’s difficult to evade taxes, the tax compliance becomes better;, corruption comes down. There are many benefits which are collateral to this. We have not yet understood it.
I start my work by 7-7:30 am and go home by 10.30-11 pm. When in Mumbai, I travel within India also about two to three days a week. I take early flights, come back late; it’s an uncertain schedule, which takes a toll on me. Thus, I'm not that healthy; I am diabetic. Even if I try to manage the work-life balance, it doesn't work so. I enjoy my work so I try to give more time to my work. My wife is able to handle the rest. She is a doctor so she understands. We have one son in Std X. If he has a vacation, my wife takes a leave and they come along with me for conferences.
Not to take myself seriously and not to believe in my own bluff. Be sincere, help others. Work for the society.
Life has many colors, India has many opportunities. In the next 40 years, the world will create wealth that it has never created so far. Most of it will be created by young people. India is a technology-oriented country with lot of young people. So most of the money will be made by Indians. Everyone has a chance to contribute. We can either feel bad about the situation around us or rather work hard or create new skills. The time in the future will be very exciting.
Money makes the world go round, according to a popular adage, and no one knows more about money than the MD and CEO of the prestigious Bombay Stock Exchange (BSE), Ashish Kumar Chauhan. His knowledge about finance is outmatched only by his eloquence of speech. At a Sydenham college event where he was the keynote speaker, Ashish wowed the audience with his brilliant insights into the key to achieve success in life. Corporate Citizen brings you the excerpts
There are these books I liked a lot as a child. They are by renowned management guru Ram Charan, and they are called Know How and Execution. He is one of the world’s highest paid consultants. He stays in New York, and is the guru to most Fortune 100 and 500 CEOs across the world. The tragedy is that not many people know about him. Some of the top Indian business houses pay him huge money for a consultation.
Despite his current stature, he has come from very humble beginnings. He is the son of a shoemaker, a mochi, from Agra. He is not ashamed of his origin, as he says, “I learned most of management that I practice now, because I sat in my father’s shop to repair shoes. He figured out how the cash flow works; how seasonality works, because of this, during monsoon, you don’t get clients as a cobbler. So you have to plan and keep some money beforehand.”
Those are the things, small little things that can make you big if you understand life as it comes. I want to touch upon this because Ram Charan is one of the greatest heroes in modern India, and most people don’t even know about him.
When I was young, I was always told that change is the only constant. The last 27- 28 years of my career have taught me that not only is change the only constant, change is accelerating. So what has happened in my lifetime will happen faster in yours. In India, we don’t talk about change and so we don’t know how to deal with it. We must teach the youth how to handle change, how to anticipate change and how to create an effective response to these changes. Once we do that we will be adequately prepared.
Today we are bombarded with news from all sources—TV, Facebook, Twitter, etc. Most of it is irrelevant news, which I call noise. You have a lot of noise and a sliver of relevant news hidden in that noise. One must learn to filter out the noise and get to the important information.
Most people who have made money, who have come up to a good position in life, including me, have done so by accident. We have been lucky. It is not because of our wisdom that good things happened. We were simply in the right place at the right time.
Since the beginning of civilization when man invented fire, if someone came up with new technology, the elite class of humans captured that technology, mastered it and controlled the non-elites.
My first job was with IDBI. My first experience at this job is that all of us went on a strike for three to four months. For once, it was fun to be on strike and still get a salary. We were just young boys who had just joined. At that time, IDBI had ordered 1,000 computers, and everyone said that our jobs were going to go away. And now after 27 years, you realize that the computers are here everywhere and they have changed our lives forever. One single technology, known as IT, has changed the perception of the world. It has also changed the perception of India. Thirty years back, when I used to go abroad, India was perceived as the land of the snake charmers. Today if you go there the news is about the American jobs are taken away by India. So the world has changed its perception about India in the last 25-30 years. Indians have also changed their perceptions about India in the last 30 years.
"If you have to create billions of dollars in wealth, you have to put in billions of dollars in investment. But newer technologies will allow you to put in a very little money, and lot of brains"
When we were young, a person who could speak English well was considered intelligent. We used to think arey bachpan se hi English bolta hai. Everyone spoke in their mother tongues then. Even I studied in a Gujarati-medium school till Class XII. The inferiority complex Indians had due to lack of exposure is now totally gone. We may still be a poor country lacking infrastructure, but we are still more confident and more intelligent than many foreigners.
In the last 30 years, one single technology changed India, the world, and the world’s perception about India. The next 40 years are going to witness even faster changes. If you give the new generation a mobile, they ace it in minutes. The next 30-40 years will come out with at least 20 such similar transformational technologies. And those technologies will change the world,
When you play chess, you play a move and the opponent plays the next move, but when Vishwanathan Anand plays, he plans 13 moves ahead. In life too, we should always plan several moves ahead.
India is a very young country, and a very tech-savvy one at that. In the next 40 years, 70% of the jobs will be such that we won’t have thought of today. We don’t know what those jobs will be. So you need to have that mindset. When we grew up, we had to learn for 25 years, and then earn for the next 50 years. Now, you have to learn continuously. People who don’t learn will remain behind, because, things are going to change very fast. You have to unlearn many things, and learn newer things.
The next 40 years will create tremendous wealth. In the next 50 years we will add close to 300-350 trillion dollars in wealth. Most of this wealth will come out of the newer technologies, and it is the youth who will learn these technologies. At age 50 it is difficult for me to learn. The youth are still open to learning. The curiosity hasn’t yet been beaten out of them. Be humble, but be curious. Even if you are not humble it is fine. Survival is about being curious. Otherwise, you may walk, but you may be a zombie.
India has a great chance to make it big. In the 1750s when the British were taking over, India had population of 20% of the world, and GDP of 25%. When the British left in 1947, India had a population of 16%, but GDP of just 2%. We went from 25% to 2%, and now we are close to 4% of world GDP. We are around 2.5 trillion dollars today. We can basically go to 25 trillion dollars in your lifetime.
That is the crux of it. If you work hard, you work diligently, and you constantly learn, you can create wealth for everyone. Wealth in the hands of only a few people doesn’t benefit humanity. You need to learn from the past, but the future is even more important. And if you can’t capture the future, then basically we as a society have no hope. We have come this far in the last 35 years. You will have to go even farther for your benefit and the benefit of the society.
The last thing I would like to speak about is non-linearity. I don’t know if you have been taught about non-linearity, but it is a very interesting framework. Class 5 students are given an example, i.e. if 100 workers can build a house in 2 months, then 200 workers can build that same house in half a month. This is an example of linearity. If you have to create billions of dollars in wealth, you have to put in billions of dollars in investment. But newer technologies will allow you to put in a very little money, and lot of brains. It has happened to Mark Zuckerberg, it has happened to Sergei Brin, even to Nandan Nilekani and Narayana Murthy. There are the role models in front of you who are prime examples of non-linearity. Being an employee without stock options is being in linearity. When you are an entrepreneur, or an employee with stock options, then you are playing for non-linearity. It’s your choice what you want to aim for.
By Vinita Deshmukh
