What is the scope for SMEs in the economy as well as the index? There are less than 500 listed SME companies on the BSE.
Take the case of Rajasthan. What types of SMEs do they have? Marble, artificial jewellery, gemstones. How many SMEs operate there? Do we have even 1% of them with us on BSE? No.
Take the case of Tamil Nadu. We immediately think about Tiruppur. Is it all about Tamil Nadu? What about the Karur belt? What about the Trichy belt where you find so many OEMs making automobile parts, spare parts. Have we touched any of them? Nothing. So, in my opinion, if you are talking about SMEs as providing a very huge share of employment, GDP growth, exports, 500 is not even a number to talk about.
How large can it become in the next five years in your view?
Sky’s the limit.
5,000, 10,000 companies?
Sky’s the limit. Many of these entrepreneurs only know their mother tongue. India is a very big country in terms of the number of languages. We have restricted capability. The day we realise that we have these types of restrictions and capability limitations, we will outgrow them. We will go to the local. We will talk in their language. We will explain to them in their language how it is going to be useful for them to be visible.
There is a place near Salem. Wonderful wood carvings are made there and they are exported. We do not have any one of them in our SME segment. I can give you hundreds of names, hundreds of examples.
I can see how passionate you are about that subject.I am. It is very close to my heart because it is contributing in a very significant way to the Indian economy. I think we have to do a lot more there.
You have a very unique profile. Essentially, you understand risk very well. But what a brilliant time you have spent at the other exchange and, of course, foreign banks and you were a banker. So, you understand the full circle of financial services very well. How are you looking at the prospects of our country right now and being an exchange, and a veteran in financial services, the market prospect because that will mirror the economy over the long term.
Let me share this with you. We all have seen such times in India where there used to be huge scarcity for food, kerosene, palm oil, sugar, everything. Today, we do not talk about any of them. India has grown a lot and in my opinion India is going to grow even more. This is another pet topic for me.
If you look at it, the growth of a country depends mainly on three factors: Consumption-led growth, export-led growth and investment-led growth. There is no need for me to further say anything. In all these three areas, we are excellent. India has a population with 65% plus in the age group of 15 to 65, which we call income earning age or employable age and which will continue to be in that sweet spot for quite some time to come in the near future.
A growing middle class, which is known for its consumption capability and the doubling of the middle class consumption very regularly and globally contributing to middle class consumption; the ability to speak in English, which is a global language, our time zone, the legal and regulatory systems that we have, democracy and cultural diversity, all leads us to a sweet spot for further growth. It is going to be a golden era for Indians in the near future.
It will only get better in the coming decades.
Yes, that is what I feel.
The Street believes that all these efforts put together, the next three to six years, for even BSE is very bright andthey are putting around 25% CAGR earnings possibility in the next two to three years. Is that a fair estimate or can it be improved upon?
I am representing a listed company. I can’t make any forward-looking statements. So, I cannot give any reply to this question.
I do not want a reply on earnings. You can talk about the strategic focus of you and your team over the next two to three years.
If I have to say it in a single sentence, I would say we want to unleash the power of vibrance. That is what I tell my team and they believe it. I have a wonderful team with me who fully supports me.Otherwise, I could not have done whatever I have done in the last six months. Six months is too small a period for bringing in changes.
Already, you perceive that I am making changes but that is not because of me, it is because of my team. The team is oriented to unleash the power of vibrance. Now, what do we mean by that? In every activity, we have to make our presence, our vibrancy felt. We are in equity, equity derivatives, currency derivatives, commodity derivatives, interest rate derivatives, SME, mutual fund, RFQ platforms, retail debt. I can go on naming.
All of us have only specific tenure in that we have to pick and choose. In the current year, what we have picked and chosen is equity derivatives first, followed by equity and then currency options to be very specific.
In equity derivatives, we had zero volumes and today we are trying to see some green shoots; maybe we will be able to grow with the support of one and all. In respect of equity, we are currently clocking around 7% market share. My request to the market participants, particularly the institutional participants, is to start putting some more volume with us. At the moment, When I have 10% market share, automatically. the volume starts building up. Here again, I will be able to play a wonderful complementary role in the growth of the market as a whole and not by cannibalising any market share.
So, just the initial push of increasing the volumes up to 10% is what is required. After that, the cycle on its own starts in a big way. That is the second most important effort we are doing. Currency futures, we already have around 35 to 40% market share. So, our focus is on currency options where we have not opened much of an account. We do have a product which is trading but not to the extent it can trade. Me and my team are working towards rejuvenating it. Once we have stabilised equity derivatives, that will be a major area of focus.
SMEs would be a great focus for us. And mutual funds again because of its socio-economic impact and the financial savings being converted into capital market savings impact into the market, we will be focusing on. As of now, these are the priorities that we have put in front of us.
Commodities and later interest rate derivatives will all follow. Interest rate derivatives are a slightly complex product for India. There are a lot of changes that need to happen in Indian markets for that to happen and it will take some time. Certainly, this will be our approach and this will be our strategy. My team is fully tuned and aligned with what we are talking about. In fact, what I am telling is not my strategy; this is what we as a team felt we should do.
You also have a lot of investments in some of the other companies, CDSL and many others. How are they doing? Are you hoping to keep them on for now or some value unlocking?
By and large, they all are doing well. By and large, we have a very close oversight over what we have invested in and how we are doing. For many, it is very early days for investments. Many investments start giving fruits only after the minimum gestation period is over. Most of them are in those areas. Of course, CDSL is in advanced stages and that is what we are seeing.
How do you see the environment right now on the regulatory side and how exchanges and regulators are working in tandem to ensure a vibrant environment in the market? Decades back, the market used to be very concentrated. A few people could concentrate on their positions. How would you see the market right now on risk parameters?
You have touched upon the regulatory relationship with exchanges and how the regulatory formulation happens in this country. It is a role model for the entire world. The way in which our country has progressed in regulation making, the consultative approach that it follows, the committee-based methodologies applied to evolve policy formulations in the larger interest of public, the consultative papers that come into the public domain, allowing everybody and anybody to have a say on what is being proposed to be called as a regulation – these are all great measures and a benchmark for the global economy to emulate.