Ravi Kumar 00:00

In 2008, though, specifically. The U.S. was going through a very difficult time, you know. Unemployment in the U.S. was like, insane. There were literally robberies happening, where my parents lived. And when we came to India, we didn’t see any of that. India was like this oasis, you know, it was like, everything was booming. You know, the first few years, frankly, were very slow. There were days when I would ask myself, like you said, like, why am I doing this in India. It could be in the U.S. We started to seeing Robin Hood, you know, you’re like, man, they can open up an account online on their phone. And here I was, like opening up an account like 30 pages of documents, you know, people from like, you know, Kolkata, couriering us forms to Bombay to open up an account. It was very painful. But I think all this changed in 2016, when Aadhaar enabled everything. These next 30 years are going to be incredibly glorious for the country. You know, I think the most amazing, you know, economic growth story of our times is probably been the Indian growth story. If I could pick any place in the world to be an entrepreneur, especially a fintech entrepreneur, it would be India.

 

Siddhartha Ahluwalia 00:54

Hi, this is Siddhartha Ahluwalia and welcome to the Neon Show. This episode’s guest is the CEO of India’s fastest growing investment platform. The idea for the company came after his previous business failed due to the market crash in the U.S. in 2008, causing him to pivot to India. He wanted to provide an investment opportunity platform to retail traders and investors in India. This concept has now been transformed into a 30,000 crore company as of today. Our warm welcome to our stock founder Ravi Kumar on the Neon Show. I would also like to thank our sponsors, Prime Venture Partners, for sponsoring the Neon Show. Hope you enjoy it.

Siddhartha Ahluwalia 01:36

Welcome to the Neon Show. This is Siddhartha Ahluwalia. I have with me Ravi, co-founder and CEO of Upstox. Ravi, welcome to the podcast.

 

Ravi Kumar 01:43

Good to meet you Siddhartha.

 

Siddhartha Ahluwalia 01:45

Ravi, you have a very interesting journey. Right? You came back to India in 2008. Started Upstox and you waited patiently till the Aadhaar moment hit right? From 2012 you founded Upstox. From 2016 is when the exponential growth started. And I think the three large players in this industry are off, you know, stock trading, and stock investing completely online. The first one is Zerodha. The second one is you and third is Groww, and each one is growing phenomenally well. Each year, I think each one is growing like 40-50% at least every year. You guys have crossed 1000 crores in yearly revenue. Zerodha crossed that milestone a few years back. I think Groww is also touching that milestone. So what do you think, right, is the reason that a single market can accommodate so many players?

 

Ravi Kumar 02:41

Yeah, we get asked this all the time. I think a lot more I would say, right. I think this is not just even a three player market. Like I’m from the U.S. You know, the U.S. has had an incredible growth journey of its own for the past 30, 40, 50 years. And there are many players of, you know, huge size. They each have multiple trillion dollars of AUM. I think in our industry, also the relationship is with the customer, and what I mean by that is, there’s not really so much economies of scale. So it’s important that we focus on the customer. And as India’s equity participation really comes of age, we stand to benefit from that, like others will as well. Right? And I think each of us have an edge that we kind of provide, you know. We each have a different type of differentiation that we provide and I think all of our jobs, you know, as combined is just to increase equity participation. It’s at around 6% right now. How do we get that to 15, 20, 25, 30% is, you know, I think why we exist.

 

Siddhartha Ahluwalia 03:39

So India has crossed 100 million retail stock brokerage accounts today or not?

 

Ravi Kumar 03:44

No, I think the number of Demat Accounts is a little bit less than that, I think it’s just shy of 80 million if I’m not mistaken. I could be wrong, actually a little bit, about that. Some of them will be duplicates, but we still have long ways to go. Right? And I think this number has grown tremendously due to multiple reasons, but the biggest factor was Aadhaar enablement. Aadhaar-based enablement. Specifically, esign and eKYC really allowed people from across the country to open up an account through their phone for the first time. Before that opening up an account for any brokerage in India was a cumbersome 25 page document. You know, so before Aadhaar. Before 2016 if you wanted to open up an account, you would have to literally print out 25 page document. Sign 25 times and courier it to our you know, single lonely office in Mumbai, where because if you miss some signature, we get rejected and you’d be pissed off. You’d have to repeat the whole process again, you know, so we were the first broker to digitize when Aadhaar had launched. And that same month, we went from opening up like 200 accounts a month to opening up 1000 accounts a month. Right? And it’s been incredible journey since. So Aadhaar was a huge enabler. Internet penetration was a huge enabler that allowed people from across the country who in the past had to have a branch in their, in their local hometown to open up an account all of a sudden be able to open up an account on their phone. And, you know, like COVID also had some sort of a tail. Some sort of an effect as well in our business. So yeah, you know, I think all these factors combined has really allowed the industry to grow. And I think, you know, think especially young people. India’s such a young country. Young people are realizing that, you know, India is this fantastic growth story, right? They’re seeing all these companies that are growing at incredible rates. We’re seeing Nifty and Sensex crossing new milestones year on year, month on month, quarter on quarter, and they’re realizing that their money can go further for them. So instead of bringing into their savings account, the money in the bank account, they can invest it, right, which is very powerful. So, you know, people are coming to us, you know, without even us having to teach them or tell them anything, you know, like, you know, how do I invest my money? How do I participate in the growth of the Indian stock market?

 

Siddhartha Ahluwalia 06:01

So I get that, right, the retail participation, today’s 80 million Demat Accounts right? And I think within a few years, we might touch it 200 or 300 million?

 

Ravi Kumar 06:13

Yeah, exactly. It’s a matter of time.

 

Siddhartha Ahluwalia 06:15

It’s a matter of time. And right now, how many, how many of those Demat Accounts are open on Upstox?

 

Ravi Kumar 06:21

So out of the entire base of 80 odd million I think there is, Upstox is about 11 million customers.

 

Siddhartha Ahluwalia 06:28

Wow, you almost own more than 10% of the market today.

 

Ravi Kumar 06:33

Yeah, correct. You know, and, of course, I’m not saying all of them are active at any given point in time, but we open up a lot of accounts. So and I think, you know, the journey just getting started, right? We think that India has a huge addressable massive, you know, folks, that A. save a lot. India has a very high household savings rate. About 30-35% of households save around the country. And our job is to just channel those savings into high growth assets, like, you know, equity mutual funds and stocks.

 

Siddhartha Ahluwalia 07:12

And how many would Zerodha and Groww own out of that 80 million?

 

Ravi Kumar 07:15

I don’t know their numbers but, you know, I think all of us are roughly in the similar zip code. Right? Very similar. You know, I think, I don’t know, I wouldn’t know their exact number.

 

Siddhartha Ahluwalia 07:28

But roughly?

 

Ravi Kumar 07:29

Yeah like all of us, I think, would be sub 15 million.

 

Siddhartha Ahluwalia 07:31

Okay. And this is an industry where, which has taken the online brokerages have taken offline brokerages in a very small period of time. Let’s say the last seven years only. Right? So today, as you said, right, more than 40 million of those accounts would be open between the three of you, I assume.

 

Ravi Kumar 07:50

Yeah. Maybe even more, you know, and it’s not just us three, right? There’s also a couple of traditional brokerages that have made the leap into digital—

 

Siddhartha Ahluwalia 07:57

Yeah ICICI or HDFC.

 

Ravi Kumar 07:59

Yeah, like not those guys but there’s other independent players, non banking players that have done it. But yeah, I think digital players are obviously garnering a large chunk of the new accounts that are turning online.

Siddhartha Ahluwalia 08:13

And Ravi, how much is the volume that trades on the Indian stock market between Bombay Stock Exchange and National Stock Exchange?

 

Ravi Kumar 08:21

So the NSE has garnered an increasingly larger market share. You know, the two big segments are well, there’s three segments in India. One is the cash equity markets. Of that I think NSE does like 90%. There’s a futures and options equity markets. The derivative markets, of that NSE in the past has had like a 99% market share, but the BSE is now starting to make some significant inroads as literally as of the past month. So you know, we’re very hopeful, you know, that they’ll be able to turn that ship around. Then there’s a commodity segment, you know, where each of these exchanges have their own kind of commodities exchanges, and it’s kind of spread, and then there’s a whole mutual funds side, where BSE actually does very well. So that’s the way it’s split. And of this, right, it’s not like all of this volume is coming from, like retail at all. I think retail from the latest numbers I know is about 20%. In fact, in the world of like futures and options, trading, derivatives trading, the majority comes from what’s called colocation, which is the exchanges have their own data centers, where a lot of these, you know, big prop trading firms set up shop. And, you know, so the NSE colocation site, for example, may have like 150-200 different customers, but these guys do 50% of all of (inaudible) volumes and a significant amount of cash as well. So a big chunk comes from there. Then there’s institutional players, you know, that are other foreign players or domestic players like LIC itself, as you can imagine probably has a significant you know, buying and selling of shares. Right? So they do all that. So there’s foreign institutions, domestic institutions, retail, which I think contributes about 18 to 20%. That’s the rough kind of breakup.

 

Siddhartha Ahluwalia 10:12

And how has this market been growing? Like for the last 10 years, because you have been a participant in this market for 10 years.

 

Ravi Kumar 10:18

Yeah. So I think, you know, the cash volumes are generally somewhat correlated with how the index kind of performs, you know. And, again, retail is only a small portion of this, right. It’s a sub 20%. So, of course, that itself has grown. So when we first came to India, and like 2008ish, equity participation in India, which is basically number of people India that have Demat Accounts was like sub 2%. And 2012, when we started, the retail business was again sub 2%. In 2016, before Aadhaar launched was still sub 2%.

 

Siddhartha Ahluwalia 10:57

So zero growth? (chuckles)

 

Ravi Kumar 10:59

Pretty much almost like flattish growth, you know, and now we’re at, you know, six percentage kind of a number. So it’s almost tripled, right, In the past few years, which is incredible. But we still have very, very long ways to go. So in this timeframe, it’s not just retail that’s also picked up. You know institutional volumes have also gone up. You know, companies like LIC, have also started upping their, you know, their buys and the stock markets. All these… Everyone’s volumes kind of picked up, right. And retail share itself has also grown. And it’s still hard, but what I’m trying to say still has a long ways to go.

 

Siddhartha Ahluwalia 11:02

And how many large cap, mid cap, and small cap stocks would be there? And what’s your understanding of these three kinds of stocks?

 

Ravi Kumar 11:42

Yeah, I wouldn’t know the exact like breakup off the top of my head, you know, but if you look at say, like nifty. Nifty 50 is obviously the 50 most, you know, highest market cap stocks. Sensex is composed of the top 30 stocks, I would say anything, the top 100 is like largely large cap, they command a large share of market cap, because those shares, those companies are generally the biggest. Then there’s mid cap, and there’s small cap. The BSE traditionally also has more stocks. I think around 2000 odd stocks trade on the NSE and BSE will have lot more than that, because they also have a large proportion of smaller cap, and like micro cap stocks almost. So and of course, you know, some of these small caps eventually become mid caps. And as they go through their own journey they become large caps too perhaps right? So we’ve seen that evolution, you know, and it’s it’s been very exciting to see.

 

Siddhartha Ahluwalia 12:35

And you were, as Upstox only catering right now to retail investors, right?

 

Ravi Kumar 12:39

Yes, sir. Yeah, our business is, you know, completely mass retail. It’s not even like, you know, approximate retail or something like that. It’s literally mass retail 90-95% of our accounts are, you know, coming from tier two, tier three India. 90% plus of our accounts are first time investors, meaning they’ve never opened up a Demat Account before. Upstox is their first platform of choice for opening up a Demat Account. That has not always been the case, by the way. So again, before Aadhaar, right, it was much more of a metro story, you know, not just us, but pretty much every brokerage out there was opening up accounts where they had a physical presence, you know, or you can open up an account via courier or something like that. Then once digitisation happened, Aadhaar opened up the floodgates, you know, and internet penetration did its magic. We started seeing a huge upsurge from tier two, tier three India, which is again, where the growth going forward is also going to come from so as we, you know, go from 6% equity participation 10, 15, 20, a large, large portion of this growth is going to come from the smaller towns, right. And younger people that are joining. They’re starting their journey in investing in equity markets.

 

Siddhartha Ahluwalia 13:50

So if I had to say, right, where is majority of your account, new accounts coming right now? What would you say which demographic of India? Let’s say which part north, south? And what is the age group that they’re coming from?

 

Ravi Kumar 14:03

It’s actually pretty diverse, you know. Like people think that you know, for example, certain communities in India are more affluent towards investing or trading traditionally so he’ll come from there but that’s not how it is (SPEAKING HINDI) I think it’s very, very wide ranging. You know, we get it, we get not fully equal, you know, but, of course, like most of it will come from, you know, the metro plus plus kind of cities. Not most, but like the, you know, Maharashtra will constitute, you know, a large chunk of our accounts, but it’s basically that, you know, basis population is where we’re getting accounts. And every year, it gets even more spread out, right? Like, you know, four or five years ago, it had been could have been that we had most of our accounts coming from say tier two. Now most accounts are coming from tier three, for example, right? So that’s very encouraging to see and I think almost year on year, the average age of an account also keeps dropping, right. So we’re like at sub 26 years of age now, as an average, you know, account being open up.

 

Siddhartha Ahluwalia 15:04

So you’re seeing two major trends right? A tier three account is coming up more. And the tier three account also the age is less than 26.

 

Ravi Kumar 15:12

Yeah, exactly. So it’s less than 28. Not 26 but 28. Yeah

 

Siddhartha Ahluwalia 15:17

That’s a very interesting stat. That means that kind of a youth had a disposable income, to invest in stocks.

 

Ravi Kumar 15:23

And, you know, so the thing about India is that, you know, India has been a very savings rich country. We have over 30-35%, household savings rate in India. And people generally invest in things like, you know, gold or, you know, physical real estate, or, you know, they’ll keep their money parked in the bank, for whatever reason. You know, and those assets, you know, are not the best at beating inflation, investing for the future. So what we’re actually doing is channeling. In other countries, people don’t even save so, you know. The business there is like, teach people to save and when you teach people to save, tell them to invest into the stock markets. Here, people already inherently save. But you have to let you know, we’re kind of telling people like, please don’t keep your money in like your bank account where it’s not even beating inflation, for example. But investing in something like a low cost ETF is probably way better for you long term. Right? So the concept of saving already exists in India. It’s just about channeling those savings into better products.

Siddhartha Ahluwalia 16:24

So India has traditionally been a country which has invested in fixed deposits, right? 7-8% interest rate. Why has that been?

 

Ravi Kumar 16:35

Why has that been like that?

 

Siddhartha Ahluwalia 16:36

Yeah.

 

Ravi Kumar 16:36

Well, because it’s a safe haven, right? I mean, when you—

 

Siddhartha Ahluwalia 16:38

And why do Indians prefer safe havens with respect to other countries?

 

Ravi Kumar 16:42

I think part of it is also the safety net that India has perhaps in the past not had as much of. Like, in the US, you have this thing called a 401k. You have very high levels of pension funds, etc, etc. It’s a big social safety net, right? Which perhaps, is starting to come up in India now, more and more. Employers are starting to do it. But I think historically, it lacked that. And because of that, people wanted to save for a rainy day. And bank fixed deposits are like, you go to the bank. They’ll cross sell you, you know, keep your money in a fixed deposit. Guaranteed 6%, you know, like return. So you get excited and you sign up, but it’s not even beating inflation, right? These interest rates are linked to ultimately inflation numbers. And it’s not even beating inflation. So people are getting smart now. They’re realizing that, you know, the same 10 rupees now is not worth as much. So how do I beat inflation. Then the next step is invest in equity markets.

 

Siddhartha Ahluwalia 17:43

And right now the youth is changing, right? They are tilting towards that. So this generation, I think, is definitely not putting money in their FDs?

 

Ravi Kumar 17:50

No, no. Yeah, exactly. And it’s, you know, we’ve been so impressed by this. You know, like, people think that, of course, there’s an education awareness building initiative that we do at Upstox, as well. But we’ve been just so amazed by young people like getting younger and younger year on year. Like when you go to a college now, and you give a lecture, right? What should have been a two and a half hour lecture ends up being a six hour lecture. This happens all the time to us, you know. We’ll have 250 students in a room. We used this thing called Up Learn seminars, and we go to colleges around the country, and we give like supposed to be a three hour lecture ends up being a four and a half, five hour, six hour lecture because, all these young folks are asking us all these very interesting questions. So the questions are not now like, you know, what is the stock market? Or why should I invest in the stock market? It’s more like, how do I get started? What’s a better asset clap for me, for me to invest in? Should I invest in, you know, a large cap fund? Actively managed fund? Should I buy into low cost ETF? Like, the questions come directly from them now (SPEAKS HINDI), so it’s been very exciting to see that. And there’s a much deeper level of understanding now, you know, that Indian markets are growing. Stock markets are like, extremely exciting, long term. It’s benefiting the country, and it can benefit you as well.

Siddhartha Ahluwalia 19:02

And if you have to say, right? When you started in 2012, how many IPOs were happening in that year in India? And how many are happening now?

 

Ravi Kumar 19:12

Right now is not the season for IPOs. Super short term but over the past few years, obviously, we’ve seen a huge upsurge in IPOs. And I don’t know that when we first started, like very rarely, you know, I think, and they’re very traditional companies, you know, like some family owned enterprise that would all of a sudden want to go list would be the kind of companies you would hear. Past, you know, two, three years have seen a lot of digital companies, of course listing and we will see more of that going forward. Right? So it’s not just a traditional outfits, but it’s also, you know, digital native businesses that are going to the public markets for, you know, for fundraising. You know, and again, look, we’re like huge believers in India growth story, right? So, India today has, you know, about three, three and a half trillion dollars of publicly traded market cap and we think that in these next 10, 15, 20 years, that number could be like $15 trillion. So that number is not going to just come from existing companies getting bigger and bigger, which will also happen, but also be from new age companies listing where it’s going to be a combination of everything. So we’re very excited by this future, and hopefully, you know, we have the privilege of playing a, you know, some role and making all that happen.

 

Siddhartha Ahluwalia 20:27

And in your opinion, like you have seen it historically on your platform, which kind of companies when they do IPO, get the most interest from the Indian retail market? Like, what could be the valuation?

 

Ravi Kumar 20:40

Yeah, I think it’s been pretty diverse, you know. People thought that maybe, you know, new age companies listing would get a lot of interest. Of course, that’s the case, right? Like, some of these brands have fantastic brand following, right, digital companies. But, you know, like, I remember when DMart listed, it was huge, right, like people love that company. So I think it all comes down to how the businesses run, you know. The reputation of the business. The fundamentals of that business. And we also live in an age now where like, research is available at your fingertips, right? So you get a lot of insight on how, you know, a stock, how company’s fundamentals are before you think about investing in it. So I think the interest is very wide ranging, you know. People appreciate the quality of the entrepreneur, you know, the quality of the founding group, that promoter group. And, you know, all that also, of course, plays in so it’s less about the type of business but more about, you know, who’s behind that business and the history of that business so far? That kind of matters.

 

Siddhartha Ahluwalia 21:42

So the founder plays a very important role when a company lists, right?

 

Ravi Kumar 21:46

Of course yeah. The founders. The promoters and you know, the legacy of that business right? What’s that company been up to? You know, it’s not like you don’t list unless until you’ve been around for whatever, 7,8,9 10 years plus, right? So you already have enough history. And in today’s you know, digital day and age, you can find out every possible nugget of information about a company. So there’s a lot of transparency, which is great, right? And it allows people to make the best decision for themselves.

 

Siddhartha Ahluwalia 22:13

So if you have to advise an entrepreneur to list on a NSE or BSE today, and for example, let’s say a company is profitable like you, right? What would be your advice on at what revenue, what valuation to list on these stock exchanges?

 

Ravi Kumar 22:29

Yeah. So I think, like, historically, right, if you look at, I can tell you about the U.S.. So look at Amazon, right? Yeah, like a Facebook, when Amazon or Facebook went public, they were not making that much revenue, right? Like, I think maybe 250 million or something like that is when they probably went public because of course, the private markets were not at the same levels as they are today. Right? The depth was not there. Then, you know, big private equity outfits and private equity outfits came in VC funds, and P funds came in to start investing into companies and allowed them to basically remain private for much, much, much longer. But I think, you know, going forward, I think you’ll see a shift back to how it was, is my belief, you know. Like we want to list at some point because we’re, you know, we exist because of stock markets and we like the idea of going public, and I

 

Siddhartha Ahluwalia 23:31

(chuckles) You would like to give your customers a pie of—

 

Ravi Kumar 23:33

Exactly. We think we’re building something great. We’d love other people to also invest in that story, but also brings transparency. Like we’re in the business of generating trust. So going public, to me means I am comfortable, you know, being held to a higher standard of governance. And, you know, that’s helpful for the business as well. So that’s one reason but I think, because, you know, perhaps there’ll be some I think VC funds and PE funds, of course, all stuff is cyclical. But I think we’ll see a reemergence of companies listing, when they’re not like, you know, the billions dollars of revenue, for example,

 

Siddhartha Ahluwalia 24:11

Let’s talk in terms of INR, because we are talking for Indian retail,

 

Ravi Kumar 24:15

Sorry, correct. Yeah. So, when a company in the past, like when, you know, something like an Amazon or Facebook went public, they probably were doing, you know, like 2000 crores of revenue, okay, you know, with some decent profit before they listed 2000 3000 4000 gross revenue, then because all these VC funds started deploying capital and allowed large chunks of capital. So if you’re a company that was doing like, I don’t know, like 300 crores in revenue, you could raise like 3000 crores of capital. There’s many companies that did this, which allows you to remain private longer, which means you don’t have to list for much, much, much longer, which means that the companies ended up going public were doing, you know, revenues of 1000s of crores before they went public. But I think now that trend is reversing where you’ll start seeing companies going public, when they maybe hit 1000 crores revenue, or 1500 crores revenue. I think people also care more about the profitability those businesses, you know. You can’t sell people on a dream, you know, you have to sell people on actual unit economics and actual business fundamentals, which are all very healthy, right? These are all good things. So again, I think a lot of stuff is fast moving change happening in front of us —

Siddhartha Ahluwalia 25:29

So Indian retail has always valued profitable companies, whereas the US is completely opposite. You can list being unprofitable company and still many listed companies are unprofitable in the US. Why do you think a difference in mindset,?

 

Ravi Kumar 25:45

Because of companies like Amazon, right,? Because ike companies like Amazon basically remained unprofitable for very, very, very long time. And they used to look, their logic was, we want to grow, that we want to grow the market, we want to do more and more and more and more and more, and we can think about profits later, and their stock, this kept multiplying. So I think, because of companies like Amazon, and others, you know, that have shown that sometimes grabbing market share is more important than shooting for profits. I think it led to, you know, everyone trying that. Yeah, and everyone shouldn’t be trying for that. Right? And that resulted in maybe, you know, different types of companies, you know, trying to just for the sake of revenue growth and market share capture, just thinking we’ll remain on profit forever and unfortunate builds a lot of bad habits. Right? So I think, again, every every founder won’t have the maturity, I think, to be able to run, you know, an operation on profitably. And so at some point become profitable. The knowledge and know how doing that is very difficult.

 

Siddhartha Ahluwalia 26:54

Ravi now I want to focus on your personal journey, right? So it’s very counterintuitive. You lived your life, mostly outside of India till 2008. Right? How did you get so much insights about what Indian retail investors want?

 

Ravi Kumar 27:13

Yeah, I don’t think, you know, we really knew that we would be opening up a retail brokerage, when were kids or whatever, but no, I grew up I’ll tell you my story briefly. Right. So I was born in Jabalpur, Madhya Pradesh, and you know, my dad was an IIT Delhi, PhD. So, at the age of four, he moved the whole family to France. So I, you know, my brother and I, we grew up—

 

Siddhartha Ahluwalia 27:37

And you are two kids only?

 

Ravi Kumar 27:38

Yeah, my younger brother Raghu and me and we grew up in, in France. So I was there from, you know, from four to like, nine or 10 or something. Then, move to Canada. Ottawa, Canada.

 

Siddhartha Ahluwalia 27:50

So before we proceed, you know French now?

 

Ravi Kumar 27:53

I know French. Yeah. I mean, I don’t speak it so much now. But up until third grade, I only spoke French. And like we lived in a city called Lyon, where they didn’t even speak English. So that was one of the reasons my mom pressured my dad to get out of France, because she wanted her kids to learn English, you know. So like, if our neighbor said, Hello, I won’t even know what that meant. So, my dad got a job in Ottawa, Canada, and family moved there. I was there for eight years, up until senior college… Senior High School. Then the whole family moved to Southern California. So that was a huge opening, you know, in terms of, and look growing up, you know, I think, you know, our dad has… We don’t come from a business family or anything like that. But our dad’s always told my brother and me to really get into entrepreneurship and kind of, you know, be the master of our own destiny, so to speak. So, you know, I started trading, investing in stocks, like in middle school, you know—

 

Siddhartha Ahluwalia 28:54

At what age?

 

Ravi Kumar 28:55

Like when I was 12-13 years old I think—

 

Siddhartha Ahluwalia 28:56

So you didn’t have your broking account?

 

Ravi Kumar 28:58

No, no it was my parents’ money, you know, but my parents again, were so kind to even let us use their money. You know, to kind of invest, you know, just learn. But then, you know, went to college, I went to university in Southern California. I tried to do couple startups while I was in university. I took six years to get out of school because I had, I would just keep starting companies, you know—

 

Siddhartha Ahluwalia 29:22

So your bachelor’s took six years, From 18 to 24?

 

Ravi Kumar 29:28

Yeah, exactly. Something like that. Yeah. 18 to 23 and out at 24. For more than six years, six years and a quarter, I think. You know, I got a degree in computer science, but I started three companies that all failed. But I learned a lot, right? Yeah. Then my parents moved to Chicago. So I went out there. And then I worked at a company called Thinkorswim, which was an online options trading platform. I worked there for about a year and a half, two years. Then my younger brother Raghu got out of University with a degree in Actuarial Science, which is like applied Mathematics. And my brother and I, we started just trading. So we started a high frequency trading operation, where we took about 20-30,000 dollars in savings and turn it into like two and a half-3 million bucks over the course of two years,

 

Siddhartha Ahluwalia 30:11

Can you tell us how to do it? (laughs)

 

Ravi Kumar 30:15

We would trade what’s called news. Economic news. So like, when news came out of some countries, we would be able to, you know, bind to things like, you know forex and different types of futures products in a very low latency way. You know, so my brother was the quant. You know, he was a kind of the quant brains behind all that. And I was a programmer, and the business mind kind of around all that. And we did very well, right. We were very young, you know, and it was an amazing, amazing learning experience.

 

 

Siddhartha Ahluwalia 30:47

To have three and a half million at the age of 25-26 is, like liberating.

 

Ravi Kumar 30:52

Yeah, exactly. I mean, it was very stressful at that time. We were, of course, very grateful but it was nonstop work, man. You know, we were basically like up at any given hours of the night or the day and, but it was an amazing time. You know, we couldn’t have we couldn’t, we learned so much as well. Like, more than the money we made is also learning experience we went through was incredible. Then the 2007-2008 you know, market crash happened and—

 

Siddhartha Ahluwalia 31:19

Did you lose any money in that out of the three and a half—

 

Ravi Kumar 31:21

No luckily we didn’t, you know. My brother Raghu was actually very instrumental in this. He recognized that a lot of weird things are happening in the markets, and we pulled out all of our capital. And we were luckily… We didn’t lose anything. And within like, 10-15 days, I remember everything just exploding essentially. But we grew up and we would visit India, you know. Growing up, I think our parents did a great job of just, you know, keeping us in touch with, with Indian culture and stuff. So every couple of years, we’d be these NRI kids that would come and, you know, make the rounds across all of our—

 

Siddhartha Ahluwalia 31:54

And your parents are from which city?

 

Ravi Kumar 31:57

So originally from the south, you know, we’re Tamil but my mom grew up 100% pretty much in Madhya Pradesh, and my dad mostly grew up in Delhi. So, like, our parents mostly speak Hindi amongst themselves, but they would speak to us in Tamil growing up. But we’ve always had this kind of connect with India. You know, we’ve learned like classical music and stuff growing up. And then, but we hadn’t seen India visited, you know, family like 10 years, because we were working so much and going to school. So then in 2009, when the opportunity came. 2008 we came to India, you know to visit—

 

Siddhartha Ahluwalia 32:35

What was the India shining story that attracted you to India, because USA was also like growing. It’s not like… All these companies like Uber and Airbnb. You know, and other giants like Coinbase came after 2008.

 

Ravi Kumar 32:48

In 2008, though specifically, the U.S. was going through a very difficult time. You know, unemployment in the U.S. was like, insane. There were literally robberies happening, where my parents lived. And when we came to India, we didn’t see any of that. India was like this oasis, you know, it was like, it was there. It was booming, you know. So we were like, why don’t we come here and see what we can do.

 

Siddhartha Ahluwalia 33:09

Maybe you were in the rich neighborhoods of India. (chuckles)

 

Ravi Kumar 33:10

Not at all.

 

Siddhartha Ahluwalia 33:11

You hadn’t seen the floods of Mumbai. In the Dharavis. (chuckles)

 

Ravi Kumar 33:13

We were in Jabalpur, Madhya Pradesh and my mama took us to this sub broker’s office of a big brokerage house and we saw so much activity in that room that we decided, you know, why don’t we attempt doing some of this, and that’s when we came to India. But the first few years, we were not doing, you know, retail brokerage. We were doing, you know, one of the first people to get direct market access, on the exchanges. We got our brokerage licenses over time. We were doing proprietary trading, which basically means tutoring your own capital, you know. Shrini, our third co founder also joined at that time, and, you know, three of us were working out of a, you know, a bedroom, a house, and within a couple years, we’re one of the largest, you know, direct market access participants in the country.

 

Siddhartha Ahluwalia 34:01

So, you would have invested a three and a half million that you made, and how much did you convert that into using the direct market access?

 

Ravi Kumar 34:07

I don’t have the exact numbers, but you know, we probably multiplied it, you know, a few times. But then we also started spending on a retail operation. So retail operation, you know, began in 2012. And we started basically—

 

Siddhartha Ahluwalia 34:24

Till then you were just trading your own money?

 

Ravi Kumar 34:26

Yeah. Until then, we’re trading our own money.

 

Siddhartha Ahluwalia 34:28

Probably would have made like three and a half into a $10 million?

 

Ravi Kumar 34:31

Yeah, maybe something like that. You know, I should probably do this calculation for my own benefit. But yeah, we basically stopped our proprietary trading operation in 2014. It became too competitive but luckily, we had the retail business, you know, that we started in 2012. And, you know, the first few years frankly, were very slow. There were days when I would ask myself, like you said, like, why am I doing this in India? It could be in the US. Like we started seeing Robin Hood, you know, you’re like, man, they can open up an account online on their phone. And here I was like opening up an account like 30 pages of documents, you know. People from like, you know, Kolkata, couriering us forms to Bombay to open up an account was very painful. But I think all this changed in 2016, when Aadhaar, you know, became a possibility and enabled everything. And all of a sudden, we went from opening like 200 accounts a month to opening up a 1000 accounts a month, you know, and it’s been an incredible journey ever since.

 

Siddhartha Ahluwalia 35:31

And how did… because the poster boy for your industry is Zerodha. Right?

 

Ravi Kumar 35:37

Yeah they started the whole thing.

 

Siddhartha Ahluwalia 35:39

Which is great, because you have somebody who is co-educating along with you and the Kamath brothers do a really good job in PR.

 

Ravi Kumar 35:48

Yeah, they’re great. They’ve done a lot for the industry. And I think a lot of it, a lot of us owe it to, you know, what they’ve done. And we have, like, immense respect, you know, for, for what they’ve done for, not just for, you know, our industry, but also just startups overall. Right? The fact they’ve been able to bootstrap. Become such a profitable business itself, incredible to see. And it’s inspiring.

Siddhartha Ahluwalia 36:09

So by 2016, when you raise your first 4 million from Kalaari, you would also be a profitable business, I assume, right?

 

Ravi Kumar 36:15

Yes. So we’ve always had, you know, very good unit economics, you know. This business generally does.

 

Siddhartha Ahluwalia 36:22

Because you make like 20 rupees per trade.

 

Ravi Kumar 36:24

Correct, right. And it just kept scaling, right. And then we were profitable for quite a while, actually, you know, and then we started spending more on growth. Once you raised the next round from Tiger, and then we sponsored IPL, which has been a fantastic journey, right? So it became unprofitable for a little while, but we grew like revenue a lot significantly, and a number of accounts significantly, right. And, and now we’re profitable again. So we’ve been able to, you know, I think our business is also in one of those places where if you want to become profitable, you can just stop spending on growth activities, and you’ll still grow right, but not maybe as aggressively. But you can all of a sudden turn it into becoming like a 25-30% PAT business.

 

Siddhartha Ahluwalia 37:09

Which you aim to be by next year?

 

Ravi Kumar 37:10

We’re pretty much already that, right? We’re already, you know, almost there. But yeah, by the end of the FY 24, I think throughout the whole year, we’ll, we’ll probably be like a 25 or 30% PAT business.

 

Siddhartha Ahluwalia 37:21

And if you can recall, right, what worked with you, or what’s worked for you in distribution, to grow from the first, you know, 1000 to, let’s say, a million accounts.

 

Ravi Kumar 37:34

Yeah. So we’ve had a, you know, a pretty interesting kind of journey there, too. You know, at one point, it was all about partnering with sub brokers, digital sub brokers, like, you know, if someone that, say, had a website, where they would sell different things, advice on different things, and we’d become a partner of choice on the brokerage side. And, you know, that became the way we would grow initially. Then, online influencers became a thing, you know. We were able to partner there for, you know, for some growth—

 

Siddhartha Ahluwalia 38:11

To partner with the likes of Ankur Warikoo?

 

Ravi Kumar 38:14

Exactly. Right. But that also, you know, a lot of it also became unviable as time went on. Then the big breakthrough for us was, you know, getting the rights to IPL and ICC, you know. So we just concluded a three year partnership with IPL, which has been an incredible, incredible experience for us. Very lucky, grateful to have been able to partner with them—

 

Siddhartha Ahluwalia 38:36

And if you can recall, right? How much approximately, you paid them and what has been the ROI out of it?

 

Ravi Kumar 38:40

No, it’s I mean, it’s very expensive. You know, those numbers probably won’t be able to share completely. But the way we look at ROI is, you know, we’re not a brand that’s looking to, you know, be around for the next four or five, six years. We’re looking to be around for the next 50 100 years. You know, and the kind of companies that we look up to are like, you know, there’s a company called Charles Schwab in the U.S., which is a 40-50 year old institution, you know, and Schwab today has in a country of 300 million people, Schwab has over 35 million accounts, and they have in an economy of $23 trillion GDP, Schwab has over $7 trillion in AUM. That’s just one platform. There’s Fidelity. There’s Vanguard. There’s many, many, you know, players of incredible size, that have basically allowed a large part of the American population amass an incredible amount of wealth and wealth creation. The U.S. economic growth story is extremely inspiring, right. $100 invested in the s&p 500 in 1990, today’s worth over $2,000, which is over seven and a half-8% annualized. And again, platforms like Schwab and Fidelity have literally allowed hundreds of millions of Americans to benefit from this incredible growth story. The U.S. economy has grown four times more than any other developed country in the same timeframe. India has actually grown even more than that during this time. I think these next 30 years are going to be incredibly glorious for the country. You know, I think the most amazing, you know, economic growth story of our times is probably the Indian growth story. You know, these next, like, within our lifetimes.

 

Siddhartha Ahluwalia 40:19

You think it is going to be faster than China?

 

Ravi Kumar 40:22

I think so. I think so. The thing about India that’s different in China is if you look at the MSCI—

 

Siddhartha Ahluwalia 40:28

What is the MSCI sorry?

 

Ravi Kumar 40:31

Morgan Stanley, something index I think. Country index or something index (Morgan Stanley Capital International), but it’s basically you know, it’s a third party, Morgan Stanley sponsored entity that measures the growth in every country, right? So what they do is look at the top traded for what I remember the take the top traded stocks of an economy and they put it in an index and they kind of normalize it across countries. So if you look at a country like say, U.S. it’ll be nice generally mirror the, you know, the index of those countries, so that’s gonna be 500 and it’ll be closer to the MSCI USA. India’s MSCI will be closely mirroring the Nifty or the Sensex. So China’s… So U.S. is growing whatever seven and a half-eight percent. India has grown even more than that, when we say 9%-10%. China’s has barely grown. Right? So China’s I think numbers would be like one and a half 2%, you know, and the reason that is the case is because China, of course, has done amazing GDP growth, right, like hundreds of millions of people in China have come out of poverty these past 20-25 years. But, you know, the way their their stock markets kind of work is probably not as transparent as what you’d find in the US and also India. Right? I think in India, regulators like SEBI are doing an incredibly great job of just maintaining transparency, and maintaining very high standards for corporate governance. And ultimately, you know, India is also blessed with a very high quality pool of entrepreneurs, and companies. More and more companies are listing with high levels of corporate governance, and they’re allowing people to buy into these stories. Buy into these IPOs and growth stories in parts of it from the wealth generation. That’s not the case in places like China for whatever reason. So MSCI India has done… I think it’s one of the top three MSCI countries in the world in the past 20-25 years and I think going forward over these next 25-30 years, we’re probably even more incredible, right? So we’re talking potentially, you know, market capitalization from a three and a half trillion dollars going up to 20, 25, $30 trillion. You know, and hundreds and millions of people, you know, onboarding, and becoming investors and being part of this, this amazing growth story. So very similar story, what’s happened in the US is what’s gonna end up happening in India as well and we wanted to play a role in making that happen.

 

Siddhartha Ahluwalia 42:46

From from an entrepreneur perspective, right, you always maintain the headquarter of Upstox is India right means your intention is to list in India.

 

Ravi Kumar 42:58

Correct.

Siddhartha Ahluwalia 42:58

Maybe 2000 crores of revenue or something like that, something like that, right. 300 million in USD. So why do you think India is a perfect market for you to list rather than U.S.? Because that’s a much richer market.

 

Ravi Kumar 43:11

So I think it also depends the type of company you are like, we are a 100% consumer brand, right? Not even metro consumer, tier two, tier three consumer brand. Our ambition is 100 million customers over these next 5, 6, 7 years and that’s gonna come from mass India. So the IPO process itself is a marketing process. It’s an ability for our own customers to understand the brand. To participate in our own growth story. So if we were to list in another country, you kind of lose that connect. Right? So, you know, we’re again, we’re very proud. We exist, to be totally blunt, we exist because of the capital market structures of India. And, you know, it’d be it’d be amazing for us to list in India as well, at some point.

 

Siddhartha Ahluwalia 43:57

And what do you think different that regulators should do? To allow more entrepreneurs like you and me to list in India?

 

Ravi Kumar 44:06

I don’t know, I think, you know, talking about the benefits of going public and stuff like that is good. You know, I also don’t think it should be too easy. You know, you have to… When a company wants to go public, they’ll know, you know, it’s not, it’s not like buying a shoe or you know, what I’m saying or like signing up for something else. It’s, it’s a very profound, calculated decision. And I think, again, look, I think we’ve been extremely impressed by Sevi, you know, and all the great work they’ve done that they’re doing just to protect the retail integrity, and the retail investment, populations integrity and stuff like that. So in terms of ecosystem. So I think, you know, overall, it’s already been doing a very good job, you know, and I think more and more regulators are coming in to protect even more.

 

Siddhartha Ahluwalia 44:57

There has to be a fine balance between regulation and you know, being open for new companies to list.

 

Ravi Kumar 45:03

Of course, like, for example, you know, in India, it was in the past which was very difficult to list if you’re a unprofitable business. That’s of course changed to some extent. Right? So that was a, you can say that’s a welcome rule. You know, but I think it’s okay, man, you know, if you want to… If you’re sizable business in India, I mean, you can list you know. I think the markets are deep enough. There’s a lot of excitement, you know, for companies going public. There’s also institutional buyers, you know, that they’re willing to, to be part of your growth story. So I’ve never seen that as being a big impediment… In the past, because the profitability rule, you could argue that that was a big impediment for digital companies, unprofitable digital companies to list. But that’s also kind of gone now.

 

Siddhartha Ahluwalia 45:51

So you think it’s the perfect market for Indian entrepreneurs, especially digital, native entrepreneurs to list in?

 

Ravi Kumar 45:57

Yeah I think listing is only I mean, I think forget listing, I think there’s no place in the world better than India in terms of, I think just being an entrepreneur, India today is an amazing, it’s an amazing time to be an entrepreneur in India, right? It’s like, if I could pick any place in the world to be an entrepreneur, especially fintech entrepreneur, it would be India. If I had the option to pick anywhere in the country, anywhere in the world, I’m saying, this place, the rails that are available to you. The addressable market size available to you. The cost of operations. The talent pool that’s available to you. The capital pool that’s available to you for fundraising. The secondary markets or primary markets are all just incredible. You know, and it wasn’t, it wasn’t always like this. You know, in the past, we didn’t have the same mechanism, like I was telling you earlier, when we started up stocks, we didn’t have Aadhaar based onboarding, for example. UPI was not even there, right? So I think all these things have really helped, you know, the ecosystem.

 

Siddhartha Ahluwalia 47:01

Except for Aadhaar, and UPI, what changed for you as an entrepreneur? Like, you’re saying that 2023 is the best time to be an entrepreneur in India? Because you started as an entrepreneur here 15 years ago?

 

Ravi Kumar 47:13

Yeah. Yeah. I think also, it’s the confidence. Like I think, you know, see, as a business, what do you want? You want a large addressable market size. You want pools of capital that you can fundraise from. You want a talent base that you can hire from. All these things are there, right and more, right, you there’s no country in the world today that’s growing at the clip India is growing at. Because of our growth rates, you know, there’s so many things that are opening up, you know, like year on year on year for you. New opportunities are opening up year on year for you. As GDP per capita increases and as you know, more and more people enter the middle class, there’s more new business opportunities that open up. So it’s all about and also we’ve just seen, you know, the kind of caliber of entrepreneurs that are coming out now. It’s very different than what I would have found, say, 10 years ago in India. You know, the confidence that people have here is amazing. You know, it’s even more than what I find when I go to the U.S., for example. So, like, it’s like everything is there, like, what else would you want? Right? I will ask you a flip question like, what else would you possibly ask for? Right? There’s deep pools of capital. If you have a great business idea, there’s a lot of people that are willing to fund your business.

 

Siddhartha Ahluwalia 48:22

India hasn’t seen that kind of scale, I would argue, you know, just playing devil’s advocate that $10 billion company. Like U.S. it’s so easy, at least looks from the outside to create a $10 billion company because of such deep market if your fundamentals are right. And then those $10 billion companies become $100 billion like Coinbase, Airbnb. India hasn’t seen the tip of that iceberg, even for creating those 10 billion.

 

Ravi Kumar 48:49

Yeah, but I think it’s just a journey. You know, like, if you’d asked me, you know, five, six years ago, where the startup community would be in India today. I would have not said I would have not pictured this right now. Right? So, again, we have a lot of great deep pocketed big fish investors that have supported India. So that’s also helped a lot. But if you just kind of think about what’s happened these past five, seven years, and these next 10 years will be like, it could be it could be incredible. And remember, the gems of tomorrow are born today, right? It’s like, so you want to be in a place where there’s a lot of upside, so to speak. So if you kind of take all this into account, right. You also realize that India is growing right, faster any other country in the world There’s just a lot of opportunity here.

 

Siddhartha Ahluwalia 49:39

You’re saying… Today India has more than 100 startup unicorns. Companies above 8000 Crore or 1 billion in valuation. That number would roughly touch 1000 in 10 years, is that what you’re—

 

Ravi Kumar 49:51

I would say maybe even more. I’m extremely bullish, right. So I’m, I’m generally like… See, to me the seed of all this is the quality of the entrepreneurs. Right? Like what is the talent pool that you’re working with? That’s where it starts from. And the kind of talent we have in India is, I think, unprecedented.

 

Siddhartha Ahluwalia 50:08

And would you say that is even better than U.S.?

 

Ravi Kumar 50:10

Because what’s happening also is people are not leaving the country. In the past, you know, all your stars would all leave.

 

Siddhartha Ahluwalia 50:15

All the IITians would leave.

 

Ravi Kumar 50:16

I wouldn’t even say just IITians. I’m saying stars but yeah generally they have been IITs, IIMs, whatever but all the stars would leave the country for better greener, so called greener pastures. But those stars are now staying back. Yeah. Right. So if they’re staying back, what’s going to happen? Five years from now, those same stars will start companies will employ more and more people. They’ll create opportunities for the country to grow. So you know, and also people are coming back. Some people are also coming back.

 

Siddhartha Ahluwalia 50:18

You came back. (chuckles)

 

Ravi Kumar 50:19

I’m one of the early people, right, but like, you know, yeah, right, me and my other friends, we all we came back, but we’re also seeing that trend, right of people wanting to return back. So that’s the seed, right? If you see that talent, then that means five, seven years from now you’re going see a lot of growth. So because we’re kind of plugged in ecosystem, and we’re seeing that happening, just confidence. Ultimately it’s just confidence, right? The entrepreneurs of yesterday have been like, no. They’d be scared to do things perhaps. Now, just like, let’s get up into it now. That you’re seeing that confidence in, you know, any young, young entrepreneurs. So it’s just, it’s amazing seeing that.

Siddhartha Ahluwalia 50:47

Thank you so much. It’s been a wonderful conversation. I would have loved to continue more on it. But you’re limited by time.

 

Ravi Kumar 51:30

Thank you, man. It’s been, it’s been fantastic.

 

Siddhartha Ahluwalia 51:32

It’s been a pleasure. Thank you.

 

Ravi Kumar 51:34

Thanks.