Join us in this insightful episode of the Blume Podcast as Karthik engages in a candid fireside chat with Radhika Gupta, the dynamic Managing Director & Chief Executive Officer of Edelweiss Mutual Fund. Delve into Radhika’s fascinating journey from a diplomatic upbringing to becoming a trailblazing entrepreneur in the financial services sector. Discover the twists and turns, the challenges faced, and the strategic decisions that led her to her current role. Gain valuable insights into the world of asset management, entrepreneurship, and the power of compounding success.
Karthik: A part of Radhika Gupta's LinkedIn bio reads, "I'm a girl on a mission with wings of fire," and I believe it truly captures her personality. I've known Radhika for nearly 15 years, and I recall visiting this very building for interviews related to Penn undergrad admissions. Her office graciously hosted these interviews, although I contributed less compared to Radhika, I did participate for a few years.
Radhika currently serves as the MD and CEO of Edelweiss Asset Management, one of the country's most renowned asset management companies. She co-founded Forefront Capital, an alternative investment boutique, before it was acquired by Edelweiss in 2014, which led her to this building.
Radhika is a frequent contributor to publications like Money Control and Mint. She recently published a book titled "Limitless: The Power of Unlocking Your True Potential," which received much critical acclaim. What always strikes me about her is that she leads with a smile. She genuinely sets the standard for what it means to be an empathetic and highly ambitious leader..
Radhika, we're so pleased to have you on this episode of the Blume Podcast.
Radhika: Thank you. And it's good to do something different in this building rather than meet for interviews, which is also nice.
Karthik: This is also nice. Thanks again. I'm going to break this up into three parts, right? I'm going to talk about people in our tech community, which is primarily our audience, and they may or may not know much about Radhika, her history, and what drove her to become an entrepreneur. Radhika is one of two guests I have this season who are also uniquely individuals who have built post-acquisition and moved forward to compound their successes. So, that was my motivation to bring you on this season's episode.
So, I definitely want to discuss how all of that unfolded and how the journey at Edelweiss took place. The theme for this year, as I've mentioned to you offline, is compounding. There are various interpretations of it, and every entrepreneur has their own definition of it. Compounding happens in many ways, and I certainly want to delve deeper into that.
So, let's begin with a little bit of history. You grew up with parents who had very distinguished careers; your dad as a diplomat and your mom as a school principal. As per the research my team has conducted, as a diplomat's daughter, you attended schools all around the world. Can you tell us how this unique experience shaped your worldview as a young child and influenced your choices as you grew up?
Radhika: It's an amazing background, Karthik, to have. I mean, I don't think I realized how privileged I was to have the opportunity to live in Pakistan, even though I was homeschooled for the first five years of my life, and to grow up as a teenager in Nigeria, where day-to-day security was a problem, and there was no mall where you could go buy clothes. You had to find a way to get by, to be a high schooler in Italy. I always say you won't get the experience of being a tourist because, firstly, no one visits Pakistan and Nigeria as tourists. But the ability to see so many different parts of the world and truly immerse yourself in the reality of living and building a life in these countries in a very short span of time, as it's only three or four years in each place. The ability to constantly move forward, which I think has perhaps been the most valuable lesson. So I am very comfortable with change.
You can put me in South Sudan today, and believe me, I'll be okay with it because I've lived through such experiences. If you changed me from being a founder to becoming part of another company and then back to being a founder again, and I'm cool with it. I just think the comfort with change and the ability to thrive in chaos comes from being a diplomat's child. We were just so comfortable with it. I also think it gives you an inherent sense of optimism. A mentor of mine once told me that leaders fundamentally have to be optimistic because nobody wants to be led by someone who's cranky about life and doesn't have anything to say, correct? So I think this background gives you a fundamental sense of optimism because that's the only thing that will carry you through..
Karthik: No, fantastic. I can see parallels of this in Army kids and someone who's been the son of a state bank employee and has had to move to 12 cities in 16 years, there are traces of all of this. Thanks for sharing a part of your early life. Then, you ended up going to school in the U.S. Clearly, you made a choice, like most others, to say, "Hey, McKinsey is the gold standard. Let me start there," and then you joined a hedge fund. So, what impact did those early choices have on you? There are some references to campus placements being a tough time. When you reflect on that, I think there are three subsets to the question. How do you reflect on that phase? There's always that difficult phase. What did it teach you? When you made these choices, what did success, money, and career mean to you in those early years? Because I'm also trying to understand how it shaped your entrepreneurial journey.
Radhika: I think my early choices appear more thought out than they were, to be honest. I was brought up in a home with no private sector background. In our home, people knew the difference between Income Tax, PCS, and IFS, as well as what a joint secretary and an additional secretary was. However, if there was a conversation about the difference between banking and consulting, it was a blank. So you have to understand that background. My initial choices were about figuring it out. It was almost like Goldilocks trying out multiple chairs and determining what was just right.
I had a brief stint with technology at Microsoft as a summer intern. Since I pursued a dual degree in business and engineering, I had a range of options. I thought, "Maybe technology is the way to go." Then I tried consulting, which seemed like a broad enough place to start. However, I felt it was a bit too generalist for me. That's when I joined a hedge fund, AQR Capital, which was founded by Cliff Asness, a fellow Penn graduate. He invited me to come on board, and it was a finance firm, but it focused on quantitative finance. This allowed me to apply both sides of my background, and I felt like I may have found my Goldilocks in the asset management industry.
The reflection is that for many of us, this is how you find your initial starting point. You have to begin somewhere, and then you figure it out. Every experience teaches you something, and these experiences help you find the answers.
Your second question about success is very interesting because my definition of success has evolved significantly over the last 17 or 18 years of my career. In the early days, it was a very traditional definition. My purpose was quite straightforward: I was a middle-class kid who went abroad and simply wanted a good job with a good brand. Now, it has transitioned to the joy of creating a larger impact. So there has been a definite transition in how I see success.
Karthik: No, absolutely. I think it happens to all of us. That said, you know, I understand you're saying that now, given the position you've reached. However, this seems to be an interesting turn or twist in the tale, maybe coincided with the global financial crisis. But what then, given all of those heuristics, and you were not much older or super mature at that point—maybe you were mature, but three years or four years into your job—how do you make this call that you'll come back to India, start like a boutique investment firm? At that juncture, how did that translate into necessarily this bold vision that you've arrived at today?
Radhika: I think coming back to India and becoming an entrepreneur is still the boldest thing I've done. Yeah, it's, it's a big move. It's a big move in the context, as I said. Personally, as someone who had never lived in India, that was not startup central. It wasn't the Shark Tank, and it wasn't a celebrated time to be a founder. Financial services are a different kind of business. It's not easily funded, not traditional… and contrary to my belief at 24, being a Wharton graduate coming back to India didn't result in people rushing to give me a lot of money to manage. None of that really works. So, it's a very unconventional move, I think, from my lens, as I try to decode the decision. When we saw India in 2008 and 2009, we just saw India exploding between 2003 and 2007. There was a big bull market. Capital markets were really coming up. My father has always been a very patriotic man. Incidentally, he would always tell me, I don’t know what kind of karmic connection it was.. "One day, you should come back to India and work for a company like Edelweiss." I was like, it's bizarre. I think they just had their IPO. But there was no other connection. I was like, okay. I didn't even Google what Edelweiss was.
Karthik: it's amazing that that reference came up.
Radhika: He said that.. he's like, “look at these guys, look at what they're doing.” So, we just saw India as an emerging place to come back and start up. The reality is also, Karthik, that if you wanted to start up in financial services, because penetration is so low, you could start a lot of things. I mean, I couldn't imagine starting up a hedge fund in the US. But taking those ideas to this market, which is what a lot of companies have done, seemed like a real possibility. And that's all that drove the decision. And then literally building started..
Karthik: It’s similar to my dream of coming back in the sense that you could be someone who could have put in another four or five years, got your green card and attempted to get into venture or start a firm.
You're lost in the milieu. Like, you know, when people ask, why did you come back? I said, like, you're one of 750 graduates in a year out of business school, a commodity in the U.S. Here you have all the tools and networks and the advantages, unfair advantages that no other place would give for what you work towards.
Radhika: Yeah. You're living in an economy that's the centre of growth. As you said, you have all the advantages and people always ask me, you know, if you want the same amount of money and did the same thing in both markets, where would you be? And I said, I think my ability to create impact here.. there is perhaps no greater joy than a 28 year old woman coming up to you at the airport saying she's seen your story or read your post and that inspires her to build a career in financial services. I don't think I would have got that in the US.
Karthik: I agree. I agree. I think. The bar in terms of how much more is to be done in India. It's so high. It's just amazing that, you know, like you asked me, why did you suddenly start this podcast? And it's a similar thought. The fact that you can influence thousands, if not millions of minds to start thinking in a certain direction is that power tool you won't have in …
Radhika: It's a power, it's a privilege.
Karthik: The pleasure is a privilege
Radhika: It's an absolute privilege and that you could only
Karthik: Switching gears to what Forefront was about, so I know you started it with Nalin, who I've also had a great relationship with, and I've met many times. Not as often since the pandemic; I've not been doing the interviews as well for… but we have this debate around husband-wife teams and, sadly, I would say that the track record is more against than for because, but that's true of all startups. You only have two or three great success stories.
So it's probably the same ratio, but because it's easy to pick on, people pick on it, and people say, "Oh, these things never work." Right. And there are decisions around complementarity. Why did you decide to work? Is it a skills issue? So what are some of the pros and cons..
Radhika: Ah, so I don't think it's an easy answer, by the way. I wouldn't portray it as very romantic. In large part, I agree with what you say. I don't want to give a very romantic notion of it. Nalin and I, and actually a third founder, worked together. Sometimes having a third founder is also a good balance in the equation, in the husband-wife equation.
Look, I think for Nalin and me, we had worked together quite extensively in college. So we felt we had always been good teammates in that sense, project mates, etc. So there was a little bit of history. I think the good part of being a husband-wife team is a certain amount of empathy. Even two people in the same profession, when you come home late at night and you're in a bad mood because the markets had a really rough day, you don't need to give explanations.
So your crises are understood. Your joys are understood. So I think that's a huge benefit. I think that is the largest benefit. You don't need to explain a bad day or a good day or your stress. You can share that. So you don't need to do context setting, which is lovely.
I think what is challenging is there is fully no separation at home. So you don't come home to a different world. It is there on the dining table also. It is there every day. So it carries over because we are human beings. So it carries over because we are human beings. Now when I come home to my 15-month-old child, nothing carries over because he lives in a different world. But when I come home to a spouse in the same profession, everything carries over. And for us, this is an interesting point because our professions have been so similar. We found that having interests that were very diverse…. So our personal interests are completely the opposite. If you're going down this route, you have to find some space, and that is different. In fact, when the acquisition happened, and I always joke with my bosses about this, they decided to put Nalin and me in the same cabin, and we've never sat in the same cabin, and I was frustrated as hell. One day I told my bosses, I was like, “can you please get us out of the same cabin?” They said, “We thought you are husband and wife, maybe you want to share. I'm like, no, we want space from each other because we have to go back and share a house.” So I think finding points of space is extremely important, finding what X will do and what Y will do, and the boundary lines are also super important. .
Karthik: So.. what scale did this business get to? I'm getting to Edelweiss in a second. Maybe five years before the Edelweiss event happened. So how are you building the business? What was the thought around .. the same compounding journey that you've built into Edelweiss? What would it have looked like as a standalone journey? And at that, at that point, maybe before you started talking to them, you'll come to how that happened, but what would your mind have been? What was the dining room conversation then?
Radhika: So it started with the objective of being an alternative asset management boutique. At that time, private equity existed, as you well know, real estate existed, but there weren't too many alternative investment boutiques.
I should tell you a funny story. Even when we were looking at coming back and looking at the regulated asset management structures in India, at heart, I wanted to run a mutual fund platform. But then we saw the capitalization, and we said, there's no way we can afford this. At heart, I wanted to run retail, but retail wasn't a possibility. Retail just wasn't a possibility. The rules didn't make it a possibility. So we decided to cater to a much more high net worth market. And the ability was to bring a different style of investing that we had learned overseas to the Indian market. That business started at literally the minimum you can start an asset management business at, which is 25 lakhs raised, as I said, from friends, family, and fools. And it scaled to about 200 crores, which even today is a reasonable size.
Karthik: Were you structured as an AIF?
Radhika: We were structured as a PMS and then became an AIF.
Karthik: AIF only came in 2012
Radhika: We were the first category 3 AIF in the country.
Karthik: I can believe that we were the first, I think Category one AIF in the country.
Radhika: There you go. It was such a high at that point because we worked with SEBI a lot more on category three AIF regulations. And there was all this press that a bunch of 24 year olds are India's first hedge fund.
Karthik: I recall that. Because there was no category three yet at,
Radhika: …there was no category three.
Radhika: So we, you know, we helped co-construct the regulations around leverage and what the circular would be. That's another great part of building in India. You really get to build.
Karthik: By the way, as you know, I represent the industry as IBCA Chairperson.
Radhika: Yeah, I think Nalin looks at the Cat 3 council
Karthik: Yeah. there you go.
Karthik: So we get that voice which would have never got elsewhere. Suddenly got called to Parliament to give testimony.
Radhika: Yeah, there you go. So you get to shape policy here, which is a... Which is also an interesting thing. And, you know, I've done much more of that in my Edelweiss stint. So yeah, we scaled to about 200 crores. I sometimes do think if the business had continued, what would it have become? And it continues in the Edelweiss umbrella, but I think the alternative investment industry has grown. Much more since then..
Karthik: …scary growth in the 5,7 or 8 years.
Radhika:So all asset management and financial services businesses in India - and actually, to a certain extent - most businesses benefit from this under-penetration. Yeah. You know, so if I look at my current business, it's about 15 percent AUM to GDP when the world average is 80 percent. Alternatives will be even lower. So I think all good businesses in asset management will scale.
Karthik: Yeah. You just have to build the foundation to be strong. And the nature of the business is that they are multi decade businesses, right?
Radhika: They will only be successful. The game starts at five years old.
Karthik: So remarkably, our story is similar in the sense that it came, I had spent five years more.
Karthik: Our stories are similar. I didn't start on day one, four years maybe, and then Blume started. But then when we started, same thing, we were the last of the DVCFs to close. And then almost the first of the AFCAT ones to open, right? And so, we were probably at the same 150, 160 mark when you were at 200. Um, we haven't obviously grown as much. It's not easy to manage that kind of capital and doing venture capital. But, we also got, you know, if you do a throwback to 2012-13, even as we were getting started, we got offers to sell half of ourselves. And it was tempting because the pain of raising capital for.. at least in your case.. it was liquid.
It's market oriented for us. It was like, Oh, we won't give money for 10 years. And they're like, are you kidding? Who are you get out of the room? Right? And so, it's been slower, but, I think for us, the trade was useful because you want to be in control of your investment decisions. There's a significant role played if you give up that control. And it's not very common for asset houses in our business to come and buy another asset house.
Radhika: Well, that is one of the challenges of asset management, you know, that I felt even then. In fact, at some point in my Forefront journey, we were looking for funding. Yeah. And this is not a business where someone will conveniently take a 5-10 percent stake. Of course, someone told me nobody wants to have a conversation with you, or back then at least they didn't. So this is not a traditional, you know, founder business.
Karthik: Yeah. And, and so therefore, maybe walk us through how does a conversation like this even materialize? So did you just get noticed because you were doing a lot of great work and you got an inbound from, you know, the association banker to build a great organisation. We need someone like Radhika to come and lead this or how did that happen?
Radhika: No, it was actually quite the opposite. You know, we had a partner who wanted to exit. Now, Nalin and I also felt.. and you made this point about raising capital.. even though we're in a liquid markets business, at that point, 2014 hadn't happened, but we felt we needed a larger platform to scale the business. So we actually went through a formal banking process. Yeah, we appointed HDFC Bank as a banker. And as you know, Karthik, selling an asset management business is very different from selling a tech business because much of the value lies in the founder. So you can't run away. Right? And so you're also evaluating a prospective acquirer not just for the financial terms, but for the fitment and for potentially three, four years of a career afterward. Keep in mind, we had never worked in India. So firstly, everyone dissuaded us from selling. Everyone told us it was a horrible idea. I still joke with Rashesh that people told me I would be eaten alive. I'm still alive. Nobody's eaten me! And we met about nine people. We met larger corporates than Edelweiss. We met smaller ones. We met family offices. And I think what finally.. and by the way.. there's a joke that when our banker said Edelweiss, I said they're too aggressive, they're too aggressive, they're different. And he was like... But actually, I feel the cultural fitment is just right. And that's actually what happened in the first meeting. I realized these are probably the right guys. And that's how the conversation happened. So I think you should..
Karthik: So you went through a swayamvar, you found the nice
Radhika: match. Yeah, you found the right, nice match. The one that you didn't think would work out. It was all very filmy and, you know, here we are.
Karthik: And the feeling of.. and I know you were mentally prepared, but going from working to becoming your boss, but then saying that, no, now I don't know if I'm giving up control and I'm owned by them, how was that, and did it, did it change very rapidly, maybe to the credit of Rashesh and the board is still here, but how did that journey go?
Because I think a lot of founders, when we are giving advice, five, eight, 10 years in, it might not be a bad option to go in and be a part of a larger strategic. These are the biggest worries. So, for example, I'm actually having these kinds of conversations with half a dozen founders who have put in 10 years and we think ironically, they've actually reached the beginning of the compounding journey.
So the next 10 years can be very fruitful, but the old investors are jaded and want exits, and the new ones are not necessarily jumping in, and they're probably a tad short of an IPO. And so we're saying, why aren't you considering a good Swyamvar again? Right. And so. Is that I'm, I'm trying to inspire them perhaps or give them tips, and anything from you would be great.
Radhika: No, I think quite a few thoughts here because one is, I think, as I said, the world tremendously scares you if you're contemplating a strategic sale, especially if it's to a strategic, if it's to a couple of family offices, people tell you that you'll retain control. But if it's to a strategic, you're convinced that you're going to give up independence and control and this whole, you know, you are going to go from being your own boss to working for someone, I don't buy this nonsense because the reality is whether I ran Forefront or whether I ran Edelweiss, my boss is my customer. It is my regulator. It is my stakeholder. It is my investor. That's correct.
Karthik: You are still answerable to all the stakeholders.
Radhika: Nobody lives a life when they're not answerable because then you're not building a business. You know, I think for all of us, we're first answerable to our customers. So I don't believe that. I do believe the fitment of the strategic is very important, but I should tell you, when we sold the business, despite all the wisdom and preparation, the day we crossed over from our Worli office to this office in Kalina, I was in tears at the Sea-Link. I was just in tears when we were taking down that board of Forefront capital. It is a big emotional decision. It's a big emotional decision. But I think the system made me feel very comfortable. In fact, there was a party that night, that the team had hosted on the terrace here saying, “Welcome home. Nothing has changed.” And it really felt like that. I should also say for me, the transition to a strategic into Edelweiss was not an easy transition. Uh, so I don't want to make it sound like a honeymoon. I had never worked in an Indian corporate before. When you are a founder, one of the good things about being a founder is nobody does performance appraisals. Nobody gives you too much feedback, especially if you're a bootstrapped founder and that transition is not an easy one. One of the things Rashesh and Venkat told me is that it will take three years, it will take three years to feel at home and somehow with the two, three year mark. I started feeling at home.
Radhika: And once you start feeling at home, this whole notion of founder versus non founder. I always say entrepreneurship is a state of mind. It's not a state of employment. If you incentivize the right way, which I truly believe I am, you will create value. and as I said, a lot more opportunities have emerged.
Karthik: A lot of takeaways, I think. The two-three year one is a good takeaway. So people have to be patient with on both sides around acquisitions, which we don't see, which is why I think 8 out of 10 of these fail actually. And the fact that you've been not just retained here, but you've been given that sense of continued entrepreneurship is a very powerful paradigm because without that you will feel like I'm constrained by the boundaries of how they see employees or even if they're good at culture and leaders, the welcome message is a great touch, I think.. I'm not saying.. founders don't do it. And as I was thinking, what you're giving us are fantastic tips for even our companies, which look to acquire others.. There's a way to make these work. It's been almost 10 years now with Edelweiss. And, you've been building for what, two decades prior to that. 25 years. So what do you think has made Edelweiss, what is your outside-in view and now you're a part of the system and so to speak, part of the leadership. What makes Edelweiss click?
Radhika: That we are still a company run by entrepreneurs who's letting people build as entrepreneurs. That is the number one thing that makes Edelweiss click.
Karthik: You took my words out of the conversation that I have with my people head, Rhea. If anyone looks or smells like a job seeker, let's please don't hire, because we only want a company run by entrepreneurs at every level because we're a small organization, but lovely to hear that as well.
Radhika: So Roshesh and Venkat are entrepreneurs… and we've always been treated… it's one of the things financial services is a very ageist business. But if you look at most businesses here, they have had first time CEOs and very young CEOs. Most of us became CEOs. It does not happen in financial services. When I became the CEO of the mutual fund vehicle and mutual fund is a highly regulated, highly public business. And I knew this while coming in. I became the CEO with a lot of support and a lot of freedom from my board. And my peers at that point were 20 years older than me on average. It's a big decision and I was not the only one. So it's a group of people. That likes the misfit, that likes the entrepreneur and backs the entrepreneur. And it's a group of people that gives us so much freedom. So in this building, there is no notion of a group EFSL, which owns Edelweiss mutual fund.. is like a private equity or a long term.. It's an investment company. We think it always thinks of itself as an investment company that holds businesses for periods and creates values. I report to a board When I bid for a mandate called Bharat Bond, which later became Transformative, It's a high profile Government of India mandate, all of that stuff. I didn't have a conversation upstairs. Should I do this? In fact, most people found out after we won the mandate. And that is the kind of operating freedom we have to build, to decide.
Karthik: People don’t usually ascribe these qualities to the “the corporate” and clearly you're not functioning like this, which is fascinating to see. It's also my motivation to say that Indian stories come in lovely flavors and varieties all across and not enough are told. We are like, we are either bracketed as corporate or bracketed as cool startup. And there's a lot of stuff in between which blend the best of both.
Radhika: And a lot of Indian corporates are bracketed as Lala, which I don't get. And I always say within this firm, I not only became a first time CEO, I became a first time stage host. I became a writer. I did my first podcast. I did my first TEDx talk.
Radhika: In post acquisition, I think fitting into a corporate structure for someone who has not been part of it Is tricky. Yeah, because there are layers and there is process and agility sometimes is not what it is in a founding form. So I think working through those layers, and I've seen it can be challenging for a lot of people who come from a founder mindset. Again, I don't want to be romantic about it. That transition is not an easy transition. I think I went through 18 months. I was crying tears in my first performance review here, despite doing extremely well. Yeah, I just struggled with the cultural fitment. So I don't think the transition is easy
Karthik: Coming to how you run your shop and the beginnings of which I'm going to touch on the whole idea of compounding. So two things. One, of course, someone dug up that you mentioned that your team mantra is Chappal Ghiso. What does that mean? Yes. And how do you execute a mantra of that nature when it actually has to be translated to people in reality?
Radhika: We're currently doing chappal ghiso doing a lot of travel, but I'll tell you, and I'll give you a little context to chappal ghiso. So we started building out the retail franchise in 2017 - Six years ago. And mutual funds is a highly fragmented industry. There are 45 players here. A lot of the large players are big-bank backed names. Now if you are a big bank backed name, I think financial services is a business of trust, especially asset management. And when you're talking to the common consumer, SBI has a branch, even on the borders of India and Bangladesh, Edelweiss cannot be pronounced on the borders of India and Bangladesh, less be known. So you don't have brand, you don't have reach. And I quickly realized in this business, nobody cares about you when you're ranked 37 on a 45 person league table.
So standing out and building a brand in retail financial services with limited budgets is a Herculean task. I've done the same exercise in institutional, but at least that you're catering to an audience you can talk to. Here it's a B2B2C business and you're catering to someone who's giving you a 500 rupee check.
Very different. And you're doing it without a lot of funding. So Chappal Ghisso came from a conversation I had with people in the investor community like yourselves. Who would ask me in the early days in 2017 - 18, and you are ranked this, what is your edge? How do they ask these questions in boardrooms? What is your edge? Is it going to be some big strategic choice you're making? Is it going to be XYZ? And the reality is, I don't believe in an industry as regulated and commoditized as mutual funds you can make very large strategic choices..
Karthik: True. Yes. How do you differentiate?
Radhika: Products are known. The pricing is known. And I said ‘hum chappal zyada ghisenge’, which basically means we will work. We will do more outreach to distribution partners. We will be more responsive to customers when they have a problem. The CEO will be accessible on social media if you have a question. The team will just be out there and do more. Hum chappal zyada ghisenge.
That is going to be our edge. Because we are hungry. And sometimes, I believe, hunger is enough. We're doing a product launch as we speak. And someone told me that for once, we don't feel that we have to push your product. People want to sell it because your guys are just there everywhere. That's how you drill hunger. And to your point of how you drill chappal ghiso in a retail organization… because in a retail organization, messaging is very important, Taking a message sitting in an office in BKC or Kalina down to someone in Raipur who doesn't see you at all or once a year..is a hard task.
Karthik: And what has worked for you in terms of role modelling .. and communication, because I see a lot of parallels, of course, in multiple startups, but even At Blume, I think that's I would like to say that's an edge. How do you culturally drive that message through to the foot soldiers?
Radhika: I think three things. Being very visible. In my first year, I probably met 2000 channel partners one on one or in one-to-small groups, just travelling. So being on the ground and being visible.. I still have an objective.. I have a young son that I'm going to travel to every branch, every single year.
Karthik: And how many of these exist?
Radhika: We used to have 8, we have now 32. And many branches multiple times a year. Just being on the ground is so important. I was talking to someone who is in the business of election forecasting yesterday, and he said, what does a successful politician do? Understand the needs and be out there, not only so that they know him, he or she knows them. And he says the same is true of any business. It's about understanding your customer base and them knowing that aap ho wahaan.. Koi problem hai Raipur ke bande ko… that CEO is there to listen. So I think one, that second, keeping limited messages and not changing your messages. This was a big learning for me because in my wholesale and institutional avatar, you can change messaging very quickly. In retail I've realized, you decide a message today here and It takes a year to percolate down the system, to your system, truly. And it takes them another year to percolate it down. So having limited messages and keeping consistency of those messages. I heard something from HUL that said, it's taken us 13 years to say, Daag Ache Hain, which is a well-known campaign. And they're still saying Daag Ache Hain, because India has changed. But that message takes time. So fewer messages in the same consistency of messaging. We are very careful about our messaging, what we want to say. And changing it is a really big decision. We change messaging once in three or four years.
[00:35:18] Karthik: I had a question later about your drive for personal branding and leadership branding. And I think we've already answered that in some sense on why it's important because everybody needs to see you at the helm.
Radhika: Yeah. Which is my third point also.. is that as leadership, you have to be accessible. So breaking down barriers, I really do believe that even though we have cabins. I am accessible for problems because in an investment business, we are also a fiduciary. People should be ready to talk to you. I always believe that in this business, you will realize compounding if you stay in the game. The biggest worry I have is that you will make a big mistake and get out because it's a very public business.
And your people know when things are going wrong. So if your people talk to you, you don't have the risk of getting out of the game and then you'll enjoy compounding. You stay in the business, you'll compound.
Karthik: I think you've hit that stride at this point and your chapels are striding now.So now to the compounding part, the third section. So in the last five years alone, it looks like your AUM has grown 10X. There's in each of the businesses we've interviewed this year, those magical moments of how..as you said, undifferentiated, young, AMC, crowded market, numerous incumbents and suddenly you take off? How do you explain that sort of take off moment? And if you can correlate, maybe what happened before and after that. Because this business is very different from the other ones that I might have had on the show.
Radhika: So I don't think in the AMC business, while you experience the compounding later, you put in the inputs today. And if you put in the inputs today, you'll get the rewards two years later. If you don't put in the input today, by the way, you will see the impact two years later. So that's also equally true. So if you have a period where you slack off, I promise you in this business, you will see the impact in the year because your connectivity will go down with people, you will get slack, and suddenly business will start falling. Most people who look at our trajectory will say Bharat Bond was the takeoff moment in 2019. I don't think that was. I actually think it was when we went through a crisis in 2018, the credit crisis happened. It wasn't the easiest time for the parent and people literally told us we would die. Till then we were an asset management company, looking at what everyone else did, trying to find our feet. But. Looking at the market, I think in ‘18, we were forced to find an innate sense of self-confidence that screw everyone else. We are going to do what works for us, and it doesn't matter what people say. That change in attitude happened in 18-19. It led us to bid for things like Bharat Bond, which became a runaway success. Bharat Bond was India's first corporate bond ETF, five asset management companies applied. We were the smallest. When we bid at the bidding center; someone told us, why are you guys even trying? You won't even be able to manage this if you win. And there was a lot of press about why is a small asset management company trying to win a state mandate. And we won. We did Chappal Ghisso, and I did 50 trips to Delhi that year. And we built out this product. It became a 50,000 crore franchise. All of that happened. The brand changed. Everything happened. But it came from an innate sense of we're not going to follow what the market does, and we are going to play this game our way. The same trajectory with Bharat Pond was repeated in a lot of products, and within our parameters, we started becoming a very innovative asset management company. So I always think it's the change in confidence.
Karthik: Well said, the reason I'm pondering over it is because obviously you draw correlations between what you've heard from other guests in your own journey. So I think you're absolutely right. It resonates very well with what we've been going through as well. People like didn't see us potentially break out and become, even get to this size that we've got. And it surprised the hell out of people that we had actually raised so much money in our fourth fund. And I think some of those, all the cues that you gave, the effort was put in long, long ago. If you didn't, if you took the brake off the pedal, you would have just slipped entirely. Yeah,
Radhika: yeah.. and that's the risk today too. It is complacency is the biggest risk in the business.
Karthik: So.. Flip side of this rapid growth. We also contend with it. Suddenly you went from, just to give you a parallel, we were five years ago, same day if I was meeting you, 2018. We were like 80 million under management and now we're like 650. So it's a pocket change compared to what you do in the retail market. But I'm just saying from a responsibility of capital and the team that you have to manage, it's a key change.
And in your business, which is not apples to apples, but still curious to know what would then worries you about the staggering growth cause performance is still demanded off whatever size of assets you manage in the asset management business.
Radhika: I think a few things and no one's asked me this question, but in our first five years, we set out on this path that we want aggressive growth because we need relevance in this industry.I also know beyond the point, you will never be the fastest growing… There was a point Karthik where every quarter the league tables would come out and we would be the fastest growing one. Everything is so energizing for people. Last year we took a turn and there was a major change in taxation. We were a very prominent fixed income AMC fixed income taxation changed. And we decided our heady days of growth are over. We want to focus on depth and retailization. So sustaining growth is part of the journey, it's not the end in itself. And that's, to your point around communication. After five years, we had a change in communication to the market and our own employees that you're not going to see us being the fastest growth. These are the new metrics we're going to measure yourself against. And now please track these. So one is that growth is not always sustainable. Two is, as I said, complacency. I think the easiest risk in the MC business is to say I've become top 10, I've become top 12, I've become complacent, and I will stop doing the things that made me get here. I will stop chappal ki sewing. So that risk that you'll slack on customer issues, that you'll slack on performance, that you won't go out and meet your distribution partners, that complacency is the biggest risk in the business. And third is the visibility that happens when you're large. So when you're small, you can grow quietly, but in a business as public is this, when you're large, you get a lot of scrutiny and the cost of failure is very high and in a market’s business, failure happens, regulatory failure happens. So I think the challenge of just managing risk reputation… one of the aspects of our business that people don't know I manage most carefully is brand risk, reputation risk, and PR risk. And I look at that myself.
Karthik: I think the best founders in every business, not just financial services, the one trend I've seen in all my top founders - Is that they never lose sight of that because it drive. It’s not just not the risk of regulation and customers, but also how your employees see you, what talent you bring in, and these are small things around compounding, which brings me to the question I have for almost all my guests, which is. How do organisations compound? This is an abstract question I know, but I think it's important for everyone to hear, every different perspective that I can gather, only because without that, I feel it's almost impossible for long term building, which is the idea I'm trying to propagate here. And when you were a young CEO, you had a whole bunch of potentially very young L1s who were also first time sales heads, first time CXOs.And did you have to do something consciously for culture to compound for this, you referenced entrepreneurship multiple times. How do you compound that element? It feels like it's impossible to hold on to after a certain scale and after a certain point in the organization's life.
Radhika: It's a very relevant question because as I said, you'll get the delta in this business if you hang around long enough.
And at least the retail asset management business is about consistently doing the same thing day after day and not stopping doing it. And so how do people not get bored is really a question. And how do I not get bored? I think you have to find new vectors to challenge yourself and make things interesting for yourself and people.
We went down a growth journey and now We're now going down a deep retailization journey, taking the brand. And I think you have to translate what each leg of your journey means to people down the line. Because I got this feedback in my early days that aap kehti ho ek lakh crore ka banna hai, what is in it for me? What does that mean for me sitting in Patna branch? And I think you constantly have to answer the question that if this is what the next three years for the org means, this is what it means for you and this is what it will deliver for you. And this is the benefit. Why am I here? What is my innate sense of purpose?That's how you preserve and how you preserve the sense of culture.
Karthik: And other than doing the gessoing and landing up at all these branches, what have you been your favorite communication tools for this?
Radhika: My favorite communication tool is a simple one. It's called leadership connects, a very boring name, but every six months I catch up with every department in groups of five or 10. And I don't speak in that too. So I come and they sit in this room or, virtually if it's a branch and they just bomb me with questions, we started this in COVID and all I do is I list the questions and I answer them. Now in the early days, Karthik, all very strategic and, now the questions are as much as, Oh, I've heard you're going to quit.Is that true? Oh, this is a problem. And I'm actually, my board is much kinder to me than my own guys are. So we have town halls and we have emails and all of that
Karthik: ..from the top of sense of transparency and comfort that you anything is You can question anybody on anything
Radhika: You can ask questions. It's a place that you can ask questions. The CEO is there, she's accessible. You go ask your question. And so people ask. So that has been, I think, our most successful one, outside. And you don't realize, your smallest tweets, your smallest LinkedIn posts, they read between the lines, they read everything.They read until you walk onto this office with a smile on your face, on an angry mood. There's a conversation about it.
Karthik: In your book, Limitless, your second chapter had a funky title, Taking Risks, Understanding Sips and Surviving Blips. And you go deep into your take on risk taking. And we all heard about what the risk reward equation means.How do you think about risk and its need and its essence for compounding? Can you compound without taking risks?
Radhika: I think you need to take the right kind of risks to compound. I'm in the investment business, and investments are about taking the right kind of risks. If you don't take risks, you get FD returns. So you have to take risks. We have to take risks with business. We have to take risks with investments in the business. We have to take growth risks. What I don't want to take is brand risks and franchise risks. And so the lines I think that Summit Pests are the ones I learned here. Is it worth it? Which is my growth risk? And can I afford it? Which is my franchise risk? And so there's a kind of risk I want to take and I have to take. But there's a kind of risk, like a new product I launch and it fails, that's a risk I damn well take. Something that questions the reputation of this franchise, I'll never take it.
Karthik: Maybe the last question before I get to a little bit of a fun rapid fire is, I guess the biggest idea around the theme of compounding is to show there's incredible value to be built after the business is brought to a certain stable state, which de-risks all of what you just said in the last episode… but it is a 10 year journey and there's incredible short term pressures on performance, capital raising, speed, keeping, how do you keep people engaged and interested for 10 years before you can sell all of this glorious vision, right? What are your advice for founders having lived through this journey, balancing the short term performance profitability expectations, long term sustainability?
Radhika: You mentioned the acquisition when I joined, and I wasn't the CEO of the retail business then, but I was watching it. When Forefront was acquired, we were a 200 crore business and on the sixth floor, this asset management company existed. It was a hundred crore AUM-MFS. We're sitting here 10 years later at 1,15,000 crores and also a journey that is less documented from heavily loss-making to meaningfully profitable and hopefully on our IPO in a few years. Last year in my annual report, the theme was strong foundations means sustainable growth. And I think that is the balance we trade. You have to build a business on foundations that are strong. Not only do we run a business, but we invest in companies every day. And I think the same criteria that we look for in companies applies to our own business, building strong foundations, doing business in a sustainable way. In every business, there is an opportunity to take shortcuts every day, for exuberant growth. And it's those questions and those choices that you make. So I never want to over-hire and lay off people. It's just something I don't want to do. I never want to sell products for negative unit economics, and I never want to do anything that compromises the franchise. I think those are the foundations you need to build for sustainable growth. And in finance, Karthik, we were taught that there is something called terminal grwoth
Karthik: That's how the DCF formula works.
Radhika: That's how DCF works, right? In India, there is no terminal growth rate. That's compounding in India. Do you think HDFC Bank will stop growing after 20 years? So India, the definition of terminal growth rate, our economy is going to have a demographic dividend till 2050. So we don't have to worry about terminal growth rate.
Karthik: I think that's the biggest takeaway from that answer is that maybe people are badly analyzing.. this need for short term gains and like artificial rewards. I think it's a message, not just for the founders, but also for the venture capital that you got to build differently in India and, this race to arms race to try and get most capital in some valuation which doesn't hold water in the first five, six years, it's going to punish and destroy the possibility of that compounding between years 10 and 20.
That is a worry because everyone wants to cash out in 10 years. Yeah. And that is probably the biggest flaw in the model.
Radhika: I've had this debate with my board and I'm like, sometimes you have this thing as a CEO. Are we ranked 10 or 11 or 12 or 9? And he was telling me, in the asset management business, if the opportunity is so large, you will build up a business of serious value. Growthis assured.
Karthik: We'll wrap on that. And I'll just have a short section on rapid fire questions. Maybe a word, a phrase, a sentence. That the team has put together a bunch of questions for you. They're not similar for all of our guests, but here let's go on that. Yeah. So the first is what's the most important thing you look for when you or your colleagues hire somebody at Edelweiss?
Karthik: You do over index on hunger.
Karthik: What's more important, ambition or accountability?
Radhika: Accountability, because and I love ambitious people. And I just said hunger, but you can’t deliver if it is all talk.
Karthik: in your business, I would say doubly.
Radhika: So perhaps this is just getting things done is underrated, especially in India. Ideas are a dozen execution is hard.
Karthik: You already spoke about the effect of the Chappal Ghisso, but how many days of business travel probably every year?
Radhika: Before my son, it used to be three days a week. Now it's about two days a week.
Karthik: What does a Sunday look like in the life of Radhika Gupta?
Radhika: Sunday actually looks like hanging out with a 15 month old, sleep, music, poetry, writing.That's it.
Karthik: Nice. Do you write poetry or just read?
Radhika: I write poetry and if you see me in any of my presentations, my retail presentations, you'll see a lot of shayari come out. It's a great way to connect to people. I'm known for my shayari.
Karthik: Any book or two that you would like to recommend?
Radhika: Karthik, I have to confess, I don't read non fiction books.I read a lot. But I read a lot of fiction, so I'll go to the airport and because I also studied literature in college, so I'm crazy about reading fiction. So there are a lot of old fiction books that I come back to.
Karthik: Thank you again, Radhika. I know it took a while to get this scheduled because of your crazy travel. But a lot of things I learned for the first time about you, your life, what drives you and how phenomenal this journey has been. And as I said, I think each story is different. We all know that each entrepreneurial story is different. This one particularly excited me not just because you're a woman founder, but also because you've.. Worked in a relatively male dominated world, but also this unique journey of taking your dream, knowing that it can become a much bigger dream in a different home, making it work - not easy - and building one of the most formidable asset management businesses in the country. So congratulations again, good luck for the road to IPO and thanks for the time today.
Karthik: Thank you
Radhika: very much.
Part of Blume Podcast
Welcome to The Blume Podcast, where we explore “The Power of Compounding” through insightful conversations with industry leaders. In this season, we bring you four captivating episodes featuring Peyush Bansal, Raamdeo Agrawal, Nithin Kamath, and Dinesh Agarwal.
In the first episode, Peyush Bansal, founder and CEO of Lenskart, shares his journey of building a successful eyewear company and the importance of hiring the right people. Discover how his clarity of purpose and long-term thinking shaped Lenskart’s success.
Next, Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services, shares his investment philosophy and insights on India’s growth. Gain valuable advice on building a strong brand identity and the dangers of building a startup for the wrong reasons.
In the third episode, Nithin Kamath, founder and CEO of Zerodha, reveals the secrets behind building and scaling an online brokerage firm without external capital. Learn about the power of compounding and the importance of trust in the financial industry.
Lastly, Dinesh Agarwal takes us on a journey of starting a business in India during the internet boom. Discover his thoughts on business growth, profit margins, and the significance of small and medium-sized enterprises in creating employment.
Tune in to The Blume Podcast and unlock the power of compounding with these inspiring stories and valuable insights. Stay tuned for new episodes coming soon!
Karthik ReddyKarthik Reddy founded Blume with Sanjay Nath in 2011. Karthik has shaped Blume’s investment approach and philosophy over the years, and in turn has overseen investments in some of Blume’s leading portfolio companies such as…
- Current Section
- Co-founder & Partner
- Media, Entertainment & Gaming, ConsumerTech