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Mini Review Article International Journal of Family Business and Management Open Access Managing a growing Family Business: A Case of Tracom Pvt. Ltd. Shahir Bhatt1* and Amola Bhatt2 1,2Assistant Professor, Institute of Management, Nirma University, Ahmedabad

Received: July 10, 2019; Accepted: July 31, 2019; Published: September 9, 2019

*Corresponding author: Shahir Bhatt, Assistant Professor, Institute of Management, Nirma University, Ahmedabad, Mob: 9687600550, Email: shahir@ nirmauni.ac.in

approached the classic fork, common to many family businesses. Abstract The case describes the issues experienced in a family business, They had recently received an offer from a very well-known Stock broking company, having its operations pan- for becoming a particularly in the first two phases of its life-cycle, viz. the introduction generation entrepreneur and he has taken up the task of sustaining franchisee. While the offer was very lucrative in terms of money and growing the growth his family stage. business The main in protagonist,the wake of cut-throat Parthiv is competition. the second and other benefits, there were downsides to be considered. Anuj, The case presents an opportunity to discuss the issues commonly faced in a family business setting such as lack of funds for discretionary use, gooda Chartered than bad. Accountant The competition by qualification had burgeoned and currently, and while Executive BFSI tight control by family members and traditional practices. The case Director of Tracom was convinced that this offer would do more also looks at how growing businesses need to expand their portfolio by leaps and bounds, broking was also becoming a crowded (Banking, Financial Services and Insurance) sector had grown twenty year old home-grown brand should be diluted in light of a by adding related products and services. The dilemma is whether a the game was of market share. If Tracom wanted a comfortable market. The big fishes were gobbling up the smaller ones and player. franchisee offer received from a bigger and better established market Keywords: position, it made sense to partner with the bigger fish. Parthiv, who had joined this business before three years and had learnt Family business; growth stage; financial services; the ropes quite well in this short duration, knew that his brother Introduction suggested that inspire of a huge number of players in the broking market,made perfect the number market of sense, demat but accounts his heart stood did at not a mere agree. 3.1 Reports crores

On a cloudy Sunday morning in August, 2018, Parthiv was (at the end of February 2018) among the two depositories NSDL hissitting mood in thetoday. balcony In fact, of his his mind grand was bungalow, lost in thought overlooking and the his and CDSL (Central Depository Services Ltd., , India); in beautiful garden. However, the full Gulmohur bloom did not lift a country with a population of 134 crores. Parthiv was looking an elaborate breakfast on Sunday mornings and the general rule on the Business development side and had started appearing overall gloom enveloped him. Usually, Parthiv and his family had of not talking about their family business presided. But, today onin mediatheir own.to strengthen Accepting the the brand offer awareness.would mean He dilution was convinced of their twothat decadethey had old the home-grown potential to brandbuild theand brand, they would survive be and reduced grow had to deliberate on an issue concerning their twenty-year old familyParthiv, business his elder of brother,stock broking, Anuj and by the his name father, of Mr. Tracom Vijay Stock Shah exchangedto employee-like glances status, and looked being at constrained what their by father the covenantsand founder of ofthe Tracom franchising had to company. say. Having expressed their opinions both Brokers Pvt. Ltd. Tracom, established by Mr. Vijay Shah in 1995 in Ahmedabad, worked as a financial intermediary, providing equity Tracom Genesis: Tracing the history of family trading, depository services and other financial services linked business to the capital markets. The journey started with a membership th of National (NSE, Mumbai, India), (BSE, Mumbai, India) and later membership of National essentially meant trading on computers, had expanded its client Mr. Vijay Shah was born on 15 March 1951 to his parents Securities Depository Ltd. (NSDL, Mumbai, India). Tracom, which Mr. Sakarlal N. Shah and Mrs. Manek Sakarlal Shah. They were 6 siblings with Vijay being the youngest child. His father owned a base to 10,000 accompanied by a brokerage income CAGR of one of the best mills in the city of Ahmedabad; aptly called the While the thrill of running one’s own business and the challenge mill named “Ahmedabad New Textile Mill”. It was considered as 23.28% since inception and offered a breadth of financial services. members currently managing the operations of Tracom, they had of taking it further prevailed in the hearts of all the three family “Manchester of India”. The family was considered high in net worth and lived a very luxurious life. They owned a1949 year Jaguar

Symbiosis Group *Corresponding author email: [email protected] Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Copyright: © 2019 Shahir B, et al.

economy, India has also seen a tremendous boost in the Initial

Mark V car in an era when owning two-wheelers was also rare. Vijay was pursuing his Bachelors of Science in Physics and was Public Offering (IPO) segment. The number of listed companies only seventeen years old, when he received the first blow of the on NSE and BSE increased from 6,445 in FY2010 to 7,501 in responsibilityuntimely death on of hishis shoulders.elder brother. At aSubsequently, tender age of his nineteen, father met he March 2018 and the market capitalization of all the companies with paralysis and all of a sudden, Vijay found his entire family’s listed on the BSE reached a record of Rs. 150 lakh crore (US$ 2.33 trillion) backed by high gains in the broader market. The allbecame textile the mills, Director under of which the textile the ownership mill. However, of Ahmedabad after two years, New amount raised by IPOs in India increased from US$ 318 million The Government of India (GOI) ordered the nationalization of in FY 2008-09 to US$ 10,888 million in FY 2017-18(IBEF Report theiron Financial IPOs. Services, June 2018).In fact, even the SME (small and Textile Mill was transferred with all assets to GOI for Re. 1. The medium-scale enterprises) segment received a great response for closing down of the mill led to severe financial crisis. Vijay was young and on account of financial pressure and strong advice to higher disposable incomes with the middle-class and a rise in The positive sentiment is sustained in the Indian markets due from his relatives, he started selling the family’s personal assets at throw-away prices. He sold the bungalow, car, family jewelry, growth, after Hong Kong in terms of HNWI population in 2013, was always fascinated by the story of the Phoenix which rose the High net worth individuals. India has clocked second highest frometc. and ashes settled and for his an indomitableordinary middle-class spirit started life. However,searching Vijay for and further it is expected that India, along with China and Japan would have the highest number of HNWIs in Asia. newer avenues. Business ran in the veins and as a result, after some informal market research, he started a PVC factory in the According to ICRA Report on Stock Broking industry, the Odhav area of Ahmedabad city. However, lack of funds mandated revenue pool of the industry is expected to grow about 15 – him to establish this venture as a partnership firm with his 20% on a year-on-year basis in FY2018, while the volumes are uncle. Although, Vijay managed the complete business, he was andbound distribution to grow inincome. the range of 20 – 25%. The major source of frequently intercepted by his uncle and despite all his efforts; revenues would be brokerage, followed by depository income Currently, as per SEBI records, there are about 7850 thehe hadstake to of take his hisuncle. uncle’s The approvalbusiness forwas petty growing, expenses but the as well.cash cycleAfter wasmanaging uncomforting the business as raw for material seven years,expenses he offeredhad to be to paidbuy of the popular discount brokers in India are , ProStocks, registered stock brokers in the equity segment in India. Some in cash immediately. In 1994, Vijay received a generous offer for he exited the business. Upstox, SAS Online and SAMCO while full service brokers quoted selling his business and the valuation being proper in his opinion, and Kotak Securities on the basis of parameters like customer are ICICI Direct, , , Reliance Securities upon the growing capital markets in India. His father-in-law Vijay was now looking at other options, when he stumbled clients,service, some brokerage, other top trading stock broking platform houses performance, are HDFC investment Securities, offerings and various monthly plans. Going by the number of stocksMr.Govindbhai based on B. company Desai was fundamentals an active investor and management and had risen meets. from rags to riches by his disciplined investment strategies, picking his Axis Securities, MotilalOswal Securities, Karvy Stock Broking, India Info line Ltd. and SBICAP Securities. Discount brokers limit He even served as the President of Bombay Stock Exchange from themselves to execution of trades on their platforms at reduced 1991-1995. He explained the technicalities of the stock-broking commissions. They do not offer other services like personal business and advised Vijay to start with one. Backed by a mentor consultations, advice, research, tax planning, etc. which full this time, Vijay took the opportunity and established Tracom service brokers provide. Most discount brokers operate online StockFinancial Brokers Services Pvt. Ltd. in Sector 1995 in Ahmedabad. andICICI have Direct minimal branches. ICICI Direct is a part of ICICI Securities and offers trading companies, insurance companies and capital markets. Although The financial services sector consists of non-banking financial and investment services. It has a membership of BSE and NSE. It the ratio of India’s Gross domestic savings to Gross domestic provides an opportunity to invest in multiple products comprising product has remained above 30% since 2004, about 95% of the partof equity, of ICICI derivatives, group which currency, has a mutualbank, life fund, insurance insurance and policies, general household savings are deposited with the banks and the balance fixed deposits, etc. The expanded portfolio is possible as it is a in other financial assets (IBEF Report on Financial Services, June schemes2018). However, is touted the to be asset among management the fastest industry growing with industries an AUM in customer-friendly.insurance company Some in its of bouquet the limitations of businesses. are that Moreover, commodities the (asset under management) of Rs. 21.36 lakh crores in cannotintegration be oftraded banking, through broking this and platform demat accountsand the makebrokerages it very athe transitioning world. This growthfrom a bank-basedalso trickles economydown to theto arevenues market-based of the destination for retail as well as institutional clients. stock broking firms as allied service providers. Moreover, with are comparatively on the higher end. However, it is a favored

Citation: Shahir B, Amola B Page 2 of 5 : 1-5. (2019) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Int J Fam Busi Manag 3(3) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Copyright: © 2019 Shahir B, et al.

ShareKhan

ShareKhan carries an experience of eighteen years in stock function, Mrs. Amita Shah heads the human resource department, Mr. Anuj Shah looks after business operations and development base of 1.7 million customers, it easily features in the top list of and Parthiv’s responsibilities are towards sales and marketing. broking and with assets worth Rs. 46,900 crores and a customer Tracom has a dedicated team of eleven members, working in primarily five major departments namely Accounts, Compliance stock brokers in India. It has a membership of BSE, NSE, MSEI distribution. and Trading, Demat and Business Development & other products (Metropolitan Stock Exchange of India Ltd.) and MCX (); and provides a gamut of products and services including trading in equity, derivatives, currency, Tracom primarily serves retail clients, which are further classified into High Net-worth Individuals (HNIs) and other ShareKhanmutual funds, allows bonds, the customers IPO, depository to trade services online as in well addition as using to portfolio management services for retail and institutional clients. small investors. With the help of in-depth research and analysis, Tracom is able to provide customized solutions to its clients for mobile application. Moreover, they also provide online and investment needs as well as speculative purposes. Tracom has classroom training to investors. Although, the brokerage slabs also invested in state of art IT infrastructure for its front-end and can be selected as per the customer requirements, the fees are backThe officenext work, generation which helps in toTracom contain the overheads. higherAngel asBroking compared to flat fee brokers.

immenseParthiv, interest the younger in sibling was ironically had grown pursuing up listening science stream to the Established in 1987, Angel broking is one of the leading discussions of his family business. An average student with stock broking and wealth management firms in India. With a membership of NSE, BSE, commodity exchanges like MCX and in high school. Unable to get good grades in Class XII, his pursuit NCDEX (National Commodity & Derivatives Exchange Ltd.), the of Engineering was only possible on an NRI (quota reserved for company offers an extensive range of financial services. The ignoringNon-resident what Indian) others hadseat, to which say and meant sold spending some topnotch an enormous shares company focuses on retail segment and offers a host of customized amount as tuition fees. Mr. Vijay advised him to follow his interest, advisory services with the help of advanced technology. The company offers trading facilities across devices with a single at rock-bottom prices for the required funding. Parthiv still takes access to the leading equity and commodity stock exchanges this incident as his first learning on capital markets, that equity of the country and provision of tie-ups of trading accounts to hisinvestments graduation. sold The in atrend hurry of never Telecom payoff. was But picking this incidentup and daysalso popularAbout privateTracom banks. Stock Brokers Private Ltd triggered a lot of sincerity in Parthiv and he performed well in

where data would prevail over voice were near, so Parthiv AfterTracom obtaining was the established corporate withmembership the objective of NSE of (Cash providing and landed up taking his Masters degree in Telecommunication quality stock-broking services to create wealth for its customers. Management from USA. Having a natural flair for business, he offers;ended upone taking from majoritySprint, which electives was ofa well-established Management as opposedTelecom Derivatives segment), Tracom officially commenced its operations to Engineering. For his final placement, he received two brilliant from Jan. 1, 1996. Initially, Tracom focused on equity trading and up and trying to make its mark in the Telecom market. A lot of revenues came through the brokerage route. Over a period of player and the other, was from Mobile Access, which was a start- accesstime, by to acquiring IPO subscriptions. membership The ofrecent NSDL, addition the services to the expanded portfolio to opening of Demat accounts of the customers and providing hepeople applied advised one ofhim them to take for buildingup the offer his career.from Sprint Warren looking Buffett, at the brand value, but he was aware of some investment rules and enhancingis advising wealthand facilitating creation investment and satisfaction in mutual for all funds. its customers, While the vision of Tracom is to be a favored financial services organization, the Investment Guru insists on being wary of the herd mentality and doing exactly the opposite of the masses. Parthiv took up the investors, associates and employees; the mission statement offer from Mobile Access and within six months in late 2007, USA highlights the commitment of the company to drive excellence was hit by a severe financial crisis of Sub-prime loans given for through improvement in its products, services and technology. mortgaged assets. The country’s financial system crumbled and While the stock broking domain world over is brewing with the severe impact led to a lot of retrenchment with Sprint lying transactionsscams and stories so as to of sustain fraud andlong-term fly-by-night relationships, operators, team Tracom work, off around 10,000 employees. Mobile Access however, did not upholds values of complete transparency and integrity in its fire any employee as they worked on optimal resources. Parthiv satisfaction. The Board of Directors at Tracom comprises mainly observed the start-up culture carefully and noticed that even focus on client growth, giving time-bound results and customer in adversity, with the sales dipping and funding crisis, because the expenses were on the lower end, the firm could break-even of the family members; Mr. Govindbhai B. Desai, Mr. Vijay Shah, operationally. As there were no profits, ESOPs were awarded to Mrs. Amita Shah, Mr. Anuj Shahand Mr. Parthiv Shah. Currently, retain talent. The main objective was to garner a decent market Mr. Vijay Shah heads the equity research and share and then sell for a good value to a larger player. This was Citation: Shahir B, Amola B Page 3 of 5 : 1-5. (2019) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Int J Fam Busi Manag 3(3) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Copyright: © 2019 Shahir B, et al.

encouraging them to share their feedback about the strengths a typical story of start-ups everywhere. Working in a start-up andneeds. weaknesses Parthiv started of their interacting relationship with with the Tracom. existing At customers the same gave the much needed exposure to all functions of a business and for an aspiring entrepreneur like Parthiv, it was a great source of value-addition. Parthiv had also realized the importance of helpedtime, he him did in a randomdoing a competitormarket survey analysis on investors as well. Next,who werehe knew not networking early on. Inspite of being a radio-frequency engineer, thathis clients, the internal to find stakeholders out what they were valued. as important This and as otherthe external inputs gregarioushe used to type, attend he quarterly interacted meetings with a lot of of the sales company, and marketing so as to ones. So, in order to reduce the power distance and satisfy the know the general market trend and company’s vision. Being the people who were closest to his clients, he started establishing know, about two years later he would be heading the Sales and rapport with his internal staff. These exercises helped him bring people and tried to gain knowledge on that front. Little did he about reforms in his business. Firstly, the notion that they were one-self brought him back to India and his family business of Marketing team of Tracom. But the idea of sweating it out for incomeonly stock securities brokers and focused IPO subscriptions. on equity trading Further, had the to mutualbe changed. fund stock broking. Stock broking was not an alien concept for Parthiv. He introduced service extensions like investments in fixed Although he had no formal education on the investment side, during his engineering internship in Mumbai, he had stayed with market was already climbing its way up in the list of investible his maternal grandfather, whose current portfolio was worth Rs. instruments. Parthiv convinced his father that mutual fund was reading100 crores. and Parthiv absorbing while information helping his manifested grandfather in arrange the Director’s all the going to be the preferred investment avenue and although late, report,annual reportsmanagement had got reports, enticed etc. by theThe front annual cover reports and had made started him they should not miss the bandwagon. Moreover, mutual funds understand the management side of the business and he had would serve as benchmark returns for measuring progress in pure equity investment returns. In hindsight, the mutual fund business has reaped positive cash-flows and it is estimated that developed his insights in investment having read around 200 odd emergeby 2020, as the wealth revenues managers from mutual and propelled fund would their surpass growth their in core the pickingannual reports. up the Fortune His love 50 for companies. stock markets But andthe Sub-prime equity investments crisis hit revenues of equity broking. The new products helped Tracom was evident when he invested his entire savings in US in equities, clientssector. Further,and Tracom Parthiv still noticed had a longthat technologyway to go in was this playing respect. a very So, histhe fatherUS markets, whether and they his USD were 20,000 in the portfolio right business. was reduced His father, to USD a significant role in providing transactional data needed by their 8000 in a matter of few minutes. Depressed, he had questioned real-time information about markets and client portfolios on the mobileas a first phones. step they This purchased software softwaremade uploading called M-Profit trading whichbills easier gave man of worldly experience had told him to have a longish view. He had advised Parthiv not only to hold on, but to invest some more moneyat this bottom, to his portfolio, if he believed the and at any point of time, the clients could view their portfolio, the companies to be fundamentally strong. With this advice put into gains or losses and other relevant details. This solicited a very keenpractice, interest Parthiv in fundamental ended up with analysis. two things; an 18% CAGR two positive feedback from the clients. Next, to give impetus to the years later, when he squared off his positions in the market and a tobusiness, offer a salaryParthiv which initiated would recruitment be higher forthan Business that of some development existing employeesprofile. To attractworking the with best Tracomtalent, he from realized the thatlast heten would years. have His Parthiv joined Tracom in November 2010 and started with the most basic tasks like writing cheques, meeting clients and father advised him to be careful as this could create some issues depositing their cheques in bank and so on. He could feel that the owners hesitate to do. He called on the existing employees and culture which he had witnessed. The staff was small in number on the work-front. So, Parthiv did what most family business office culture in India was quite different from the informal US fetch a higher salary but at the same time, the pay would be asked them to work on business development side, which would and the hierarchy was not very tall, and yet the power distance could be felt. Six months in business, Parthiv had lost all his variable subject to achieving the targets. This candid offer led managingexcitement other’s of joining wealth his was family another. business The Indian and his economy passion was of Asto aa positive matter workof fact, environment to boost professionalism, and smooth sailing plans for to the induct new affectedequity investments. by the general Investing recession your spreadown wealth worldwide was one and thing people and twobusiness independent development directors officers on as the well board as for were the management. in process. This would make management meetings more formal and the were wary of investing in equities. Due to this reason, the existing existing family members functioning as directors would also broking revenues were waning and new customers were out of bounds. Moreover, the general perception in the market was the opportunity to get honest feedback from the stakeholders. get a fresh perspective. Moreover, as owners they did not have that stock brokers were thieves and served only their purpose. Had Parthiv not been passionate about investment in stock and feedback mechanism. Bringing in independent directors would ensure a proper review markets, he would have left his business for good. But he decided to turn the tables. His first learning from marketing course in management was to “Know your Customer” and identify his Citation: Shahir B, Amola B Page 4 of 5 : 1-5. (2019) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Int J Fam Busi Manag 3(3) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Copyright: © 2019 Shahir B, et al.

The Present

insteadthe size isof restrictedexpanding due either to paucity become of fundsstagnant and orhence, are thediluted. role of the next generation is not clearly defined. Hence, most of them Parthiv had started appearing in media channels like CNBC, BTVI Reuters (formerly Bloomberg), Sandesh TV, GSTV; giving responsibilities sorted out and the clear goal was to scale up the This had been the best way to promote their brand at low cost. At Tracom, however, all the three family members had their his views on market movements, selective stocks, upcoming IPOs. business. But, they also knew that they were not going to have a Media publicity actually worked as pull strategy, as customers second chance at the offer received from the large stock broking came asking for the guy who appears on television regularly. company.References The valuation was perfect and it was now or never. There were some customers who also questioned on the higher 1. Chadha S. Number of super-rich in India will double in 10 years. 2014. rate of brokerage charged by Tracom and tried to squeeze out 2. on the brokerage commissions. Parthiv had seen some stock demata ccounts. 2018. different approach. He would call for tea for the customer and Mascarenhas R. The call of the market: Investors open record no. of startbroking explaining companies the rationale driving such behind customers the higher out, costs. but He he would had a 3.

Press Trust of India, Mumbai. Investor accounts in NSDL, CDSL past records with other small and large broking companies, to 4. https://www.angelbroking.com then compare their revenue structure, portfolio churning and recorded at 2.5 crore. 2016 5. www.chittorgarh.com/stockbroker a few customers. put his case forward. This approach had helped him acquire quite http://www.icicidirect.com 7. 6. 8. www.sharekhan.com Tracom was a debt-free and investment rich company and www.sebi.gov.in www.topsharebrokers.com/category/best-brokers-by-lowest- could survive without additional brokerage revenues. But, had the necessary reforms for scaling up. In typical family businesses, brokerage-and-transaction-charges/ the owners been so complacent, they would not have introduced 9.

Citation: Shahir B, Amola B Page 5 of 5 : 1-5. (2019) Managing a growing Family Business: A Case of Tracom Stock Brokers Pvt. Ltd. Int J Fam Busi Manag 3(3)