C J George is a veteran of the stockbroking industry. From starting out as a stock analyst to building a major financial services firm, George has shaped and witnessed the evolution of India’s capital markets. Last week, he moved into the executive chairman’s role at his Kochi-headquartered Geojit Financial Services, with his son Jones George taking over as managing director.
In an interaction with TNIE, he recalls the early days of stockbroking, the challenges of building a business with little capital, and how changing market conditions opened new opportunities.
Excerpts
Can you tell us about your beginning in the stockbroking industry?
I started in 1984 as an analyst in Delhi with Batlivala & Karani, then one of India’s largest broking firms. I later moved to its Kochi office. The Cochin Stock Exchange was a small club of 10-15 members, with liquidity in only five to 10 scrips. Most of the liquidity was in the BSE, Delhi and Madras. We started providing liquidity in scrips that were not traded on the Cochin Stock Exchange. That’s how I started. I knew the importance of liquidity, and that’s what matters to investors.
Geojit happened in 1986, right?
At the time, I joined Cusat for my PhD, thinking I would leave the profession. I resigned from Batlivala & Karani. A forex broker in Cochin, Ranajit Kanjilal, who was my client, approached me about starting a venture. He had a teleprinter and a telex and told me, “You know the business.” The business did not need much capital. Around September or October 1986, the Cochin Stock Exchange was offering memberships for the first time. The market was buoyant and most of my colleagues at Batlivala & Karani took membership. I had no intention of doing so.
The application fee was Rs 2,000, which I didn’t have. On the last day, my friends convinced me to apply. I took Rs 2,000 as office loan and got the membership.
You said the stock market began picking up in 1986. What triggered it?
From my experience, the beginning of India’s liberalisation was under the Rajiv Gandhi government, when V P Singh was the finance minister. His first budget significantly reduced customs and excise duties, eased licensing, and opened up opportunities for new players. Companies could import capital goods at lower duties and expand production capacity. The impact was visible in the markets. Demand for investment and IPOs increased, corporates started doing well and a new generation of brokers emerged. Geojit, Motilal Oswal and Kotak came up around this period.
Popular perception is that liberalisation began with Manmohan Singh and P V Narasimha Rao in 1991. Are you saying it started earlier, with V P Singh?
Yes. The 1991 reforms were more extensive and were driven by a crisis, but I believe the beginning came with V P Singh’s budget. His measures were the first significant move towards reducing customs duties, easing licences and opening the economy. The 1991 reforms were, in a sense, crisis management — we were forced to reform. The groundwork had already begun in the mid-1980s. I was in the market at the time and saw the impact directly.
Why do you think V P Singh does not get enough credit for this?
The credit usually goes to Manmohan Singh because the 1991 reforms had a much greater impact. But many people in the industry would say V P Singh started the process. He was not an economist, but he had technocrats and advisers around him.
You were born into an agrarian family. Did your parents agree to you entering the stock market business?
I didn’t tell them I had started a business. Financial market salaries were high, and it was a Bombay organisation. My starting salary in 1984 was Rs 1,500, which was very good then. So I kept the business from my parents for at least two years.
Tell us about the partnership with Ranajit Kanjilal...
We started in the garage of Ranajit Kanjilal’s house. He had a teleprinter. Since forex broking is interbank, there were no individual clients — only banks. You met bank dealers at the bar in the evening (chuckles). So the garage worked. It was slightly furnished, and we started on January 1, 1987. We will be 40 years old soon.
What happened to the partnership?
After the Harshad Mehta scam (in 1992), the stockbroking business became very dull, while his forex business was doing well. He wanted to discontinue, so I took over the firm. Then the NSE came up. I retained the name Geojit (a combination of George and Ranajit) because I took over the entire firm — its assets, liabilities, and clients.
How did you survive the Harshad Mehta scam when many brokers went bankrupt?
Many of our clients lost money, and some could have defaulted. Many professionals — chartered accountants, lawyers and MBAs — entered the market after seeing Harshad Mehta and lost money. One thing that helped Geojit was that we never had proprietary exposure. We had client exposure. Our employees were also chosen primarily for their honesty, from references and because of their family background. That may be the reason we did not lose money.
Tell us about your IPO...
When NSE started offering memberships outside Mumbai in 1995, I didn’t have the money to take membership. So, I did the IPO (laughs). Our IPO was for just Rs 97 lakh, against a paid-up capital of Rs 3 crore. It was oversubscribed 15 times. KSIDC (Kerala State Industrial Development Corporation) took a 24% stake. Initially, we planned to bring in a partner from Singapore, but that did not work out. We then approached KSIDC. Its managing director, V Somasundaram, found the proposal interesting, and an independent consultant, S P Billimoria (today’s Deloitte), was appointed to assess its feasibility. By then, Geojit had survived the Harshad Mehta crisis and was standing tall. The most dynamic Amitabh Kant had taken over as KSIDC managing director and made the decision to invest. He had discretionary powers to invest up to Rs 50 lakh.
What is the KSIDC stake worth now?
KSIDC invested Rs 50 lakh for a 24% stake. The stake got diluted when we subsequently expanded our capital, with investors such as Rakesh Jhunjhunwala and BNP Paribas coming in. KSIDC also participated in the last rights issue and now holds close to 8.5%. It is worth close to Rs 200 crore, and we have paid Rs 60 crore in dividends. If someone had invested Rs 10,000 in our IPO, they would have received Rs 10 lakh in dividends, while the investment would now be worth Rs 32 lakh.
In those days, shares were in the form of physical certificates...
Yes. Every Friday, one of our employees would fly to Mumbai carrying two large sacks of physical share certificates for delivery. On Monday, the employee would return with another two sacks of certificates for delivery in Keralam. Around 10% would come back as “bad delivery”. Investors lost money, and so did we. Things changed with the arrival of depositories and the dematerialisation of share certificates.
How did investors respond to paperless or dematerialised shares?
They initially thought it was a bad idea. Everyone was used to physical certificates, which were being replaced by statements of account. Geojit, along with Kotak, Karvy, and a Chennai-based firm, took membership in the depository and began promoting demat accounts. Keralam became the first state where investors in every pin code had access to a depository participant. I remember the ICICI Bank IPO when investors had to choose between physical shares and demat shares. We persuaded Catholic Syrian Bank to apply for the demat option. It did, but when it wanted to sell the shares a year or two later, there were no buyers for demat holdings. We approached the depository for help and contacted institutions in Mumbai, including UTI, LIC and the State Bank of India. One institution was willing to buy only at a 10% discount because demat shares had little liquidity then.
How has investor behaviour changed?
Globally, markets have moved towards the gamification of trading. In Keralam, many young people who might once have been long-term investors have become traders. Transaction costs have fallen sharply, and with instant trading through mobile apps, people are tempted to buy and sell within minutes or hours. This is a global trend, not unique to Keralam or India. Keralam traditionally had many long-term investors, but instant gratification and low-cost trading have changed behaviour. Investors should remember that market investments carry risk and are not comparable to fixed deposits.
You have spoken about the risks of futures and options (F&O). Are you opposed to these products?
No. F&O began with a useful purpose — hedging risk. A ginger farmer, for instance, can use a futures contract to lock in a price for the next harvest and reduce uncertainty. An investor holding Reliance shares can buy a put option to hedge against a fall in the share price. The problem is that low transaction costs have encouraged speculation. Many trade options without holding the underlying asset and may not fully understand the risks. We offer low-cost trades for clients who want to hedge existing investments, but we have not built our business around speculative F&O trading.
What led Geojit to reduce its emphasis on F&O?
In 2015, we studied clients who traded in F&O and those who invested through SIPs between 2010 and 2015. According to our findings, all SIP investors who continued for five years made money, while 95% of retail F&O traders lost money. We cut employee incentives linked to F&O by 50% and doubled incentives for SIPs and mutual funds. Our F&O revenue fell and never returned to its earlier level. We are not a major player in that market today. It was a business decision based on what we believed would serve clients better over the long term.
Do you think more women are investing in markets?
More people are investing through SIPs and mutual funds, which is encouraging. Women, like other investors, are increasingly using digital platforms. Some have become frequent traders, but many continue to invest in a disciplined, long-term manner. The concern is that checking prices every day can tempt investors to trade repeatedly. Regular investing and a long-term approach are different from reacting to every market movement.
Geojit was an early adopter of internet and mobile trading. How do you see technology changing the business?
Investors have always faced three questions: when to invest, where to invest and how to invest? Traditionally, we addressed the “how” through branches. At our Veekshanam Road branch in Kochi, we had 35 telephone lines, but clients still struggled to get through during the first half-hour of trading. We also had NRI clients. Internet trading helped solve that problem. Technology and discount brokers have made the “how to invest” part easier. The harder questions remain: when and where to invest? Our focus is on helping clients make investment decisions and build wealth over time, rather than encouraging frequent trading.
Is financial literacy keeping pace with the growing range of market products?
There is still a need for more financial education. It is encouraging that school commerce textbooks now include lessons on the stock market. Geojit also worked with the NSE to conduct investor-awareness programmes in schools and colleges. At one point, we reached around 3,000 schools a year. Investors have to keep learning as products and markets evolve. Those who need guidance should seek appropriate advice, though people are often willing to accept advice but reluctant to pay for it.
What would you suggest to someone just starting to invest?
For someone with savings, I would suggest considering a systematic investment plan. Invest regularly and remain invested for the long term rather than react to market news or daily price movements. Compounding can be powerful. For illustration, investing Rs 10,000 a month for 50 years at an assumed annual return of 14% could help accumulate more than Rs 100 crore.
How does a traditional broker compete with discount-broking platforms?
We never saw our purpose as converting investors into traders. Our aim has been to help clients create wealth. Discount brokers have built technology-led businesses where the transaction is the end product. For us, a transaction is a means to an end — helping investors build wealth. We have clients who sold during market falls out of fear. One client invested Rs 10 crore in 2007. After the crash, it fell to around Rs 6 crore by October 2008. The client sold and withdrew the money. Such cases show how panic selling can turn a temporary fall into a realised loss. Today, investors are also exposed to a constant stream of information through digital platforms. Much of it is pushed to them rather than sought out, and can tempt them to trade more frequently.
What did Geojit learn from its association with BNP Paribas?
BNP Paribas was the world’s third-largest bank when it came in, and we operated under the co-branded name Geojit BNP Paribas. The association helped us build a national brand. BNP Paribas followed global standards and we were able to adopt many of those practices.
Has BNP Paribas fully exited the partnership?
They have reduced their stake to around 7.5%. They wanted to own the company outright and approached me, but I refused to sell. They later bought 100% of Sharekhan, which they subsequently sold to Mirae Asset.
Why did you decide to remain in Kochi when Mumbai is India’s financial capital?
That has always been a dilemma. Had Geojit operated from Mumbai, we might have grown multiple times over. But it was a personal choice. With technology, it does not matter where a business is located. Charles Schwab and E-Trade disrupted the US market from outside Wall Street, and I believed we could do something similar. We deliberately remained in Keralam. I don’t regret that decision.
Keralam has a reputation for being business-unfriendly. Do you agree?
Not at all. That is baseless. Keralam has changed completely. We have limitations such as land and power, but for our kind of business, we never had problems. Keralam was a very good ground for us. And people never understood our business (laughs).
You have said employees from outside Keralam also prefer to work here. Why?
We have many such employees. They find it easy to integrate into Keralam. I have employees from Uttar Pradesh, Andhra Pradesh and Delhi who have settled here with their families. A management trainee from Delhi recently told me how safe she feels in Kochi and that she does not want to return to Delhi.
Has Keralam’s business environment changed after the investment summits?
Keralam had signed investment agreements worth Rs 1.25 lakh crore and projects worth Rs 35,000-40,000 crore have started. The key is to be selective. We cannot compete with Tamil Nadu in every manufacturing sector. There are opportunities in IT, and in precision and value-added electronics. We should focus on industries that do not require much land or power. Keralam’s employment environment has also changed significantly. We often blame trade unions, but the situation is much better than before.
From an investor’s point of view, is this a good time to invest in the market?
I have no advice for short-term investors. Anything can happen in a short period, including geopolitical shocks such as the Iran war. Short-term investors should look at fixed income, bonds, debentures, or even gold rather than equities. They should have at least a three-year horizon. For long-term investors, I am confident there is a huge opportunity. In the short term, I would stay away from equities.
Is the India story still attractive to global investors?
Global investors are no different from retail investors when it comes to behaviour. India’s dependence on oil is a major problem and the depreciating rupee makes the market less attractive to foreign investors. If the war ends and the currency stabilises, the situation could change. Another risk is the AI trade. India has very little direct exposure to AI, so if the AI trade reverses, India could act as a hedge.
Should long-term investors use SIPs?
They can invest in instalments. Put the money in liquid funds and transfer it gradually into equities through a systematic transfer plan (STP). I think the worst is over for the markets. Indian investors are also increasingly looking at US stocks. I think that is healthy because it provides diversification and allows investors to participate in opportunities that are limited in India.
What about taxation in India?
Two things have happened in India: long-term capital gains tax has been imposed and dividends are taxed. I think it was a mistake on the part of the government. This has encouraged some people to move money abroad and become NRIs. Dubai, for instance, has attracted investors with its lower tax burden and business environment. When P Chidambaram made dividends tax-free in the 1997-98 budget, many partnerships, which were taxed at the individual level, converted into companies. That was the beginning of a corporatisation revolution in India.
TNIE team: Kiran Prakash, Rajesh Abraham, Rajesh Ravi, Anu Kuruvilla, Gopika Warrier, T P Sooraj (photos), Harikrishna B (video)