Hrishikesh Parandekar says iTrust was a nice fit with Karvy’s wealth management business.  “We met the iTrust entrepreneurs, liked the business and acquired it.”

Earlier this month, Karvy Private Wealth took over iTrust.in. In December, NetAmbit bought Rupeetalk.com. The exits have been described as not so profitable. So, has the click-and-buy model failed? The new owners have a strong offline business and were looking for a foothold in the online segment. Hrishikesh Parandekar, chief executive officer of Karvy Private Wealth, talked to Moneylife on these and related issues. Excerpts from an interview.

What was the reason to acquire iTrust? Did you also consider other websites like rupeetalk (before it was acquired) before finalizing?

iTrust has a great online space positioning, website traffic and brand recall for clients in a niche market. They have a good tax-filing tool for customers that  gives leads for financial planning business for retail investors and high networth individuals (HNIs). They developed corporate relations by signing up with human resources departments for employee tax and financial planning in several cities. The team of over 100 iTrust employees worked in an advisory role and solicited business. It has been a nice fit with our business in wealth management. No, we did not look at rupeetalk or other websites. We did not go out for competitive shopping. We met the iTrust entrepreneurs, liked the business and acquired it.

 Personal finance websites have been struggling. iTrust had also closed down its office in Mumbai. We hear that it has been not so great an exit for iTrust entrepreneurs. When will you break-even with your iTrust investment?  

I cannot speculate on why they closed the Mumbai office. We are not bothered about it. We have a good presence in Mumbai. iTrust had a good presence in Hyderabad, NCR and Bangalore. I can't comment on exit of iTrust entrepreneurs and their profitability. We have not disclosed the acquisition cost, but are happy about it. There are multiple pieces to the acquisition and hence we can't comment on break-even.

You decided to acquire iTrust instead of developing a website yourself? Is it similar to your other acquisition like the wealth management boutique, PARK Financial Advisors?

It is a question of buying a brand in a niche position versus the time that it would take to build it. We decided against doing it ourselves. We have grown inorganically through acquisitions which brought in some quality senior management. Each situation is unique and so is iTrust. We got different things from each acquisition.

The customers coming to the iTrust website would be different from the HNI clients you are servicing. Are you going to change your customer segmentation?

We will continue to serve HNI customers in three segments of family office, core wealth management, and affluent business. We took the lead for the acquisition, but there will be leads and flows for other businesses in the Karvy group. The leads that do not meet our wealth criteria will be given to other Karvy businesses like distribution for mutual funds, insurance and so on. There are over 500 points of presence for Karvy distributors that can consume the leads to close business.

Are you also interested in the lead generation business for insurance, credit card, loan and so on through the website? Will you be selling leads to a third party?

We will not monetize by selling leads to a third party. We will use it to close the sale ourselves or give it to other businesses in the Karvy group. If there is need for insurance-based financial planning we can sell it as we are insurance brokers.

How do you derive business leads from Karvy group companies?

As a matter of business practise we don't tap into the mutual fund registry data at all, even though there is no regulation. To some extent, we do take leads from the corporate registry where share owners of a corporation are recorded. The share transfer agent business of Karvy has information about corporations and its shareholders. We also get leads from Karvy broking arm that has information about demat accounts.

Who are your main competitors?  

Foreign institutions like Merrill Lynch, Citi Private Wealth, Morgan Stanley; home-grown ICICI Bank, HDFC Bank and Kotak Wealth are our competitors. At the Karvy group level, there are competitor brokers like Motilal Oswal, Religare, Indiainfoline, Anand Rathi and so on. There are multi competitors in multiple segments.

Can you give information about the number of clients, assets under management (AUM), profitability?

We have about 2,500 clients with Rs2,500 crore AUM. This is the second year of our operation and we have been profitable, but I cannot share details.— Raj Pradhan