3 legacy bankers build IBSFINtech to manage $20BN treasury marketVishal Krishna
There are 6,200-plus companies in India, with turnover in excess of $74 million, which are dependent on spreadsheets and legacy ERP systems to manage critical treasury decision-making, resulting in revenue loss due to volatility in the market.
It is not too late to become an entrepreneur, and as IBSFINtech shows, it is never too late to be curious about things either. TM Manjunath, S Sethuram and Chandra Mohan Grover are not your stereotypical 20-something entrepreneurs; they are all over 50, and have sweated it out for over three decades in a large public sector bank.
The three worked on treasury management systems that did not interact with each other. In 2008, when the world was hit by the financial meltdown, which started with the collapse of brokerage firm Lehman Brothers, a lot of companies in India had to grapple with the ramifications of having their treasury operations abroad. “Back then we realised that corporates in India had different treasury management systems that did not speak with each other, and that was when the company was born,” Chandra explains.
The company started out as a retirement project in 2008, and it became a full-fledged business by 2011. It took the founders a good four years to build the entire concept of an integrated treasury management system that tracked everything from trading bonds to forex to commodity pricing.
Corporate India throws some staggering stats. According to consulting firm Connect2India, more than a million SMEs export in this country, and each of them manage treasury operations on spreadsheets or legacy management systems that do not capture price movements in currencies, investments, bond trading and financial derivatives. The losses per company could go into millions. Less than five percent of these companies use a full-fledged treasury management system.
The market opportunity
McKinsey & Co. estimates global annual treasury operations at a $135 trillion. While the market is that big there are several companies with over $10 billion in forex exposures and are still managing forex with Excel utilities.
IBSFINtech intends to solve this with its I-ToC (Innovative Treasury on Cloud) product. Says Manjunath,
“We are working on web and mobile versions of the solution that is customisable for treasury and trade finance operations, which can be deployed modularly, or as an end-to-end product, with seamless interfacing with existing IT systems.”
The product suite can handle multi-company, locations, asset-class, forex dealers, portfolio & sub-portfolio classes by providing a single instance or a dashboard about real-time exposure for key stakeholders.
When Manjunath was building this product he had already built core banking solutions for a public sector bank in the late 80s, where he had worked and understood the need to have common dashboards for operations and risk management.
By 2013, business began to take off, and IBSFintech tied up with the largest media house in India, and one of the top three e-commerce companies to manage their treasury. Some challenges they took on with clients included dealing with manual management of treasury and hedging decisions, synchronisation between treasury and purchase department, data from multiple sources, lack of information and staggered supply.
The team solved them by implementing its system, which captured money movements on a real-time basis from multi-locations and ensured that the treasury manager did not lose money. To illustrate, say, if a product is contracted at Rs 100, the company must ensure that the currency movement does not change the price beyond a reasonable limit. Or, say, in case of a bank investing in government securities, they have to ensure that bond yields do not trade higher. If the government securities are bought at 6.4 percent then the banks must track the increase or decrease in yields, and this has a bearing on the amount of loans disbursed to corporate and retail borrowers.
IBSFINtech competes with the likes of SAP, Oracle and Microsoft. According to research firm Apps Run the World, there are several treasury and risk management solutions, and the market is expected to hit $3 billion by 2020. Currently, the leaders in treasury management are Murex and Misys. Infosys with Edgeverve also figures in the top ten. “Product companies must showcase the core value they offer to their market and must have a steady stream of clients,” says Naganand Doraswamy, founder of IdeaSpring Capital.
Since IBSFINtech spent almost six years building the product with over Rs 2 crore invested in perfecting the product, it is only taking it to market for the last 18 months. Its revenues are Rs 1 crore, and have currently signed 10 customers, with 90 deals in the pipeline. The company works on an annual licensing model with large corporates, and a pay-as-you-use model with SMBs.
“Treasury management is important more so now because Indian companies have gone global and need a single window to track all their exposures,” says V Balakrishnan, Founder of Exfinity Ventures.
But for these three ex-bankers life has sprung a new leaf and they believe they can make a dent in the financial universe. They have won four national awards and yet they remain quiet about showing off, may be it is because of their old ways “let the work speak for itself and not advertising.”