Wealth creation challenges – M/s A.N.

Gandhi
Pervin Gandhi and Sujo Thomas

n December 31, 2016, Arzan Gandhi, the proprietor of M/s A.N. Gandhi, was sitting Pervin Gandhi is an

O with one of his close associate and financial consultant, Jamshed, who had visited
him for the New Year’s celebrations. Gandhi was worried regarding the wealth
Independent Researcher
based at Ahmedabad,
India. Sujo Thomas is
creation challenges faced by him in his business. As Gandhi discussed his journey with
based at the Faculty, Amrut
Jamshed, he reflected upon how he struggled in the early years to pursue his passion Mody School of
alongside taking care of his family consisting of his wife and three children. Gandhi had Management, Ahmedabad
taken lots of risks to pursue his passion and had to set the right priorities to take his University, Ahmedabad,
business to next level. India.

The journey
When Gandhi left his corporate job in 1999, he was determined to set up his own firm
although his father was opposed to the whole idea of abandoning a well-paid corporate
career and take risks in the stock broking business. He still remembered his father’s words:
“Have you gone nuts? Do you realize you have three kids to nurture? At the age of 45, your
priority should be to secure the future of your kids rather than risking all that you have”
Gandhi realized that his entrepreneurial venture was now at a crossroad: Was it the right
decision to sacrifice a corporate career for an entrepreneurial venture? How to lay down the
right priorities and set grounds for further wealth creation? Should he scale down, sustain or
plan for the next stage of growth for his business? As he discussed with Jamshed, he had to
do a reassessment of his financial plans. His son, Sarosh and younger daughter, Friya, the
two helping hands of business had different plans. He had to sponsor his son for his post-
graduate studies at the Imperial College, London. Likewise, Friya was getting married in a
while and was planning to settle in another city. The stock broking business had its own
risks and Gandhi had to play the game carefully.

Overview of Indian stock market

The history of Indian capital market was largely bifurcated into four phases. The first phase
of Indian Capital Market dated back to First World War (1875–1919) where trading activities There is no potential conflict of
interest with respect to this
thrived but was limited to few brokers. The second phase of Indian Capital Market started case study.
when the Industrial Revolution kicked in 1920 and lasted till the Independence of India in
Disclaimer. This case is
1947. Owing to British colonization, India largely remained under developed during this intended to be used as the ba-
phase. The third phase could be reckoned till financial reforms took place in 1991. Even sis for class discussion rather
than to illustrate either effective
though India emerged as one of the major capital market of Asia, it was not integrated with or ineffective handling of a
the world until 1991. In the fourth phase, the New Economic Policy and reforms helped the management situation. The
case was compiled from pub-
Indian capital market to boost its ranking in terms of global markets. One of the benefits of lished sources.

DOI 10.1108/TCJ-03-2020-0017 VOL. 16 NO. 6 2020, pp. 703-728, © Emerald Publishing Limited, ISSN 1544-9106 j THE CASE JOURNAL j PAGE 703
 integration with the global markets was the risk sharing which had led to the lower cost of
capital.
By 2015, India stood fifth in the global market capitalization with Indian listed companies
accounted for 2.45% of the worldwide market capitalization. The market capitalization of India
was even higher than that of few developed economies. India stood 8th in the world with
respect to market capitalization to gross domestic product (GDP) and turnover ratio while it
stood 9th in terms of liquidity i.e. stock traded total value as a percent of GDP (Table 1).
Citywide percentage share in turnover of equity cash segment was interesting to observe at
the Bombay Stock Exchange (BSE) [1]. Mumbai was on the 1st position followed by
Ahmedabad on the 2nd position, leaving all other metro cities indicating huge inclination of
citizens for investment in equity and an enormous potential clientele in other metro cities like
Mumbai and Delhi. Ahmedabad Stock Exchange (ASE) [2] had posted the highest
percentage of partnership brokers (i.e. 6.6%) based on the ownership in equity cash market
and second position for proprietorship (i.e. 40.2%) across all other exchanges in India
(Figure 1). A sharp increase in portfolio managers, investment advisors and research
analysts over the past few years in India indicate the growing inclination towards financial
services as a field of profession (Table 2).

Arzan Gandhi’s early years

Arzan Gandhi was born on 26th December, 1955 in the state of Gujarat, India. Gandhi
finished his schooling from a reputed school in Ahmedabad district of Gujarat and further
completed his graduation in commerce stream. He never topped in university exams but
certainly there was something special about him. Friends were quick to notice that Gandhi
was sharp with mathematics and logical reasoning. Gandhi’s honest and mingling nature
resulted in winning him many friends who used to study and hang out together. With the
passage of time, friends started to move on; many went abroad for further studies, few
started off business on their own and some joined in corporate jobs. While there were a few,

Table 1 Comparison of selected top 15 global stock markets

Market Market
capitalization of capitalization of Stocks traded,
listed domestic listed domestic Stocks traded, Stocks traded, turnover ratio
companies companies (current total value total value (current of domestic
Economies (% of GDP) US$ Million) (% of GDP) US$ Million) shares (%)

World 96.83 61781128.75 166.02 99759985.45 162.88

Developed economies
– Germany 51.01 1715800.49 42.95 1444613.09 84.19
– United States 138.98 25067539.60 229.52 41398501.97 165.15
– Australia 88.65 1187083.45 56.05 750636.34 63.23
– Japan 111.68 4894919.12 127.11 5571527.25 113.82
Developing economies
– China 74.00 8188019.32 355.42 39326016.59 480.29
– Korea, Republic of 89.36 1231199.76 133.81 1843731.08 149.75
– Indonesia 40.99 353270.96 8.71 75045.30 21.24
– Malaysia 129.26 382976.65 37.63 111481.68 29.11
– Singapore 218.61 639955.90 67.65 198030.46 30.94
– India 72.59 1516216.71 36.96 771997.91 50.92
– United Arab Emirates 52.90 195874.11 15.55 57598.34 29.41
– Brazil 27.20 490534.11 23.28 419977.77 85.62
– Mexico 35.17 402253.28 9.06 103654.06 25.77
– Russian Federation 28.79 393237.76 8.59 117316.66 29.83
Source: Created by the case authors using World Development Indicators, accessed on February 12, 2017, http://data.worldbank.org/
data-catalog/world-development-indicators

PAGE 704 j THE CASE JOURNAL j VOL. 16 NO. 6 2020

Figure 1 Percentage of stock brokers on the basis of ownership in equity cash segment

Corporate Proprietorship Partnership

Percentage to Total Number of Brokers as on Dec 16

92.7
87.8
83.7

70.2

52.9
40.2
24.8
12.3

6.6
6.3
5.4

4.9

4.2
2.3

2.2
BSE NSE Calcutta MSEI Ahmedabad

Stock Exchanges

Source: Created by case authors using Handbook of Statistics

2016, SEBI, accessed on February 10, 2017, www.sebi.gov.in/
reports/handbook-of-statistics/may-2017/handbook-of-statistics-
2016-a-href-cms-sebi-data-attachdocs-hbs2016parti-xlsx-target-
blank-style-color-8b0101-part-1-a-andnbsp-a-href-cms-sebi-data-
attachdocs-hbs2016partii-xlsx-target-_34939.html

Table 2 SEBI Registered market intermediaries

Market Intermediaries 2010– 11 2011– 12 2012– 13 2013–14 2014–15 2015–16 Apr 15-Dec 15 Apr 16-Dec 16

Stock Exchanges (Cash Market) 19 19 19 16 15 5 5 5

Stock Exchanges
(Derivatives Market) 2 2 3 3 3 3 3 3
Stock Exchanges
(Currency Derivatives) 4 4 4 4 3 3 3 3
Stock Exchanges
(Commodity Derivatives Market) NA NA NA NA NA 12 12 12
Brokers(Cash Segment) 9,235 9,307 10,128 9,411 5,899 3,199 4,824 3,183
Corporate Brokers(Cash Segment) 4,563 4,672 5,113 4,917 3,677 2,780 3,405 2,769
Brokers(Equity Derivatives) 2,301 2,337 2,957 3,051 2,761 2,760 2,762 2,670
Brokers(Currency Derivatives) 1,894 2,173 2,330 2,395 2,404 1,985 2,408 1,985
Brokers (Commodity Derivatives) NA NA NA NA NA 295 NA 1,123
Sub-brokers(Cash Segment) 83,952 77,165 70,178 51,885 42,409 34,942 36,683 31,605
Portfolio Managers 267 250 241 212 188 204 201 217
Mutual Funds 51 49 52 50 47 48 47 45
Investment Advisors NA NA NA 129 271 427 373 518
Research Analysts NA NA NA NA 26 261 233 337
Source: Handbook of Statistics 2016, SEBI, accessed on February 10, 2017, www.sebi.gov.in/reports/handbook-of-statistics/may-2017/
handbook-of-statistics-2016-a-href-cms-sebi-data-attachdocs-hbs2016parti-xlsx-target-blank-style-color-8b0101-part-1-a-andnbsp-a-
href-cms-sebi-data-attachdocs-hbs2016partii-xlsx-target-_34939.html

VOL. 16 NO. 6 2020 j THE CASE JOURNAL j PAGE 705

 who were still wondering about the career path. Gandhi was one of them, not clear as to
how to kick start his professional career.
Gandhi’s father referred him to couple of places for job prospects and fortunately he got his
first job. He started working in a textile mill, named Advanced Mill Ahmedabad, from the
year 1976 as an apprentice and served the organization for eleven long years. He had
worked under production and operation department. He had built a good rapport with
internal as well as external stake holders of the organization. However, he also had
developed passion for driving heavy utility vehicles which helped him in developing
contacts with drivers who were associated with transport companies. Commenting on his
passion and energy in transport business, Gandhi said:
I saved every penny possible and raised finance through a bank loan to buy a truck worth ` [3]
0.125 million. On 21st of October, 1977 my networking with the suppliers helped me get the first
breakthrough. I started driving my own truck with a helper to deliver goods at various places
across the state. Although I was more passionate to start a venture of my own but I continued
working at the mill due to family commitments of a middle class household. I used to spend
almost sixteen hours a day at work, which meant that I was spending around six hours in the mill
and the remaining time on the wheels. A steady start in transport business despite limited
knowledge of the industry gave a boost to my confidence.

Gandhi also used to be closely associated with one of the finance managers, Mr. Zubin
Daruwalla at his workplace with whom he used to discuss various investment avenues
occasionally. It was a major setback for Mr Daruwalla, when the share price of one of his
major holdings of the investment portfolio, Great Eastern Shipping Company Ltd., crashed
from ` 70 per share to its face value i.e. ` 10 per share. This incident disturbed Gandhi who
witnessed the fall of a well-established company’s share price. Here is where he saw a
silver lining and decided to buy the shares of this company immediately, as he thought it
was the right time for him to enter the share market. Looking from business perspective, he
firmly believed that the right time to buy a security was when its share price would be low,
which was exactly the case. He invested 50% of the additional income accrued after
repayment of the loan installments in equity shares of Great eastern shipping company Ltd.
The entrepreneurial journey of Gandhi was not smooth. Within a span of ten months, his truck
caught fire in the month of August, 1978 but fortunately Gandhi and the helper somehow
managed to escape. This incident led to a situation where he was forced to shut down his
existing business and continue the mill job to have a steady income. His major savings were
already invested in the starting up of the venture. The balance loan repayment burden acted
like a fuel to the fire as the income from mill job was not sufficient. As if business issues were
not enough, there was a huge family pressure to settle down with a Zoroastrian [4] (Parsi) girl
from their community. Under pressure Gandhi married Shehnaz in the month of May, 1981.
Shehnaz hailed from a middle class family based in Mumbai city where she worked as a
school teacher. Shehnaz recognized the entrepreneurial zeal of her husband and firmly
backed him to realize his dreams. Gandhi with the support of his wife, gathered courage to
once again kick start his earlier business of transport and bought the second truck worth `
1.40m in the month of December, 1981 planning to start the journey afresh. The transport job
with the second truck helped for few years in generating second source of income for
Gandhi. As and when he got some savings after meeting his daily expenses, he kept on
investing in equity shares of companies of good repute mostly in small quantities. Yet again,
the road to success was not as smooth as he had thought of it to be. Reflecting on incidents
which had the capacity to radically change his way of life, Gandhi stated:
In an unfortunate incident during June 1985, my second truck met with a major accident. The truck was
old and due to this a marginal insurance claim value was received since the asset value had reduced
due to depreciation. I had to reimburse for the balance loss of truck along with goods. A day came
when, I had borrowed money from almost every friend of mine and used most of the savings to pay back
the financial burden. It was the trigger point when I decided to shut down the transport business totally. I

PAGE 706 j THE CASE JOURNAL j VOL. 16 NO. 6 2020

 realized that it was more important to know when to exit the business rather than pump in more
investment without higher returns. While it was not all hunky-dory, the shares that I purchased way back
since 1978 had shot up by more than 10 times of its purchase price by the end of 1986. This prompted
me to finally start investing in multiple smaller size portfolios for myself and family members to start slowly
generating wealth by savings through another source of income. Alongside my investments, I kept on
researching about good stocks at a discounted value. I always believed that value can never be found in
news or stock recommendations, the reason being that herd mentality completely drains out the value of
the stock. I made my notes and did my own SWOT analysis to short list the best of stocks usually with a
top down approach. Once I felt I had a list of some great value stocks that could multiply my
investments, I would discuss the same with my friends, relatives and colleagues. Some initially did not
get convinced as everyone would not be comfortable investing in value stocks, you see growth attracts
more investors but that is where value dies and so does returns. While many friends and colleagues who
invested in small quantities in the companies which I suggested, started seeing some great returns. This
even lead to a fixed Sunday meeting spot and discussion group with my friends and colleagues where I
would explain them why I opted for a certain stock over its peers and eventually this would often lead to a
brainstorming session about new and innovative investment strategy.

By this time, the mill era was almost on the verge of collapse in Ahmedabad. The recession
in the textile industry led to closing of shutters for major mills and continued thereafter
(Menon, 1984). The fortune favored in October 1987 when he got an opportunity to work
with Housing Development Finance Corporation (HDFC) in administration division and later
continued in the same job for almost thirteen years. By that time he had settled with a stable
salary from the HDFC and had an extended family with two daughters and a son. He
continued with systematic investment in equity shares of stable and sound management
companies which eventually provided him whopping returns on the investments (Table 3).
His financial condition gradually started improving both through a fixed income from the job
and a fluctuating yet fast growing income from stock market investments. Further to
generate wealth for the family, he acquired 1000 sq. feet of land in the outskirts of
Ahmedabad city in 1994. His loan application to acquire a land was sanctioned by the
HDFC bank since he was their employee and had a strong credit track record. Seeing the
appreciation gained by Arzan and those who invested initially with him, many relatives or
friends who were reluctant initially also started investing in shares of companies that Arzan
used to suggest. The biggest achievement he felt was when his friends and colleagues
started investing in the value stocks he suggested. With every passing quarter, the Sunday
meeting got even more popular among his known ones. People started trusting in his
analysis and advices and simultaneously kept gaining wealth through investment in stock
market. As they say Rome was not built in a day similar the confidence in Arzan was not

Table 3 Initial investment portfolio of Arzan Gandhi – (1976–1999)

Name of Companies Year of Investment in Secondary Market
Great Eastern Shipping Corporation Ltd. 1978
Colgate Ltd. 1979
Castrol Ltd. 1983
Hindustan Lever Ltd. (now HUL) 1980
Lakme Ltd. 1984
Larson and Toubro Ltd. 1984
TATA Motors Ltd. 1985
TATA Steel Ltd. 1989
Name of Companies Year of Investment in Primary Market
HDFC Ltd. (10 Equity shares) 1987 in Initial Public Offer at issue price of ` 185 per share
HDFC Bank Ltd. (100 Equity shares) 1995 in Initial Public Offer at issue price of ` 10 per share
Holding Period and Yield
Individual Script Investment Horizon On an average 3 to 7 years
Range of average yield 50% to 900%

Source: Compiled by case authors from interview with Mr Gandhi

VOL. 16 NO. 6 2020 j THE CASE JOURNAL j PAGE 707

 built in a day but his constant dedication and perseverance towards his interested not only
benefited him but also the people around him. As a result, local Parsi trusts and NGOs
started contacting Gandhi for the trust investments and financial queries. Over the years the
investment advices provided by Gandhi gave significant returns which led to word of mouth
marketing for Gandhi and his firm.
Moreover, an unforeseen boom in the Indian Stock Market during 1999, also led to an
incessant profit from the consistent investments over the years (Figure 2). This led to
enormous returns to others who had invested based on his advice as returns would follow
wherever value exists. Many friends, relatives and colleagues advised Arzan:
If we can gain so much just from your advice and our brokers earn, why don’t you start your own
broking house and manage our portfolios and earn for your advices? You pursue your passion
towards this field and we will make sure that all our investments would be handled by you.

This idea kept on playing in Arzan’s mind and his passion towards his investments and in turn
helping people earn from it boosted his desire to start his venture even after a failure in his
previous venture. Moreover, throughout this phase, Arzan also systematically planned the tax
liabilities and invested some proportion of profit to acquire a mansion in the heart of the city in
1997. The pursuit of passion along with earning better than current corporate job alongside
satisfaction of working as an entrepreneur, triggered the initiation of M/s A. N. Gandhi.

Setting up M/s A. N. Gandhi

It was the year, 1999 which turned out to be a crucial year for Gandhi since he left his HDFC job.
The thoughts of opening his own stock broking firm kept on hammering him and he could not
sleep peacefully. He always remembered one of his college professor’s advice – “One does not
need intelligence for creating wealth in stock market, only investment in good management scripts

Figure 2 Performance of Indian capital markets – S&P BSE SENSEX (1981–1999)

Closing Value of S&P BSE SENSEX

5005.82 *
6,000
3926.9 *

3658.98 *

5,000
3346.06

4,000
3110.49

3055.41
3085.2
2615.37

3,000
1908.85

2,000
1048.29
778.64
666.26
527.36
524.45
442.17

1,000
271.87
252.92
235.83
227.72

YEARS

Note: *Indicates the highest return generating years from Indian

capital markets
Source: Bombay Stock Exchange, accessed 24th February, 2017
www.bseindia.com/indices/IndexArchiveData.aspx

PAGE 708 j THE CASE JOURNAL j VOL. 16 NO. 6 2020

and patience were enough”. This advice predominantly engraved in his mind. He realized that his
limited experience was possibly no more a bottleneck as his knowledge driven by his passion had
already proved fruitful to him and others. In the same year, the announcement came from ASE
regarding the recruitment of new stock brokers and further regarding the allotment of membership
to those who fulfill the requirements. This boosted the hunch of Gandhi who was as such exploring
ways to start his own venture in the investment advisory business.
Although he had a heated discussion with his father, he was still determined about his
ambition. His aspiration to start an entrepreneurial venture led to the beginning of an
investment and broking firm. In 2000, he acquired the membership at the ASE [5]. The total
start-up investment around INR. 60 lacs were actually into two broad areas. Capital
investment comprised of membership fees for acquisition of trading rights at the ASE as
well as investment in fixed assets. The working capital investment mainly catered to the
maintenance of margin money [6] with the ASE and other maintenance expense. He
struggled to arrange for an office as all offices at ASE were already allotted to other
members. By the time Gandhi fixed the property issue, he realized there were much bigger
issues to address. For him to maintain the regular minimum balance with the exchange and
to generate clientele were much bigger headaches (Figure 3).
Gandhi’s dream to run an investment management firm gradually began and he also wisely
recruited staff for his office. A dedicated team of five members started supporting Gandhi
(Figure 4). He had recruited many employees who had worked with him in the textile mill and
gave them work opportunity in his new firm. This actually helped him in achieving another
milestone for his entrepreneurial venture i.e. building a good and motivated team. There were
relatives, friends, old colleagues and many other members of his Zoroastrian community as
well as other communities who backed his venture by investing through M/s A. N. Gandhi;
though in small denominations. The journey that had just commenced, caught eye balls of
almost everyone in the vicinity and eventually spread across the city. Gandhi was considered
an honest and trustworthy man in Parsi community. Gandhi’s logical and convincing advice
coupled with firm’s quality services to clients, served as a perfect launch pad for his firm to
reach new heights in stock broking business. The boom in Indian stock market was the cherry
on the cake. And further utilizing the profits generating from investments, he soon expanded
by acquiring a new office in one of the upcoming areas of the Ahmedabad city.

Shattering moments
Gandhi had to witness a devastating earthquake which shook the state of Gujarat in
January 2001 and it trampled his aspirations. He added:

Figure 3 Potential investment areas while starting M/s A. N. Gandhi

Salary Expenses
Maintenance of 11%
Margin Money
with ASE
18% Other
Maintenance
Expenses
1%

Investment in
Office Premises Membership
44% Expenses
26%

VOL. 16 NO. 6 2020 j THE CASE JOURNAL j PAGE 709

 Figure 4 M/s A. N. Gandhi – organizational structure

Anosh Gandhi (Proprietor)

• Managing Personal and clients' portfolios
• Giving advices on Personal Finance to close friends
• Getting New Clientles

Arun Parmar and Imran Shaikh (Terminal Operators)

• Managing clients' investment portfolios

Rohinton (Accountant)
• Record Keeping, Documentation and Pay-in Pay-out
settlement maintenance

Haribhai and Ajitbhai (Attendents)

• Administraive Duties

Source: Compiled by authors from interview with Mr Gandhi

The mindset of people changed drastically as their lives were at stake. Major clients refrained
from trading. It was the first time when I noticed that my firm’s bottom line showed losses. As if
this problem wasn’t enough, another major crisis knocked my door.

In March 2001, the Indian Capital Market was gravely affected by Ketan Parekh’s scam
which led the BSE SENSEX stumble from 6100 points to 3788 points. The Ketan Parekh
scam was around ` 1200 million that shook India while Calcutta Stock Exchange (CSE) went
into crisis. Due to this incident, major investors across the nation lost their lifelong savings
(Pathak, 2011). These events not only led to a deadlock in capital market but also took away
investors’ trust from capital market as an investment avenue. Commenting further on this
situation, Gandhi mentioned:
It was indeed the biggest nightmare for my business and I was not sure how to react in such
crisis situation. I failed to understand whether it was serious mistake to chase my dreams despite
being warned by well-wishers. I honestly was not sure whether I could save my firm and if so, in
what ways? I definitely had to learn my lessons through this episode and also got prepared for
the next stage.

As an aftermath of Ketan Parekh’s capital market scam, Gandhi had learnt his lessons.
Gandhi’s rags to riches story had many management lessons for those with entrepreneurial
aspirations. Commenting on this situation, Gandhi said:
The first thing I did was to rent out my second office which secured a fixed monthly income. The
next strategic move was to persuade the clients that the right time to enter was actually when
the market was down. I could not resist myself to quote Henry Buckley who was apt to say that
‘Save a part of your income and begin now, for the man with a surplus controls circumstances
and the man without a surplus is controlled by circumstances’. I started sharing my own
experiences of gaining handsome returns by capitalizing on such market situations. I gave
advices to those who wanted to sell off their existing stocks due to the fear of booking further
loss. I had to counsel my clients several times clarifying why one should not panic while investing
when the market was bearish. I firmly believed that both bearish and bullish trends were part of

PAGE 710 j THE CASE JOURNAL j VOL. 16 NO. 6 2020

 any market and a smart investor should actually average out the purchase price by acquiring
shares when prices are at rock bottom.

Looking for the silver lining

Although Ketan Parekh’s scam of 2001 turned out to be a nightmare for millions of
investors, Gandhi, in the midst of despair spotted an opportunity. Securities and
Exchange Board of India (SEBI) realized the gaps in the system and introduced radical
reforms in the Indian Capital Market so as to boost investors’ confidence. The immediate
impact of the SEBI measures made the trading and settlement system more transparent.
Gandhi found that it led to influx of investors which included first timers as well. He saw
the opportunity here. Indian stock market actually became a lucrative area to study and
invest for all budding aspirants. Gandhi’s firm had greater number of clients than before,
it was not because of SEBI’s new regulations but because of his strong reputation in the
market. This was again the turnaround for M/s A. N. Gandhi. Commenting on this
situation, Gandhi stated:
A number of people from different communities approached me for portfolio management and
wealth creation. I started observing the trend where many investors showed complete faith in my
firm and left all the portfolio management decisions to me. One of the foremost reasons was the
integrity exhibited by my team. For instance, I would never sell the entire investment of the client
at one go, even though that might be more beneficial to me. A gradual sell of investment is
always better for the client so that they can get the advantage of price appreciation. Most of the
clients just observed the operations on day one and then mostly offered me to handle the entire
portfolio. My business worked on trust and patience. One satisfied client in your business would
not only come again but would repeatedly bring more clients. I had built my business on a set of
personal values which I was unwilling to compromise even under the most terrible
circumstances.

The positive wave in the market, post SEBI reforms had helped him to sweep the
previous deadlock rapidly and stock market slowly touched to new heights breaking all
the previous peaks (Pathak, 2011). Gandhi also became a co-member of Bombay
Stock Exchange (BSE) [7] in 2003. Just before the global recession of 2008 hit the
world hard, he had gained heavily on his own and clients’ systematic investments from
the year 2002 to 2007. The global financial meltdown in the year 2008 did not spare the
Indian stock market. The Sensex crashed by nearly 52% compared to the year 2007.
Gandhi’s firm had to bear grave consequences of drastic reduction in revenue in form
of brokerage. Gandhi, through referrals started targeting non-resident Indian (NRI)
clients with limited success. Gandhi became a co-member in National Stock Exchange
(NSE) in 2009. By the end of 2009, Indian capital market recovered up to 81% [8]
Figure 5).

Role of family in business

Things got better when rest of the family contributed to the family business. The children
in the family grew up learning from their father’s motivating journey. Most of the critical
matters got discussed at the dining area where children got the freedom to express their
opinions. This not only increased kid’s inclination towards finance and importance of
getting financially independent which made them more responsible. The liberty of
pursuing one’s own choice of career also made the children excel in their respective
careers. The eldest daughter, Kaizeen entered banking industry. It was January 2010,
that the youngest daughter, Friya, post completion of her chartered accountancy course
joined the father’s business. Her interest for finance, discipline knowledge coupled with
guidance from Gandhi’s experiences proved to be a strong helping hand for the family
business. They started giving complementary tax planning advices to old clients in

VOL. 16 NO. 6 2020 j THE CASE JOURNAL j PAGE 711

 Figure 5 Performance of Indian capital markets – S&P BSE SENSEX (1999–2016)

Closing Value of S&P BSE SENSEX

27499.42*

26626.46
26117.54
20509.09*
20286.99*
30,000

21170.68
19426.71
17464.81
25,000

15454.92
13786.91
20,000

9647.31
9397.93
5005.82 *
15,000

6602.69
5838.96
3972.12

3377.28
3262.33
10,000

5,000

YEARS

Note: *Indicates the highest return generating years from Indian

capital markets
Source: Bombay Stock Exchange, accessed 24th February, 2017,
www.bseindia.com/indices/IndexArchiveData.aspx

addition to investment advices. This helped in building further trust and reliance of the
clients for managing their finances to generate wealth. It’s only the word of mouth from
happy clients kept bringing new clients. Gradually with the family support, the client pool
reached to record breaking number having investors from all professions to varied
income group. Many clients left complete portfolio management decisions on Gandhi as
a result his honest and foresighted advices. However, it was majorly dominated by the
senior people who knew Gandhi from his earlier days. Following his sister, the son,
Sarosh also joined the firm in 2012. The dining area discussions became the prime
reason for cultivating his interest towards financial markets. Along with pursuing his
graduation in mechanical engineering, he kept coming and observing the operations of
the firm along with frequency of trades by existing clients. Soon he identified two
loopholes in the way current business operations were running. Firstly, many
documentation works were also done manually since inception of the firm. With his
inclination towards finance and accuracy in computers, he helped father in digitalizing
major work and streamlining the business operations leading to higher efficiency.
Secondly, he prepared frequency based categorization of clients so the investment
advisory follow up became more concentrated by Gandhi resulting into boosting revenue
from regular clients. The firm got a strong trio with a reliable and consistent team. They
also started many clients with systematic investments every month based on their
advices which also helped in raising the performance though small in volume but with
consistent frequency. The trio went on to take the business to greater heights while
helping Gandhi to achieve more milestones in creating wealth (Figures 6 and 7).
Recalling his various wealth creation milestones and sharing his lessons from experiences,
Gandhi said:
My very important observation for wealth creation during the journey was not to put all eggs in
one basket and to always have more than one source of income though another source can be
small in denomination. For better long term capital and wealth appreciation, regular assessment

PAGE 712 j THE CASE JOURNAL j VOL. 16 NO. 6 2020

Figure 6 Wealth creation by Arzan Gandhi for self and family

400

350

300
₹ IN MILLION
250

200

150

100

50

0
A N Gandhi Other Movable
Real Estate Investments
& firm Incomes Property
Sources of Wealth 180 340 50 20 7.5

Source: Compiled by authors using (a) firm’s records and (b)

interview with Mr. Gandhi; (Valuation as on December 31st
2016)

Figure 7 Wealth creation milestones for Arzan Gandhi

2016
•Friya
leaving
2009 - as
2012 getting
•Global merried
2002- financial •Sarosh
2008 meltdow leaving
2001 n for
•Tapping
•Gujarat's maximu •Entry of London
2000 Earthqua m returns Friya & •M/s. A.
ke from Sarosh N.
•Strating •Ketan investme Gandhi??
A. N. •Sale of
1994 - Parekh's nt and office &
Gandhi & Scam regular
1997 Firm construct
•Starting churning ion of
1985 - •Huge •Buying another of farm
1987 returns office for source of portfolio house
1981 from investmen income - •Global
•Got merried •2nd truck Equity t from Rent Financial
to Shehnaz met with and additional
1978 accident from Melt-
•Alongwith buying returns office down
•First & land
mill job, business
1976 - investment restarted from the
in stock closed profits
1977 transport permane
market business •Very
•First Job •1st Truck ntly
in cotton with 2nd high
caught fired truck •New Job returns
mill so closed at HDFC and
•Starting transport buying a
first business mention
Entrepre
neurial
Venture

Source: Compiled by case authors

and churning of the portfolio, in aliment of goal, was a must. Once targeted returns were
achieved, I shuffled proportionate investment into most appropriate investment avenue at that
point of time. Long term (at least 20 to 25 years) investments timeline in companies, having good
history of cash and non-cash dividend coupled with good management, yielded astounding
returns (Figures 8 and 9). Real estate was booming and reaching new heights, Gandhi though

VOL. 16 NO. 6 2020 j THE CASE JOURNAL j PAGE 713

 Figure 8 Capital Appreciation in equity share of HDFC LTD. through bonus issue and split

2016 - MPS*
2010 - Stock Split of HDFC
2002 - Bonus • New Face Value Ltd.
Issue in the ratio ₹ 2 per share
of 1 : 1 • ₹ 1262.45
1999 - Stock Split per share
• New Face Value ₹ 10
per share
1987- IPO
• Face Value ₹ 100, Issue
Price, ₹ 185 per share

Notes: *MPS = Market price per share in ₹ per share

Source: Compiled by the authors using (a) The Economic Times Market, accessed 27th
February, 2017, http://economictimes.indiatimes.com/housing-development-finance-
corporation-ltd/infocompanybonus/companyid-13640.cms; (b) Sify Finance, accessed 27th
February, 2017, http://www.sify.com/finance/stockpricequote/Housing_Development_Finance
_Corporation_Ltd-HDFC/capitalstructure.html

Figure 9 Capital appreciation in equity share of HDFC BANK LTD. through bonus issue
and split

2016
• MPS of HDFC Bank
2011 - Stock splits Ltd. ₹ 1204 per share
• New Face Value ₹ 2 per
share

1995 - IPO
• Face Value ₹ 10, Issue
Price ₹ 10 per share

Source: Compiled by the authors using The Economic Times Market, accessed 27th February,
2017, http://economictimes.indiatimes.com/hdfc-bank-ltd/infocompanysplits/companyid-9195.
cms

PAGE 714 j THE CASE JOURNAL j VOL. 16 NO. 6 2020

 there wasn’t need of immediate cash, sold of his rented office at four times appreciated value in
2010. He used that sale proceeds proportionately into constructing another lavish farm house.

M/s A.N. Gandhi – looking forward

While in the past Gandhi had a great deal of experiences, there were few hurdles that had
cropped up in the present. Commenting on same, Gandhi said:
The growth of the firm had gone stagnant and there was a problem of succession planning. At an
age of 61, my family members who were supporting me until now in my business were settling
down. The role of my family in my business was crucial. Kaizeen got married and settled in
another city. Friya was going to get married in a while. Sarosh was moving to Imperial College
London for further studies. He was keener on setting his professional career in abroad. The
marriage as well as sponsoring college education required additional funding. Moreover, I had
to pay attention towards financing my own future. Sarosh’s inclination towards settling his
professional career abroad and presence of fierce competition in investment advisors and
broking business had left me perplexed. I was not interested much in scaling down my business
unless there was no option left. I intend to expand my firm but was somehow not able to create
additional value. One of the challenges was that I hardly promoted my services and I believed
that a lot more could be done on this front. I had not reached an optimal level in my portfolio to
feel completely secured with retirement. I had to do meticulous planning for future to pursue my
entrepreneurial life ahead.

Gandhi was finding it very challenging to persuade the new generation of clients. It was
getting more difficult to sell his idea to the new clients. Especially in a catch 22 situation,
when on one hand, clients hardly had knowledge about investments and wanted to double
money immediately and on the other hand, it was difficult for them to digest the patience
and long term investment horizon perspective provided by Gandhi. While it was turning out
to be a million dollar challenge for Gandhi to convince his clientele, it was equally
challenging for him to take the firm to new heights after all these years.
Gandhi felt perplexed and tensed as he revisited his portfolio to monitor progress. Gandhi
had to set the right priorities and had to plan for tougher times. Gandhi had to take a closer
examination on other avenues of wealth creation. Subsequently, he had to scrutinize further
and settle on what made the most sense in the stock market. Waiting for the New Year
celebrations to start, Gandhi sat on the couch with Jamshed and sipped a cup of tea
looking outside the window discussing on how to get better equipped for future.

Notes
1. Bombay Stock Exchange is Asia’s first and the fastest Stock Exchange in world and is one of
India’s leading exchange groups.
2. Ahmedabad Stock Exchange Limited is based in Ahmedabad and is the second oldest national
equities exchange of India.
3. ` = INR = Indian rupee; all currency amounts are in ` unless otherwise specified; USD 1 = ` 4.76 on
June 6, 1966; USD 1 = ` 8.39 in 1975; USD 1 = ` 67.95 in 31 December, 2016
4. Zoroastrianism is one of the world’s oldest religions founded by the Prophet Asho Zarathustra in
ancient Iran. One of the communities of Zoroastrianism is called Parsi.
5. ASE was later converted into ASE Capital Markets Limited (ACML) and the members of ASE have
been made the sub-members (co-members) of BSE and NSE also, in 2000. With this the members
of ASE can also trade for shares of companies listed at BSE and NSE for themselves as well as for
clients.
6. Margin money refers to the amount maintained by the member of an exchange at the respective
exchange to avail the limit of trading volume accordingly. Normally, a member of an exchange in
India can trade up to 4 to 5 times the margin kept at the exchange based on the exchange (ASE,
BSE or NSE, etc.).

VOL. 16 NO. 6 2020 j THE CASE JOURNAL j PAGE 715

 7. Bombay Stock Exchange is Asia’s first and the fastest Stock Exchange in world and is one of
India’s leading exchange groups.
8. National Stock Exchange is the largest stock exchange in India and fourth largest in world as per
World Federation of Exchanges (WFE).

References
Menon, R. (1984), “Recession in Gujarat textile industry reaches crisis proportions”, available at: www.
indiatoday.in/magazine/economy/story/19840229-recession-in-gujarat-textile-industry-reaches-crisis-
proportions-802839-1984-02-29 (accessed 16 October 2019),
Pathak, B.V. (2011), “Indian financial system”, Pearson Education, India.

About the authors

Pervin Gandhi is an Independent Researcher in the areas of Financial Markets, Personal
Finance, Corporate Finance and Entrepreneurship. She has over 12 years of experience in
industry and academia. She obtained PhD in Information content analysis of corporate
announcements for wealth creation in the Indian stock market.

Sujo Thomas is a Faculty (Marketing Area) at Amrut Mody School of Management,

Ahmedabad University. He has over 18 years of experience in academics and industry. He
is an avid case writer and his cases are registered with IIM Ahmedabad Case Unit,
Ahmedabad University Case Unit, The Case Center-ECCH, ET-Times Publishing Grp. He
has published in reputed journals like Journal of Marketing Communications, Journal of
Nonprofit & Public Sector Marketing, International Journal of Retail & Distribution
Management, International Review on Public & Nonprofit Marketing and South Asian
Journal of Management. Sujo Thomas is the corresponding author and can be contacted at:
sujo.thomas@ahduni.edu.in

PAGE 716 j THE CASE JOURNAL j VOL. 16 NO. 6 2020