Banking on a former fighter jet pilot

He knows what it feels like to be in the superfast lane because he’s trained at the National Defence Academy to fly airforce jets. From the sky to come down to terra firma Abhay Aima, Country Head of Equities at HDFC Bank made the transition pretty smoothly. He smoothly put across his capability to handle an aircraft, with the responsibility being his alone and if he could do that, he could certainly take care of banking!

He admits he told Jerry Rao this, when he was looking to hire people to work at Citibank. Abhay says that convincing Jerry to give him a job was important because even in then, people with MBA degrees were preferred and he just had an arts degree from Jawaharlal Nehru University, JNU, and ofcourse his NDA experience.

He recalled, "What I asked Jerry was who is more conservative - the government of India or you? He said well it is the government of India, we are an American organisation. Now, in the airforce, you actually sign off for the aircraft and technically not even the Chief of Air Staff can tell you what to do because you are in command and that's the example I gave him."

"I said I went solo after 11 hours and the government of India entrusted me the property of a multimillion dollar aircraft. So after three-months of training in banking you should be, if you are not as conservative as them, you should be able to entrust me with banking."

After Citibank, he joined an organization that had just been started by Pradip Shah, Crisil. He explained, "I thought, if I can do that, which is the highest form of analysis, then I don't think people should ever raise the question as to if I need a management degree?"

But Citibank called him back and he did go back. He candidly admits that his knowledge of Dalal Street was not up to par and he didn’t know how to read balancesheets. He did have to lend money against stocks, so he thought he needed to bone up on this.

He elaborated, "I guess I learnt from people, I think I was the first banker who actually used to go and visit people in the stock exchange and asked them do you want a loan. In those days, it wasn't the done thing, I mean a loan was a very coveted kind of thing."

"While its got to do with fundamentals and financials, I think investing has also got to do with basic common sense. I think it's got to do with human psychology. I think it has got to do with understanding the environment because anything that you are discounting in the future - by definition you can't have a hard and fast rule."

"So there is no academic qualifications that can really make you smart (about stocks), otherwise all scientists or analysts in the world would have been brilliant stock pickers.” At Citibank, he worked in the portfolio management, PM, division, where a part was allocated to equities. After the PM division was stopped, he moved to work for the Ruias briefly. They were staring a company called Insec and there was supposed to be a tie-up with an international organisation, which didn't happen."

"Since that didn't work out, there were various options, HDFC Bank had just started and the comfort level was pretty high in HDFC bank because most of the people that were there, I had at some time or the other, worked with in Citibank."

In 1995, HDFC Bank "recruited me and I think the position came later on. I didn't even have a cabin - it was a shot in the dark - we had a tie-up with a British bank and we thought of floating an AMC, doing private banking etc. There were various options and that's where I started off."

His job at HDFC Bank was a vague in the beginning. He said, "NatWest Bank was the bank in London and we worked with them to try to set-up this division but there was a proprietary desk which was a small piece of HDFC Bank, which I was to look at. I, at that point started developing, probably for the first time in India, the concept of advisory wealth management or private banking."

He said it’s easy to learn about numbers if you have the head for it but "the most important area was understanding the human behaviour or the psychology behind how people operated in the market." At HDFC Bank, he looks after the proprietary desk, which is a small part of the business. He also looks after third party distribution, ie. distributing all non-banking products - insurance, mutual funds etc. Then there is the private banking or wealth management department, which he has to manage.

Learning from his own experience, he now gives everyone a chance to prove themselves and not just the people with MBA degrees. He explained, "What I look for is, as a human being, how is he? What is his way of thinking? How will he deal with simple things in life? I believe, if you do simple things to perfection, brilliance will come on its own. But if you are brilliant and don't do the basics properly, then that brilliance is of very little use."

His job at HDFC Bank was a vague in the beginning. He said, "NatWest Bank was the bank in London and we worked with them to try to set-up this division but there was a proprietary desk which was a small piece of HDFC Bank, which I was to look at. I, at that point started developing, probably for the first time in India, the concept of advisory wealth management or private banking."

He said it’s easy to learn about numbers if you have the head for it but "the most important area was understanding the human behaviour or the psychology behind how people operated in the market." At HDFC Bank, he looks after the proprietary desk, which is a small part of the business. He also looks after third party distribution, ie. distributing all non-banking products - insurance, mutual funds etc. Then there is the private banking or wealth management department, which he has to manage.

When he’s eyeing a stock, he first looks at management and then the financials. He elaborated, "The bigger thing would be how has the management behaved over a period of time, what is their commitment? What is their shareholding? How have they done when the times have been bad?"

"Fortunately, even the newer IPOs that are coming up, have a track record as to what they have done. It's not totally greenfield, so you have a fair idea of what is happening. You have a fair idea of who the promoters are. He explained how Infosys caught his eye. "You know when the Infosys issue evolved, I remember going through the prospectus, it was sent to me by a merchant banker and I didn't know ABC of technology."

"I went through the prospectus, there was one column which was there and which said, Rs 80 lakhs allocated to employee housing. Now I said, if this is a people-based industry and the major part of this portion is allocating to housing, that was the one paragraph that made me decide that this is something that one should buy."

Abhay’s strong points remain being able to gauge the management and the way they come across in interviews and press conferences, when talking about their companies. If their body language showed confidence, then he would be inspired to look at their shares.

Has this method ever failed him? He said, "Only 20% of the time. So I have been lucky in that way. There were times, where I was totally convinced that this fellow is speaking from bottom of his heart and I realized a few years later that, that is not the case. But, I am still sticking to the theory, as long as it is in the 20:80 ratio."

On the wealth advisory services that HDFC Bank offers, there is no fixed formula. He explained, "It depends from person to person. In fact what I tell my people is that don't think you are wiz kids, who can generate higher than normal returns. If the market falls, rest assured that returns won't be high."

"But we emphasise on the fact that our job is to see he sleeps properly. If you can achieve that understanding – ie. not necessarily increasing his returns but the fact that if I can, my client can sleep more peacefully because of what I have structured for him. I think I would be successful."

He added, "What people fail to understand is, that the wealthiest of people, the best players in the stock market also have a psychological need somewhere, for which they may take a decision which is not necessarily based on pure return. I don't think life is based on pure bottomline and how much returns you generate. I think there is more to life than that."

"When people used to ask me, 'what is your idea of being rich?' My idea of being rich is when I don't have to work for money and that means that you have certain needs which need to be taken care of and after that I believe that there is something called colour of money. Money changes from time-to-time, so you can't have the same perspective on money throughout your life."

Keeping this in mind, Abhay is working towards his own goal of retiring young and vacationing three months in Goa and three months in Manali!

Written for www.moneycontrol.com