Investors want sharekhazana.com to become an integrated portal. Is that a good move? Indiainfoline's N. Jain, icicimoneymanager's M.P. Buch, and munshikaka.com's K.N. Vaidyanathan debate.

By R. Chandrasekhar

I don't believe I came all the way to Delhi for this,'' Arun Mukhi muttered under his breath, as he scanned the sprawling exhibition hall in Delhi's Pragati Maidan. Except for some college kids, no serious business visitor seemed to be around at the internet fair. The few stalls that were there seemed smaller and more empty than what had been only previous year. And, without exception, all the exhibitors seemed to be in a dark mood. ''So much like mine,'' the executive director of Mukhi Financial Services said to himself.

Only two days ago, the VC firm that had funded the 100-year-old stock advisory firm's finance portal, sharekhazana.com, had declined to invest any further. One reason why Mukhi had agreed to spend a few lakhs from the portal's fast-vanishing kitty was the hope of meeting some other VCs, or similarly distressed dotcoms for a strategic alliance. But now looking at the thin attendance at the netfest, Mukhi was beginning to regret his decision.

Just then, somebody came up from behind and put an arm around a surprised Mukhi. ''Dilton'', cried Mukhi, hugging his friend from school. ''Where on earth did you come from? I thought you were farming oysters in Hawaii,'' Mukhi joked, throwing mock punches at his friend. ''I almost did, but then I thought Bangalore was the place to be in if you wanted to sack out,'' Jyotirmoy Banerjee replied with equal humour. ''I launched two tech companies and sold them within five years of starting them. Today, I am sitting on a comfortable nest egg.'' ''May you burn in hell,'' Mukhi said with a guffaw.

After the two friends caught up on their interim past, they decided to take a coffee break. ''So, how does it feel to have retired rich?'' Mukhi asked Dilton (named so because of his nerdy brilliance). ''Couldn't be better. What about you?'' the serial entrepreneur queried. ''Couldn't be worse. Just the day before we got refused further funding.''

''But isn't your portal the pioneer in its space?'' Dilton, asked. ''Yes, we had the first- mover advantage when we started in 1996. But I'm not so sure today,'' said Mukhi.

''I also don't think any of your competitors has the kind of off-line and online integration that you have,'' said Banerjee. As Mukhi started to answer, he saw two of his senior executives enter the coffee lounge. He gestured them to join the table. ''Jyotirmoy Banerjee, my school friend and a serial entrepreneur ...Vineet Nayyar is my coo, and Pradip Joshi heads our marketing,'' Mukhi said by way of introduction.

''Now to get back to your question. In a way, sharekhazana is unique. But we are fast losing the portal's differentiating factors,'' Mukhi noted. ''We were a no-frills, plain equity trading site when we started. Then we added e-mail and chat utilities to grow a community. Today, our portal has been aped by a number of pretentious rivals.''

''I don't think our business model was wrong,'' chipped in Joshi. ''We focused on equity trading because that's what our parent company specialised in. Unlike our competitors, we also created off-line agents in 60 cities across the country as an answer to people's distrust of the net when it came to transactions.''

''Our target audience was right too,'' added Nayyar. ''Out of the 15,000 customers registered with us, more than 13,000 are in the 25-35 year age bracket, and are the cream of the consuming class. A fifth of them are women. As our ad revenues prove, that's a demographic slice that appeals to advertisers.''

''Right, guys,'' said an impatient Mukhi, ''but the fact is, if we don't change our business focus, we will not break even for the next three years. And, frankly, I don't know if the parent company can sustain us that long.''

''What do your stakeholders like VCs and advertisers feel?'' asked Banerjee.

''They want us to be a fully integrated personal finance portal,'' said Nayyar. ''That would mean we offer a range of services from stock feeds to debt instruments to personal loans, credit cards, insurance, payment of utility bills ...the works.''

''I am sure we can do that,'' Mukhi said. ''But my fear is that the market may not be large enough to justify this kind of investment. Sure there are an estimated eight million internet users in India, but how many actually want to trade online? Besides, the ad revenue will not grow in proportion to our user base. The cost of customer acquisition is too high.''

''Could the answer be in strengthening sharekhazana's non-advertising sources of revenue?'' Banerjee wondered aloud. ''If you are going to offer a whole world of content, there may be opportunities in becoming an intermediary.''

''I agree,'' said Joshi. ''We can, for example, strike deals with banks to get a commission for every customer that sharekhazana sends their way for credit cards, loans or fixed deposits.''

''It's a good idea, but I see a major problem with it,'' noted Mukhi. ''We do not own the processes that can take such transactions to their logical conclusion. Look at it this way: if an alliance partner-say, a bank-is slow in processing an application or there's a flaw in processing, the customer may decide to go offline, maybe to another bank. Worse, he may end up blaming us for the delay.''

''I see your point,'' Banerjee agreed. ''It is important that you not only choose the right products but also the right partners. The partners should enhance, and not erode, your equity.''

''That's not all,'' sighed Mukhi. ''There is a bigger risk, and one that we are not adequately equipped to face.'' The other three men at the table waited for Mukhi to go on. ''Once we become an integrated portal, the nature of competition changes dramatically,'' argued Mukhi. ''We will be up against banks and financial institutions, most of whom are already online to act as their own intermediaries. They have deep pockets and an infinitely larger base of customers, who are also loyal. Can we take them on and win?''

Nobody at the table spoke. Then Nayyar said: ''But it is clear that we need to do something to survive. The cost of strategic somnolence will be too high.''

''Nayyar is right,'' noted Banerjee. ''What's clear is that sharekhazana needs to acquire some new skills. But you need to do a lot of groundwork to figure out what your next move should be. If you come up with a good business model, maybe I could chip in with a few crores.''

Mukhi smiled at his school friend. But deep within, he still felt the end was near.

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