In the dynamic world of finance, few stories are as compelling as the emergence of independent asset servicing companies in India, which are challenging the traditional dominance of large financial institutions. Dovetail Group, founded by Dev Sampat, Mahesh Shekdar, and Vivek Singhania, underscores this paradigm shift. Their journey from seasoned employees to entrepreneurs sheds light on the burgeoning landscape of independent financial services, driven by innovation, technology, and strategic foresight.
The story of Dovetail Group’s inception in 2017 begins with the co-founders’ realisation of a market opportunity. In the Indian financial ecosystem, asset servicing functions such as custody, fund administration, and clearing were predominantly handled by large banking institutions, often entangled with their asset management and brokerage arms.
This intricate web raised concerns about conflicts of interest and data privacy for clients seeking unbiased service providers. “We saw a unique opportunity to build something independent and free from conflicts,” explains Sampat. “Our goal was always to create a firm that champions transparency and specialisation.”
In the initial phase of setting up Dovetail Group, the three founders faced the formidable task of laying a solid foundation for their independent asset servicing firm. Armed with a clear vision, they first concentrated on securing the necessary regulatory approvals, which involved meticulous adherence to financial compliance standards to ensure a seamless launch. Establishing a strong capital base was also crucial, for which they reached out to potential investors and leveraged their extensive network within the financial industry.
They recognised early on that technology would be their differentiator, so they invested in developing proprietary systems, including advanced risk management and compliance platforms tailored to the specific needs of asset managers. Equally important was assembling a team of skilled professionals who shared their passion and vision, creating a company culture focused on innovation and client-centric service. These foundational steps were critical in enabling Dovetail to navigate the complexities of the financial market landscape and position themselves as trusted pioneers in independent asset servicing.
Asset servicing
Asset servicing involves managing and administering assets, like stocks and bonds, for investors. It includes services such as custody, which is keeping these assets safe; fund administration, which means handling daily operations like accounting and reporting; and clearing and settlement, which ensures that trades are completed smoothly. These services are important because they help investors focus on making smart investment choices without worrying about the complicated technical details.
As per recent data, the total assets under custody (AUC) in the Indian market amount to $3.2 trillion. Within this figure, foreign portfolio investments (FPIs) account for approximately 29 per cent, mutual funds (MFs) contribute around 22 per cent, insurance companies represent about 15 per cent, foreign direct investments (FDI) comprise roughly 12 per cent, and alternative investment funds (AIFs) contribute just 2 per cent. Global assets under custody are projected to surpass $300 trillion, with a substantial share originating from US markets.
India currently accounts for approximately 1 per cent of global AUC, in contrast to its 4.3 per cent contribution to global market capitalisation and 3.5 per cent of global GDP in nominal terms, highlighting growth opportunities for the country. Some of the largest players in asset servicing in India include Kotak Mahindra, Citibank, Standard Chartered, and HDFC Bank. Globally, these include Bank of New York Mellon, State Street, BNP Paribas, and Northern Trust.
In India, asset servicing has mainly been handled by big banks that offer these services alongside other financial products. However, this can lead to potential conflicts of interest. For example, an asset manager at a bank might worry that their investment strategies could be shared with other parts of the bank that handle trading or wealth management. As a result, there is a growing demand for independent firms that can provide these services without such conflicts.
The market for asset servicing in India is changing quickly due to globalisation and increasing foreign investments coming into the country. Investors from around the world are attracted to India’s strong economic growth, increasing the need for transparent and efficient asset servicing. This situation creates opportunities for independent companies like Dovetail Group, which can offer customised solutions using advanced technology to make processes more transparent and efficient. Dovetail, for instance, focuses on technology to solve complex regulatory and operational issues, ensuring that clients have easy access to data and robust risk management.
Regulatory changes in India are also influencing the asset servicing industry. Organisations like the Securities and Exchange Board of India (SEBI) are working to make investing easier and more accessible. Initiatives such as the creation of frameworks for alternative investment funds (AIFs) and financial hubs like GIFT City are designed to attract more investment. These developments not only make it easier for money to come into India but also for Indian investments to go abroad, expanding the range of services needed.
Overall, the asset servicing industry in India is a mix of traditional methods and new demands for speed, independence, and innovation. Independent companies, with their focus on using modern technology and prioritising customer service, are in a good position to handle the increasing complexities of financial markets both globally and domestically. As the industry evolves, the focus will remain on transparency, following regulations, and forming strategic partnerships, all of which are crucial for the growth and maturity of India’s financial markets.
Innovation through technology
Setting itself apart from traditional players, Dovetail Group made a strategic decision to place technology at the core of its operations. From the outset, the founders understood that robust, innovative technological solutions would be essential to meet the complex and evolving demands of asset management. They developed proprietary platforms such as the Dovetail Compliance Management System and advanced real-time risk management tools, providing their clients with enhanced transparency and operational efficiency.
“Technology is our backbone and the key differentiator,” says Sampat, emphasising that “in a rapidly evolving market, being technologically adept is essential to staying ahead and providing true value.” He adds: “Our ability to create customisable solutions empowers our clients and allows us to stay nimble in adapting to market changes.”
Dovetail Group has positioned itself strategically at this intersection, playing a crucial role in facilitating global investments. Their expertise allows them to advise clients on the multifaceted regulatory and transactional landscapes that characterise cross-border investments. By offering specialised services tailored to both inbound and outbound investments, Dovetail not only fosters global financial integration but also ensures that Indian and international investors can transact with confidence. Mahesh Shekdar adds: “Our mission is to simplify complex investment processes, making global investments accessible and seamless for our clients. Bringing global markets closer to India has always been our vision, and we are committed to achieving it with excellence.”
Shekdar brings over 27 years of experience in the banking and asset management industries. Before launching Dovetail in 2017, he honed his skills at Standard Chartered and HDFC Bank, where he specialised in transaction banking and cash management. He later joined Kotak Mahindra Bank, newly transformed from an NBFC to a full-fledged bank, where he contributed to the development of its banking operations. His expertise in managing transaction banking for asset management and insurance firms has equipped him to effectively oversee Dovetail’s operations. His deep understanding of global financial markets drives the company’s strategy to facilitate seamless investments for clients.
The power of relationships
Underlying Dovetail’s rapid ascent is the strength of its relationships – both internal and external. The co-founders brought to their venture not only a wealth of experience but also a rich network of industry contacts formed during their years at major financial institutions. This network proved invaluable in the early days of Dovetail, providing crucial capital and mentorship. The continued collaboration with former employers like Kotak exemplifies the importance of trust and reputation in their industry. Furthermore, attracting investors of the calibre of Amal Parikh and the late veteran Rakesh Jhunjhunwala highlights Dovetail’s ability to build and maintain strong partnerships.
“Relationships are the lifeblood of our business,” says Sampat. “They provide the trust and credibility that are crucial in the financial sector, allowing us to grow sustainably.” With a career spanning nearly two decades in the financial services sector, Sampat began his journey at Kotak Mahindra Bank, where he played a pivotal role in establishing the bank’s custody and clearing operations.
His extensive knowledge of capital markets and asset servicing stems from his experiences in managing portfolios and leading teams. His vision for Dovetail Group is to create a trusted platform that prioritises transparency and independence in asset servicing, addressing the complexities faced by global investors in the Indian market. Sampat’s focus on leveraging technology and innovative solutions continues to drive the firm’s growth, positioning Dovetail as a key player in the evolving landscape of financial services.
Our goal was always to create a firm that champions transparency and specialisation
In India, Dovetail is regulated by SEBI (Securities Exchange Board of India), RBI (Reserve Bank of India), and in GIFT City by IFSCA (International Financial Services Centres Authority) as fund administrators. Since its inception in 2017, Dovetail Group has grown its client base to over 100 institutional investors, servicing combined asset sizes of more than $3 billion. In just 7 years, the Dovetail Group has become one of the leading independent asset servicing firms in India, managing daily transactions worth over $25 billion in notional value for derivative transactions. The firm has achieved a CAGR growth rate of 50 per cent since launching.
As Dovetail Group secures its stronghold within India, it has set its sights on expanding into international markets. Recently, the company received in-principle approval from DFSA (Dubai Financial Services Authority) to set up an office in the UAE. With plans to expand into Singapore in the coming year, Dovetail aims to increase its global reach, tapping into rising international investment flows into India. Dovetail is already on a trajectory to become a regional powerhouse. This geographic expansion is not just about extending their footprint; it’s about capturing new market opportunities and diversifying their service offerings.
The expansion into the Singapore and UAE markets represents strategic moves into areas that are pivotal to spreading financial services networks. These regions act as gateways, channeling investments into India and vice versa, aligning perfectly with Dovetail’s mission to facilitate global-to-local financial transactions. The company is targeting Rs100 crore in revenues in the coming financial year, having already achieved revenue of over Rs51 crore by H1 with a PBT (profit before tax) margin of over 50 per cent. “Our vision is to be a bridge for capital flow between key financial centres,” remarks Vivek Singhania, a co-founder of Dovetail Group.
We aim to be the go-to name for independent asset servicing, not just in India but across global financial centres
Singhania began his career at Citibank, where he co-headed custody operations in India, managing a team focused on delivering high-quality service to clients. Following his tenure at Citibank, he joined Kotak Mahindra Bank, where he was instrumental in establishing and nurturing relationships with global custodians while managing an array of institutional clients. Singhania, a qualified Chartered Accountant and Company Secretary, has navigated the complexities of the asset servicing industry.
The company aims to further enrich its suite of offerings by incorporating domestic administration services and securing custodianship in India – areas where they currently operate as clearing members, boasting transaction volumes. By adding these services, Dovetail aspires to offer a full spectrum of asset servicing solutions, cementing their position as a comprehensive partner for asset managers worldwide.
“We aim to be the go-to name for independent asset servicing, not just in India but across global financial centres. Our commitment to innovation and service quality will continue to guide us as we expand our horizons,” envisions Sampat, encapsulating Dovetail Group’s story of growth through expertise, technology, and strategic alliances.