The earliest record of a Madras firm in dealing in corporate securities goes back to 1903 when the firm of Tod and Tod was reported to have been doing business as brokers. The firm was later listed as Scott and Tod. This firm is believed to have been carrying on business in stocks and shares well upto the cessation of the Great War in 1918. Around this time there was a second firm of brokers functioning in Madras, styled Huson and Robinson. Following the end of the War, the two firms merged into Huson, Tod & Co., became pioneers in the stock broking field, and enjoyed a virtual monopoly of the business.

2nd Line Beach in the 1920s. It was on this road that the Madras Stock Exchange was established. (Photograph: Vintage Vignettes.)

In April 1920, there were sufficient brokers in Madras to warrant the founding of a Stock Exchange. The Exchange functioned in a rented building in Broadway. In a matter of months it attracted a large number of requests for admission to membership and about 100 members were enrolled. Around 25 proved to be active.

The Exchange was trading predominantly in textile shares, shares of foreign-owned plantation companies, including rupee company shares of Ceyon, and active shares of popular companies listed on the Bombay and Calcutta Stock Exchanges. But when the initial interest in shares waned due to a general recession, the volume of business began to shrink rapidly by the middle of 1923.

The older firms, which were somewhat better established, courageously continued to carry on the trade in securities in the hope that better times would arrive sooner or later. These firms had the additional advantage of having diversified activities by way of exchange, freight, and finance broking and were, therefore, able to sustain themselves for a number of years. Nevertheless, by the beginnings of 1926, there were only two firms of brokers functioning in Madras, one European, Huson, Tod & Co., housed in the Chartered Bank Building, George Town, and the other Indian, Kothari & Sons, situated in the building occupied by the Central Bank on Broadway.

In 1934 and 1935, there was overtrading and speculation on a large scale in Government Securities as well as Corporate Securities. Many big clients of Huson, Tod & Co. could not meet their market commitments, which in turn resulted in the firm being unable to honour its market obligations. Hubert Hadow, a partner, who was on home leave in England at the time, immediately returned to Madras and offered to liquidate his assets in England – which were, in fact, beyond the jurisdiction of the Indian courts – to meet the liabilities of the company.

Eventually, Justice Mockett, in his judgement, had this to say about Hadow:

“The conduct of Mr. Hadow made a most favourable impression on the creditors – as it did on me. His conduct seems to have been a model of correctness since his firm got into difficulties, and although as a result of the order I am about to make, he must fall with the firm, losing apparently everything he has in the world, I do not think on the facts as revealed before me in this inquiry that he should be ashamed to look any man in the face.”

R.C. Paterson, an Assistant in the firm who had come to Madras in 1926, now took over the existing businesses and was encouraged by the Chartered Bank.

Paterson actively worked for the establishment of the Madras Stock Exchange. Paterson & Co. was one of the five founding members of the Exchange which was registered on August 12, 1937. The other four were Kothari’s, Dalak’s Maconoclive’s and India Brokers’.

Paterson & Co. was at the time the house brokers to most of the British companies like Binny’s, Best & Co., Crompton Engineering, Parry & Co. and Madura Mills as well as plantation companies like Pierce Leslie, Harrison Crossfield’s, and Peermade Tea. It also used to have correspondent brokers in London, Singapore, Malaysia, etc. and used to buy/sell securities in those markets on behalf of its clients. Apart from corporates, clients included royalty from the princely states of South India. Paterson & Co. was also one of the few Inter Bank Foreign Exchange Brokers in the country, a niche business catering to transactions between banks. Freight broking and dealings in commodities were smaller activities of the firm.

K.S. Vaidyanathan, who joined the firm as an Assistant in 1941, became a partner in 1947. When Paterson retired from the firm in 1951 to join Consolidated Coffee Ltd., Hadow, who had joined as a partner in 1937, and Paterson took over the business. Paterson floated the first public issue in independent India in 1948 for India Cements Ltd. and raised a substantial subscription for the company.

The 1950s and 1960s saw a number of public issues by Industrial houses in the South, such as Madras Cements. MRF, the TVS Group, and Rane Madras. Paterson played a key role in mobilising the initial share capital from the public to these companies. Other important transactions that Paterson’s assisted in were the merger of Madura Mills and J & P Coats to form Madura Coats, Best & Co. with Crompton Engineering to form Best & Crompton Ltd., and the acquisition of controlling shares in various companies by Vittal Mallya.

The 1960s and early 70s saw many plantation companies, previously owned by British planters and managed by Pierce Leslie, change hands. The acquisition of the Stanes Group by Amalgamation’s was a transaction handled by Paterson’s. K.S. Vaidyanathan himself acquired two coffee plantation companies, Ossoor Estates and Wartyhully Estates, apart from promoting Sangameshwar Coffee Estates in 1958. With controlling interest of over 5000 acres of coffee in Karnataka, his was the second largest coffee group, next only to Consolidated Coffee of which R.C. Paterson had become the Chairman & Managing Director. Vaidyanathan was also a Director of E.I.D. Parry, Peermade Tea and Stanes Group of companies.

Hadow retired from the firm in 1961 and E.V. Rajagopalan joined Vaidyanathan as a partner. When Vaidyanathan retired in 1968 to pursue his coffee interests, Rajagopalan became the sole proprietor of the firm till 1974 when he inducted
V. Sri Ram as a partner. E.V. Rajagopalan’s sudden death in 1986 was a shock to the corporate world and to Paterson & Co. in particular.

In the early 1980s, Vepa Ramesam, who was a senior executive of Standard Chartered Bank, resigned from the Bank and joined Paterson’s as a partner. He retired in 1993.

V. Sri Ram, who joined the company as an Assistant in 1964, saw the firm through its years of transition after 1970. The firm which was a partnership from 1936 till 1993 was converted into a Private Limited Company, one of the first among stock broking firms in India. Among its first directors was this author, who had joined in 1987 and became a partner in 1990. Sri Ram continued to lead the company till 2010 as Chairman of the Board, and stepped down only recently.

The 1990s saw some radical changes in the functioning of stock exchanges. Subsequent to the Harshad Mehta scam, where many banks and individuals lost large sums of money, the Government created the Securities and Exchange Board of India. This was followed by the creation of the National Stock Exchange, introduction of screen-based trading as opposed to the ‘Open Outcry’ system and the creation of a National Depository to facilitate paperless trading. Also, with economic liberalisation, the first wave of foreign investors started investing in the Indian stock markets.

While many of the traditional stock broking firms could not adjust to the fast changing times, Paterson transformed itself quite successfully. It established an office in Mumbai in 1989. It also acquired memberships of the National Stock Exchange and the Mumbai Stock Exchange. Today it has over 25 branches spread throughout South India, besides offering other financial services.

In 2009, Hinduja Bank (Switzerland) took a controlling stake in the company by subscribing to additional share capital. The Board is headed by Ivan Schouker. This year, Paterson’s celebrates its 75th anniversary.