‘Broking industry offers enough for all players’
Retail investors have been a major force in the markets in the past few months. DINESH THAKKAR, chairman and managing director, Angel Broking, the fourth largest broking house in India, tells
Puneet Wadhwa in an interview that equity penetration is at a nascent stage in the country, and there is still huge untapped potential. Edited excerpts:
What has your experience been in the broking business segment over the past few months?
Over the last decade, we have made the transition into a complete digital player. The business has received good traction as we engaged our clients digitally and offered them simple and uncomplicated fee plans.
They have validated our forward-thinking approach as we emerge as India’s fourth-largest brokerage house. Growth in client base has been strong – from nearly 1.8 million as of March 2020, to 3.5 million as of January 2021 –translating into an average monthly net client addition of over 160,000 during this period. We also experienced a robust 1,276 basis point (bps) expansion in our overall retail equity turnover-based market share to 19.7 per cent in January. We are seeing more youth from tier-2 and tier-3 cities familiar with market dynamics contribute to this growth. Equity penetration in the country is at a very nascent stage, and there is still huge untapped potential available for growth.
You stressed earlier on client acquisition in tier-2, -3 cities. Is this still your focus?
Yes. In fact, they are one of our main focus areas. This is because a large chunk of millennials, our target audience, lives in tier-2 and -3 cities. The share of clients from these markets has consistently increased from around 81 per cent in financial year 2017-18 (FY18) to around 92 per cent in Q3FY21. Correspondingly, the average age of our newly acquired clients has also steadily decreased to around 30 years. While this segment has been underserved, they understand the markets just as well as their counterparts from tier-1 cities. Digital players like us will stand to benefit from this.
Has life become tough after discount brokerages tightened their grip?
While many view these alterations as a challenge, I see the situation differently. India is a vast country with a huge population of youth. Technology offers the best approach to make inroads in the geographies that would otherwise present obstacles to growth. Many digital players are required to achieve financial inclusion. Today, barely 3 per cent of our population invests in stocks or mutual funds.
Do you expect margins and profitability to come under pressure?
The broking industry offers enough for all efficient players to grow and be profitable. Innovativeness and flexibility will always insulate a business from rough weather. Healthy margins, coupled with an asset-light business model, protect business profitability as well.
Retail investors have become savvy and are now looking to invest globally. Do you see the trend picking up?
Yes, this trend will pick up speed this year. People have realised that they need to diversify and reduce geographical risk. Global markets offer investors the opportunity to invest in a variety of sectors that may not be available here. At the same time, investors can also enjoy the benefit of a depreciating currency. We see this opportunity growing over time.