Head­winds Set to In­ten­sify

The Economic Times - - Money -

Karwa said Emkay de­rives about 75% of its con­sol­i­dated rev­enue from eq­uity broking and the rest from NBFC, in­vest­ment bank­ing and port­fo­lio advisory busi­nesses.

“It is a ques­tion of time be­fore we find that our eq­uity broking rev­enues would be­come 50% of our over­all rev­enues. In 2007, it stood at 85-90%,” Karwa said.

Increased trad­ing in op­tions, which is a low-mar­gin busi­ness, along with di­rect mar­ket ac­cess (DMA) — a fa­cil­ity that al­lows funds to of­ten ex­e­cute trades on their own in­stead of go­ing through bro­kers — have also im­pacted the broking busi­ness.

Be­ing a cycli­cal in­dus­try, the in­dus­try has had its share of ups and downs but as di­ver­si­fied busi­nesses grow and tech­nol­ogy be­comes more dom­i­nant in terms of mo­bile trad­ing, broking-re­lated rev­enues are likely to shrink.

In this sce­nario, bro­ker­ages that adapt to ex­pec­ta­tions of cus­tomers and go-dig­i­tal should do fine, said Nitin Jain, CEO of Edel­weiss Fi­nan­cial Ser­vices’ Global As­set and Wealth Man­age­ment. For Edel­weiss, broking rev­enue forms about 5-6% of the to­tal rev­enue, down from 35-40% in 2007, Jain added. Jain does not ex­pect a sig­nif­i­cant shift in broking rev­enue in the next few years.

“About 15% of our over­all rev­enue comes from mo­bile plat­form and it has been grow­ing steadily. I will not be sur­prised if it grows to 25% of the con­sol­i­dated rev­enue in one year,” Jain said.

Jain is op­ti­mistic on Edel­weiss’ credit busin e s s , whi c h con­trib­utes around 50% of its rev­enues. “We ex­pect our credit busi­ness to con­tinue grow­ing at 18-20% over the next 3-4 years,” Jain said. Moti­lal Oswal, chair­man of Moti­lal Oswal Fi­nan­cial Ser­vices, ex­pects the com­pany’s broking rev­enue share to re­main at the same level for the next few years.

As di­ver­si­fied busi­nesses grow and tech­nol­ogy be­comes more dom­i­nant, broking-re­lated rev­enues are likely to shrink

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