Incomes of listed brokerages soar in Q3 amid robust client additions

Last year saw rise of 'Robinhood' phenomenon, or direct stock purchases during sharp correction; aggregate brokerage industry income up 8 per cent at Rs 21,000 cr in FY20

Listed brokerages saw a steep rise in revenues and net profit in the third quarter of financial year 2021 as new customer acquisitions and surge in broking fees and commission boosted income. 

ICICI Securities saw its brokerage income jump 61 per cent, while Motilal Oswal saw strong traction in cash market share and highest ever quarterly clients addition. Broking and distribution business profit grew by 59 per cent YoY at Rs 77 crore in Q3FY21 led by healthy volume growth of 98 per cent YoY and gain in market share.

For IIFL Securities, retail broking revenues stood at Rs 73 crore, up 40 per cent year on year. 

“During this unprecedented time, we have successfully migrated all of our employees to WFH and despite WFH we haven’t witnessed much impact on our businesses. In fact, most of our fee-based businesses are touching new high in terms of scale. Our retail broking business which is our cash cow business has achieved new highs on various parameters and benefitting from industry consolidation with its knowledge driven phygital offerings," said Motilal Oswal, MD & CEO, Motilal Oswal Financial Services.  

Last year saw the emergence of the ‘Robinhood’ phenomenon, with retail investors opting for direct stock purchases during periods of a sharp correction. This was helped by a reversal in sentiment as the indices staged a sharp recovery after May, and ended 2020 with gains of more than 80 per cent over March 23 lows, largely driven by easy liquidity across the globe and the resulting deluge of overseas inflows.

R Venkataraman, Managing Director, IIFL Securities said: “Our investment banking business continues to gain traction. We are uniquely placed as we have strong distribution capabilities across retail, HNI and institutional segments. With the lockdown getting lifted and the macroeconomic environment gradually improving, the outlook for the sector continues to remain sanguine.”

The focus on digital during the pandemic has also helped trim costs. Features like e-KYC to open demat accounts, simple-to-use interface, and on-the-go trading facility with mobile apps have enabled tech-savvy millennials and the young working population to dabble in stocks.

Dinesh Thakkar, Chairman & MD, Angel Broking, said, “Our gross client addition continued to pass the five lakh mark for the second consecutive quarter, indicating a strong momentum. We are leveraging our Digital First approach to business which is leading to a healthy margin profile and cost to net income ratio." 

The last two quarters has also seen a surge in cash and derivatives volumes. The daily average turnover in the F&O segment for December, for instance, stood at over Rs 31.4 trillion, a record high amid a surge in volatility and greater institutional participation, especially from overseas investors. 

Sebi’s recent guidelines on leverages and peak margins, however, may make it tough for brokers in the months ahead and impact revenues. According to the new norms, a short-margin penalty is levied if brokers fail to secure the minimum margin for intraday positions. From June 1, brokers have to collect a minimum margin of 75 per cent of the prescribed limit, which will increase to 100 per cent from September 1. 

The aggregate brokerage industry income stood at Rs 21,000 crore in FY20, registering growth of about 8 per cent over the Rs 19,500 crore in FY19. In FY21, the industry’s aggregate revenues are expected to increase to about Rs 23,000 crore, according to ICRA.