Local brokerages vie for institutional pie

A clutch of home-grown retail brokerages are setting up institutional broking business to win overseas clients and large domestic institutional investors.

Of late, foreign brokerages have been sewing up alliances to grab a share in India's retail broking business. Institutional broking business is growing at 15-20 per cent per annum.

Retail brokerage Geojit Financial Services, owned 30 per cent by France's BNP Paribas, has floated a separate 50:50 joint venture exclusively aimed at institutional clients.

It is also setting up a 25-member institutional desk in Mumbai.

Similarly, India Infoline, another retail brokerage, is in the midst of putting in place its institutional business, after hiring four senior CLSA executives last month.

Indiabulls Financial Services, which is demerging its equity broking and advisory business into a separate entity (Indiabulls Securities), is also entering the institutional business and research in a big way, while JM Financial, which lost its institutional broking to Morgan Stanley after splitting with the US partner early this year, has lost no time and bought 60 per cent stake in ASK Securities, a leading institutional brokerage.

Religare Enterprises has hived off institutional equities as a separate business unit.

Said Nirmal Jain, CMD of India Infoline: "We are hiring more people for our institutional business. We will have a total of 20 analysts and 20 sales people. The idea is to have a good team. Our institutional business will be up and running in next one and a half months."

Jain said the former CLSA executives established the institutional business for the foreign institution from scratch and now these executives would be doing the same thing for India Infoline.

"For us, BNP Paribas will bring us clients from its vast network. For instance, Capital International (a big global fund) is one of its reputed clients. With our entry into institutional business, we'll be able to get a part of their business in India through BNP Paribas," said C J George, managing director of Geojit Financial.

A host of big foreign institutional brokerages, including ABN Amro, Citigroup (which bought Sharekhan through Citigroup Venture International), Standard Chartered Bank (which bought UTI Securities), E*Trade (bought majority stake in IL&FS Investsmart) and BNP Paribas, have entered the retail broking business in India in recent times.

DSP-Merrill Lynch, Morgan Stanley and Goldman Sachs have anything between 60 to 80 people for their institutional equity team and it would be a difficult task to attract big institutional business from these players, admit officials.

The fact that retail brokerage outfits' share of revenues from pure equity broking is another factor which is driving these firms to look for institutional business.

Sachin Joshi, chief financial officer of IL&FS Investsmart, said 30 per cent of its revenues came from institutional business.

"For us, our foreign partner E*Trade is into retail broking in the US and hence, we don't see a change is strategy as far as India is concerned," he said.