Now that we've built size, we'll focus on profitable growth: Upstox CEO

Ravi Kumar, co founder and chief executive officer (CEO) of Upstox, in an e-mail interview with Sundar Sethuraman, said the broking firm will now focus on profitability, after building an adequate size. Not all new players, Kumar says, will be able to scale up profitably, and there will always be an opportunity for consolidation in the industry. Edited excerpts:

How was 2023 for the broking industry, as well as Upstox? What’s the outlook for 2024? 

We witnessed a fantastic year at Upstox. After a gap of four years, Upstox broke even. Despite the challenges posed by rising interest rates and inflationary pressure, the broking industry in India seems to be in a sweet spot. More and more people are realising the importance of equity participation, especially in a fast-growing economy such as ours -- the record demat numbers are a testament to that. I believe the Nifty50 performance, broader market outperformance (smallcap and midcap indices), record IPO listings (mainboard and SME IPOs), economic optimism, preference in general for equity as an asset class, and thoughtful campaigns by the industry, in general, led to increased participation by investors in 2023. We expect the momentum to continue as the same growth drivers will be at play in 2024. 

How’s growth in active clients? What's the demographic of new investors? 

At Upstox, we have endeavoured to democratise wealth generation for India and drive more equity participation, especially in the Tier 2 and 3 markets and beyond. Due to our efforts, we are proud to be a community of over 13 million demat accounts with continuous monthly growth. Most of our customers are millennials. It is also particularly encouraging to find many of our first-time investors coming from tier 2 and tier 3 cities. 

Do you expect to post profits this financial year? When do you plan to list? 

We are confident of posting profit in the current financial year. India’s burgeoning economy holds immense growth potential. Our strategy needs to focus on product innovation and extensive investor education initiatives. While we don't have a timeline, we aspire to be a listed company.

What is your outlook for demat additions? Will it grow at an average of 2-3 million per month or will we see any change soon? Also, has growth in demat accounts translated into active retail participation? 

Growth in demat accounts does translate into increased active retail participation. We have witnessed noteworthy growth this year and expect this momentum to continue in 2024. However, we also wish that with growing demat accounts, users’ confidence level in starting their investment journey continues to grow. As part of Upstox’s ongoing “Invest Right” campaign, we’ve undertaken the substantial task of analysing over 10,000 mutual fund schemes and shortlisting the top-performing ones, based on several risk and return metrics. This top funds list garners user interest, including millennials from tier 2 and 3 cities. Such efforts are essential to help increase and sustain broader equity participation. 

There have been concerns about the rise in options trading among retail investors. Should there be more curbs on retail investors from accessing the derivatives market? 

The Securities and Exchange Board of India (Sebi) is doing a great job in this area, and there are ample checks and curbs on accessing the derivatives market for retail investors. The derivatives market is well regulated, and participants are aware of the risks involved in the derivatives markets. As overall market participation grows, participation in the derivatives market can also be expected to increase. 

How has “Upstox Invest” fared so far? How much has it helped in business growth? We have seen similar product launches by brokerages. How is your product different? 

We have received an encouraging response from our customer base in Upstox Invest. We have seen a spike in applications for MF SIPs, stock SIPs, fixed-income instruments, IPOs, etc. Our app provides two distinct modes: Aiding investors in making informed decisions across assets and assisting traders in recognising opportunities and minimising losses.

There has been some change in the pecking order in the industry. What is your strategy? Do you prioritise having more customers or focusing more on the bottom line? 

The idea initially was to build scale. Now that we have built size, we will focus on profitable growth. Our commitment revolves around prioritising quality over quantity, evolving into a flourishing and profitable enterprise recognised as the market's safest, easiest, most stable, fast, and secure platform -- with users’ interests always serving as our guiding force. 

Recently, Mirae Asset acquired Sharekhan. Do you expect more consolidation in the industry? 

It cannot be ruled out. Not all new players will be able to scale up profitably, and there will always be an opportunity for consolidation in the industry. Established players who have built their infrastructure have a unique advantage in understanding their customers and their ability to service an ever-diverse set of users with top-notch reliability and product offerings.