Broking industry aims to double customer count in 2 years: Dhiraj Relli

Relli delves into the broking house's journey and highlights key trends in the broking industry

HDFC Securities, launched as a joint venture between HDFC Bank, HDFC, and Indocean eSecurities, celebrates its 25th-year milestone. Over the past decades, the domestic broking industry has undergone several structural shifts, with one of the most prominent being investors gravitating towards low-cost brokerages. Traditionally a full-service brokerage, HDFC Securities recently introduced HDFC Sky — a flat-price broking application — as a strategic response to the emerging threat from discount brokerages. DHIRAJ RELLI, managing director and chief executive officer of HDFC Securities, in an email interview with Sundar Sethuraman, delves into the broking house’s journey and highlights key trends in the broking industry. Edited excerpts:

How do you view the evolving broking landscape where investors are exploring various brokerage options?
 

In India, the broking space is one of the fastest-growing sectors due to the rise in retail investors from Tier-II and Tier-III cities, along with a consistently high gross domestic product growth rate.

Investors have multiple options to participate and grow their wealth, aligning with the economy’s expansion.

Dematerialised (demat) accounts have surged from 20 million to 150 million quickly, thanks to digitisation and new players catering to different niches and segments.

Multiple brokerage options are creating entry points for more investors, fostering industry growth. We welcome this scenario and offer multiple options across all customer segments, from millennials to working professionals and senior citizens.

Elaborate on the role that full-service brokerage firms play within the financial ecosystem.
 

At the individual level, investments and finance are sensitive matters as they directly involve and impact money, necessitating guidance.

We provide comprehensive services for individuals to grow and manage their wealth.

Simplified investment options encourage the financialisation of savings.

As a full-service broker, we provide complete assistance and handholding to customers.

Our extensive branch network and over 1,200 relationship managers offer advice and recommendations, creating a hybrid physical-plus-digital service offering across a complete array of investment products.

Some observers have noted large differences in technology between traditional brokerages like HDFC Securities and newer, technology-driven players. How do you see this?
 

HDFC Securities continues to invest in technology to offer top-notch features and platforms to our extensive clientele.

With 24 years of experience and exposure to numerous market cycles, we leverage our rich domain expertise to provide intuitive features and digital solutions to our customers.

Share HDFC Securities’ performance metrics, such as revenue, profit, client base, and average daily trading volume, for 2023-24.
 

HDFC Securities has witnessed increase in profitability, growing 2.5 times over the past four years, from Rs 384 crore in March 2020 to Rs 950 crore in March 2024. Similarly, our revenue has surpassed the Rs 2,500 crore mark, with an active client base exceeding 1.2 million and a total customer count of over 5 million.

The recent launch of HDFC Sky has expanded our customer base, particularly among millennials, price-sensitive individuals, and derivatives traders.

Moreover, we have experienced substantial growth in our margin trade facility and lending book, amounting to Rs 6,635 crore, leading to a 120 per cent increase in annuity income from interest over time.

Additionally, we completed an equity fundraising of Rs 1,000 crore in April 2024, bolstering our networth to over Rs 2,900 crore.

We are initiating investment advisory and proprietary businesses, alongside establishing a full-fledged subsidiary in Gujarat International Finance Tec-City.

What is your outlook for the broking industry? Do you foresee sustained growth in demat account registrations, with an average of 3 million accounts each month, or do you expect it to plateau?
 

India’s growth and increasing digital penetration are propelling the broking industry. We anticipate significant growth in both new customers and transaction volumes.

Increased awareness and regulatory robustness have led to 150 million customers, with projections aiming for 300 million customers in the next couple of years. This trajectory indicates robust compound growth, with 50 per cent of India’s population expected to utilise broking and investment services, signalling continued growth over the next decade.

How does HDFC Securities approach client acquisition in today’s competitive market?
 

Our dual approach, utilising digital and physical resources with aggressive pricing and differentiated offerings alongside comprehensive brand campaigns, attracts a large customer base.

In the broking industry, the customer lifecycle value exceeds acquisition costs, justifying increased marketing spending.

Over the past six months, we have intensified our marketing efforts for HDFC Sky, aiming for substantial market share and organic growth.

The derivatives segment contributes to over 97 per cent of the overall market volume industry-wide. Our focus on derivatives has significantly intensified following the launch of HDFC Sky.

Has HDFC Securities ever explored the possibility of going public? What are the advantages and disadvantages of remaining a wholly owned subsidiary of a bank versus pursuing a public listing?
 

We will announce at the appropriate time. There are no disadvantages to going public. HDFC Bank will continue to be a significant majority shareholder in case we decide to do so in the future.

What are some recent regulatory changes affecting the broking industry, positively or negatively?
 

Regulatory advancements are driving transformation in the broking industry with recent implementations like T+1 and progressing toward T+0 settlements alongside ASBA (Application Supported by Blocked Amount).

While implementing regulatory changes poses time constraints for vendors and teams, adapting them efficiently offers a competitive edge.

HDFC Securities is committed to staying compliant and leveraging regulatory changes for a strategic advantage in the industry.

How do you see the shift to T+0 settlement?
 

A robust margin system has already ensured that customers’ amounts and collaterals are blocked upfront in India. Implementing this at a customer level was a task; having done that, it will be easy to implement and adopt T+0 in India.

We will be among the first in the globe to have a T+0 settlement, signalling India’s advancement in terms of its processes, technology, and regulations. It will eventually attract a large number of foreign investors and money.