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Financial services firms with broking arms have seen an increase in revenues as trading volumes have risen during the stock market rally.
Total income from operations for financial firms with broking operations rose 30 per cent to as high as 64 per cent during the September quarter. Financing income continued to be a major contributor to income for some, accounting for around three-quarters of the overall income from operations for key players.
Fund-based activities accounted for 72.75 per cent of the overall income operations of IIFL Holdings. It brought in Rs 694.14 crore during the September quarter out of the total income from operations of Rs 892.21 crore. Capital market operations accounted for Rs 111.73 crore or 12.52 per cent.
Fund-based activities contributed over 80 per cent to the overall income from operations of Edelweiss Financial Services. It accounted for Rs 732.12 crore out of the overall figure of a little over Rs 900 crore. Broking income contributed 6.9 per cent of the overall revenue, according to the results statement.
JM Financial’s fund-based activities accounted for Rs 203.64 crore in revenues in the September quarter. The company had total revenue of Rs 377.22 crore. It accounted for more than half the firm’s revenues.
Broking accounts may continue to account for a small portion of the overall revenue of many financial services firms, even ones whose broking operations are amongst the largest in the industry.
Rashesh Shah, chairman and CEO at Edelweiss Financial Services, told Business Standard in a recent interview that he did not expect broking and related activities to account for more than a fifth of overall revenue despite the recent growth.
C J George, managing director of Geojit BNP Paribas Financial Services, said the revenue mix was a function of the structural changes the industry had to go through after the financial crisis.
“In the past 3-4 years, a portion of the industry has shifted focus to the financing business as volumes dried up after the financial crisis. This has resulted in the segment accounting for a majority of revenues even after the market has begun to pick up,” he said.
Overall trading volumes rose from Rs 2.21 lakh crore in the September quarter last year to Rs 3.5 lakh crore in the latest quarter. Average volumes were up over 58 per cent.
However, many pureplay brokerages saw a significant upside from the uptick in volumes.
Geojit BNP Paribas had income from operations of Rs 70.32 crore. While the broking company does not provide the break-up of its various segments, like Motilal Oswal, it is also seen to have a similar proportion of revenues from the broking space.
Motilal Oswal’s broking division contributed nearly 76 per cent of the income from operations, according to company financials. Broking accounted for Rs 123.65 crore out of the Rs 162.86 crore of the income from operations in the September quarter.
Emkay Financial had Rs 27.15 crore coming from the advisory and transactional services businesses, including the broking business which accounted for the majority of revenues. It does not provide the break-up of the broking segment exclusively.
