The initial set of quarterly numbers announced by some of the listed broking companies have shown that the industry is going through a rough phase. More important, the entities are sounding bearish on the near-term outlook, with the wait for positive triggers getting longer.
Today, Edelweiss Capital – one of the largest domestic brokerage entities – announced its first quarter numbers for the current financial year. The net profit at Rs 33 crore is down 23 per cent, compared to Rs 43 crore for the previous quarter ended March 31. The total income showed only a marginal increase of two per cent at Rs 396 crore. For the previous quarter, the income was pegged at Rs 386 crore.
The past few months have seen the equity markets trade in extreme volatile conditions. Indian indices have been one of the worst performers among most benchmark indices this calendar year. Though foreign institutional investors (FIIs) have been net buyers at a little over $2 billion in CY11, negative factors, both on the domestic and global front, have been affecting the market sentiments. “The industry is facing the pain of a slowdown. Q1 was one of the worst quarters for the industry,” said Himanshu Kaji, chief operating officer (COO), Edelweiss Capital.
Edelweiss is not a stand-alone case. Early this month, Geojit BNP Paribas Financial Services – a significant player in southern India and West Asia – saw its income dip by 3.54 per cent, even as its profit rising 47 per cent. The net profit, however, saw a 30 per cent fall to Rs 4.3 crore for the quarter ended June 30, compared to the corresponding quarter of the previous financial year. The consolidated revenues also declined by four per cent on a year-on-year basis.
BNP managing director C J George attributed the fall in profitability to the adverse stock market conditions caused by the high inflation and high interest environment. The volatile and uncertain environment has also forced India Inc postpone its capital raising plans.
Edelweiss saw income from broking, investment banking, asset management and distribution businesses fall 24 per cent quarter-on-quarter. The brokerage attributed the fall to “considerable slowdown in the capital markets activity in the recent past”.
For Motilal Oswal Financial Services, investment banking fees was down 60 per cent in Q1FY12, compared to the previous quarter. Broking and related revenues were lower by 12 per cent. On the outlook front, Rashesh Shah, chairman and chief operating officer, Edelweiss Capital, expects “the challenging environment to persist in the next two or three quarters”.