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| Brokerages back in expansion mode as share market picks up |
| Vandana / Mumbai Nov 11, 2009, 00:29 IST |
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 It’s yesterday once more for brokerages, almost. The freeze on expanding branches and reduction in manpower is now a distant memory with stockbroking volumes rising almost 55 per cent in the first half of this financial year from the year-ago period.
Consider the expansion plans of the country’s major brokerages. Motilal Oswal, one of the largest domestic brokers, is planning to add close to 100 outlets by the end of this financial year. A majority of its outlets are owned by franchisees.
Others who have joined the rush to open branches are Geojit BNP Paribas, Indiabulls, Religare and SMC Capital. Geojit plans to add 50 branches in this financial year, 18 of them before December 31. Indiabulls Securities is planning to add 20-odd branches by the end of this calendar year and Religare Securities plans to add around the same number by the end of the current financial year.
Many others are waiting to join the queue with emergence of a more stable outlook on broking revenues. Though online trading is still one of the prominent growth drivers, the importance of opening more branches is not being forgotten.
“We work on a combination of branches, franchisees and bank alliances. Around 20 per cent of our turnover comes from online trading. However, branches are important as there is a huge savings pool waiting to be invested. Retail investors have still not awakened to equity as an investment class,” said Motilal Oswal, chairman and managing director, Motilal Oswal.
These brokerages’ plans are more ambitious on a slightly longer time horizon. Divyesh Shah, CEO, Indiabulls Securities, says the brokerage is looking to add 75 branches by December next year. “But it will be based on clients’ trading pattern and density of clients investing in stock markets. We will not go into very small towns. Our expansion will be based on demand. We are also looking to ramp up our team and have started hiring,” said Shah.
SMC Capitals is looking to add close to 400 branches in the next one year. DK Agarwal, director, SMC Group, says, “The feel-good factor for financial services companies has begun to return. Volumes are rising, risk aversion is going down and the long-term outlook for markets remains bullish. All this ensures a sound platform for broking firms to grow over the next few years. We plan to have around 2,000 offices in the next one year. We are also looking to grow our institutional equities business by enhancing research capabilities and are recruiting more people,” he said.
The optimism is justified. According to a report by Noble, the share of retail volumes in total is still low at 53 per cent compared to almost 63 per cent in financial year 2007-08.
But scope for more household savings entering the stock market is bright, say brokers.
A large number of brokers say the uptrend in markets has opened up merger and acquisition opportunities for large brokers. Smaller and regional players would be weeded out as the bigger players expanded their network, they said.
“One will see a number of small brokers becoming franchisees or sub-brokers. While it may not be a pure-play acquisition, many regional players will look at forging alliances with those having a national presence,” said Oswal.
Ashu Madan, head of retail broking, Religare Securities, agrees. “Certainly, the market is getting squeezed for smaller players and they will feel the pinch. Consolidation is inevitable. We are always looking to grow through both organic and inorganic routes,” he said.
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