As markets recover, broking biz sees expansion, new entrants

The revival in sentiment in stock markets since March 2009 has led new players to enter into stock broking and related businesses like margin funding and distribution of financial products.

Also, some companies which were operational but had reduced their activities are planning to expand to take advantage of the upbeat mood in primary and secondary markets. Falling office rentals have also encouraged these companies.

Ksema Fincon, Equirus Securities, Kunwarji Finstock, Fiduciary Euromax and Kantilal Chhaganlal Securities are some of the companies which have started operations or want to revive their existing business.

“Our membership with exchanges has been dormant for the last three years. We feel it is the right time to revive our business,” said Sheshadri Bharathan, managing director and chief executive, Ksema Fincon. He said the bull run of the last few years had made the cost of human capital prohibitive for market intermediaries. “The downturn brought salaries, in market parlance, to fair values, and new companies could hire people at 50-60 per cent less,” said Bharathan. He said the company intended to focus on high net worth individuals (HNIs).

There are also those like investment bank Equirus Capital, which has floated a new stock broking firm, Equirus Securities, for institutional broking. Ajay Garg, founder and managing director of Equirus Capital, said he wasn’t worried about existing and established players. “We are hopeful that in the next seven-eight years, the Indian economy will double its present size and touch the $2-trillion mark. There will be enough business for all.”

Kantilal Chhaganlal Securities is revamping its operations under the advice of noted investment banker Udayan Bose. It is planning to expand its retail and institutional broking, margin funding and other related businesses. “We are in the process of expanding our operations in terms of an NBFC (non-banking finance company) for margin funding, hiring a research team and appointing sub-brokers,” said an official who declined to be named.

“We will start operations in institutional broking and HNI wealth management, as we believe that after the downturn, the market cycle will be good for the next two years,” said Sailav Kaji, director (institutional equities), Fiduciary Euromax. The company has a team of six and hopes to have 20-25 people on board in a year. Initially, Fiduciary would start with domestic wealth management and look at other investment opportunities.

The market downturn has provided another cost cushion to new entrants in the form of easy availability of office space. “Substantial reduction in office rentals has been boosting the morale of new players. When the markets had peaked, office space was being quoted at Rs 150-200 per sq ft, but rents have since dropped to Rs 75-100 per sq ft,” said Bharathan.