Broking income soars in Q3 amid new client additions, shows data

Listed brokerages recorded a steep rise in revenues and net profit in Q3FY21, as new customer acquisitions, coupled with surging broking fees and commissions, gave a boost to income. 

ICICI Securities saw brokerage income jump 61 per cent, while Motilal Oswal saw strong traction in cash market share and the highest ever quarterly client addition. Broking and distribution business profit grew 59 per cent YoY to Rs 77 crore, led by healthy volume growth of 98 per cent YoY and gain in market share.

For IIFL Securities, retail broking revenues stood at Rs 73 crore, up 40 per cent YoY. 

“During this unprecedented time, we successfully migrated our employees to WFH and haven’t witnessed much impact on our businesses. In fact, most of our fee-based businesses are touching new high in terms of scale. Our retail broking business which is our cash cow business has achieved new highs on various parameters and benefitting from industry consolidation with its knowledge driven phygital offerings,” said Motilal Oswal, MD and CEO, Motilal Oswal Financial Services.  

Last year saw the emergence of the ‘Robinhood’ phenomenon, with retail investors opting for direct stock purchases during periods of sharp correction. This was helped by a reversal in sentiment as the indices staged a sharp recovery after May, and ended 2020 with gains of more than 80 per cent over their March 23 lows, driven by easy liquidity across the globe and the resulting deluge of overseas inflows.

R Venkataraman, MD of IIFL Securities, said: “Our I-banking business continues to gain traction. With the lockdown getting lifted and the macroeconomic environment gradually improving, the outlook for the sector continues to remain sanguine.”

Dinesh Thakkar, Chairman and MD, Angel Broking, said: “Our gross client addition continued to pass the five lakh mark for the second consecutive quarter, indicating strong momentum. We are leveraging our Digital First approach to business leading to a healthy margin profile and cost to net income ratio.”

The last two quarters have also seen a surge in the cash and derivatives volumes. 

Sebi’s recent guidelines on leverages and peak margins, however, may make it tough for brokers and impact revenues. According to the new norms, a short-margin penalty is levied if brokers fail to secure the minimum margin for intra-day positions. From June 1, brokers have to collect a minimum margin of 75 per cent of the prescribed limit, which will increase to 100 per cent from September 1. 

The aggregate brokerage industry income stood at Rs 21,000 crore in FY20, registering growth of about 8 per cent over the Rs 19,500 crore in FY19. In FY21, the industry’s aggregate revenues are expected to increase to about Rs 23,000 crore, according to ICRA.