'Broking industry offers enough for all players to grow and be profitable'

Retail investors have been a major driver of markets in the past few months besides foreign institutional investors (FIIs). DINESH THAKKAR, chairman and managing director, Angel Broking – the fourth largest broking house in India – tells Puneet Wadhwa in an interview that equity penetration in the country is at a very nascent stage, and there is still huge untapped potential available for growth. Edited excerpts:

What has been your experience in the broking business segment at Angel Broking over the past few months?

Over the last decade, we have made the transition into a complete digital player. The business has received good traction as we engaged our clients digitally and offered them simple and uncomplicated fee plans. They have validated our forward-thinking approach as we emerge as India’s fourth-largest brokerage house. Growth in client base has been strong – from nearly 18-lakh as of March 2020 to 35-lakh as of January 2021, thus translating into an average monthly net client addition of over 1.6 lakh during this period. Correspondingly, we also experienced a robust 1,276 basis point (bps) expansion in our overall retail equity turnover-based market share to 19.7 per cent in January 2021. We are seeing more youth from Tier-2 and Tier-3 cities who are far familiar with market dynamics contribute to this growth. Equity penetration in the country is at a very nascent stage, and there is still huge untapped potential available for growth.

You have earlier stressed in Tier-2 and Tier-3 cities for client acquisition, are these still in focus?

Yes. In fact, they are one of our main focus areas. This is because a large chunk of the millennial population, which is our target audience, lives in Tier-2 and Tier-3 cities. The share of clients coming from these markets has consistently increased from around 81 per cent in financial year 2017-18 (FY18) to around 92 per cent in Q3’FY21. Correspondingly, the average age of our newly acquired clients has also been steadily decreasing to the current around 30 years. While this client segment has been underserved for a long time, they understand the markets just as well as their counterparts from Tier-1 cities. We believe there is huge untapped potential here, and digital players like us will stand to directly benefit from this opportunity.

Has life become tough for the industry after discount brokerages tightened their grip?

While many view these alterations as a challenge, I see the situation in a different way. India is a vast country with a huge youth population. Technology offers the best approach to make inroads in the geographies that would otherwise present obstacles to growth and make business unit profitable. A lot of digital players are needed to achieve financial inclusion across the country. Today, barely 3 per cent of our population currently invests in stocks or mutual funds. We see great opportunity to expand. More digital player’s means faster expansion.

Do you expect the margins and profitability to come under pressure going ahead?

Broking industry offers enough for all efficient players to grow and be profitable. Innovativeness and flexibility will always insulate a business from rough weather. Healthy margins coupled with an asset-light business model protect business profitability as well.

Retail investors have become savvy and are now looking to invest globally. Do you see the trend picking up pace?

Yes, this trend will pick up speed this year. People have realised that they need to diversify and reduce geographical risk. Global markets offer investors the opportunity to invest in a variety of sectors that may not be available here. At the same time, investors can also enjoy the further benefit of a depreciating currency. We see this opportunity growing over time, as people become more educated about investing globally.