Revenues and profit surge for broking houses in September quarter

The uptick in the markets and a healthy addition of new clients have led to a spurt in profits for broking houses. Most players have reported strong growth in both revenues and profits for the quarter ended September 30 over the April-June period, which also was a good quarter.

ICICI Securities, the biggest listed broking outfit, reported a 32 per cent increase quarter-on-quarter (QoQ) in net profit to Rs 324 crore for its broking and distribution business on revenue of Rs 603 crore in the September quarter. Motilal Oswal and Angel Broking reported a 33 per cent and 54 per cent jump, respectively, in the QoQ profit after tax (PAT) and a 23 per cent and 25 per cent increase in their top line. The jump in profit and revenue is even strong when looked at on a year-on-year basis.

During the September quarter, the Sensex and the Nifty indices rallied nearly 10 per cent, while the broader markets rallied even more. Over 7 million demat accounts were added during the quarter. As a result, most brokerages witnessed a huge jump in their average daily turnover (ADTO). For instance, Angel Broking witnessed a twofold jump in ADTO during the quarter and as a result, was able to clock its highest-ever net profit and margin.

Due to the lockdown, most client additions took place through digital channels — the most cost-effective method. “Our customer acquisition engine has picked up the pace and we added a record number of new clients during the quarter, led by our fully digital onboarding process,” said Vijay Chandok, managing director and chief executive officer (CEO), ICICI Securities.

Most brokerages are looking to ramp up their digital pr­o­wess to tap the client base. “We will continue to fuel growth through our digital-first and client-centric approach, thereby having a sustainable and scalable model,” said Vinay Agrawal, CEO, Angel Broking.

Analysts say the broking business can continue to flourish, but trading volumes may take a hit when the new upfront margin rules kick in from December. “The broking segment is benefitting from tailwinds of increased trading activity from retail customers. While there could be some moderation because of the new regulations from December 1, we expect strong growth to continue,” noted Alpesh Mehta and Piran Engineer, research analysts at Motilal Oswal.

From December 1, traders have to cough up a higher margin for intraday trading. Many believe this may lead to a 20 per cent drop in cash market volumes. However, analysts believe that as long as the market sentiment remains buoyant, broking firms can reap the benefits.