Share of broking ops in revenue falls

Financing operations account for majority of revenues

 

Financial services companies, many of which started as brokerages, continue to see a decline in the contribution of their broking segments to the company’s revenue.

In the quarter ended December 2012, India Infoline Ltd (IIFL)’s capital market operations accounted for 20.19 per cent of its overall revenue. This declined to 11.81 per cent in the December 2013 quarter. For Religare Enterprises, the share fell from 11.9 per cent to 7.9 per cent in the same period. Edelweiss Financial Services’ securities broking income accounted for about five per cent of its revenue for the third quarter, against 5.5 per cent in the previous quarter.

Alok Churiwala, vice-chairman of the BSE Brokers’ Forum, said broking was now considered to be at the lower end of the value chain. “Transaction execution is used to bring in customers. They are then cross-sold a number of other products and provided other services which contribute to the overall income,” he said.

In the December 2013 quarter, IIFL’s income from capital market operations stood at Rs 81.5 crore, compared with its total income of Rs 689.7 crore. Religare’s broking income stood at Rs 70.79 crore, against its total income of Rs 893.51 crore.

The daily average turnover increased from Rs 1.72 lakh crore in the December 2012 quarter to Rs 1.89 lakh crore in the December 2013 quarter; an rise of 9.8 per cent. In the September 2013 quarter, it stood at Rs 2.2 lakh crore.

For Religare, investment and financing activities contributed 60.6 per cent to its total revenue. For Edelweiss, interest and treasury income contributed 81.61 per cent, while for IIFL, income from financing and investment was 74 per cent of its total revenue.

Other companies with a focus on broking have also seen a similar trend. Motilal Oswal Financial Services’ broking income of Rs 79.18 crore in the December 2013 quarter was down 6.39 per cent from the year-ago period. Geojit BNP Paribas Financial Services’ broking income declined from Rs 51.84 crore to Rs 46.49 crore in the same period, though the company’s income in the December 2012 quarter also factored in its institutional broking business, which is no longer a part of its operations.

Geojit and Motilal Oswal (both of which have non-institutional clientele) recorded an increase in broking income over the previous quarter — for Motilal, the rise was 4.17 per cent, while  for Geojit, it was 14.9 per cent.

CJ George, managing director of Geojit BNP Paribas Financial Services, said there was a pick-up in the non-institutional segment. “There are some inactive clients who are becoming more active. We are also seeing an increase in yields, which could be the result of a number of smaller players shutting down. The mood is helped by the possibility of a new government,” he said.

Recently, Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, had said, “Retail participation within cash volumes showed a slight uptick; however, one has to wait and see whether this continues.”