Strong demat account addition is here to stay: Ravi Kumar of Upstox

In a Q&A, the Co-Founder and CEO of Upstox explains what has propelled the growth and the company's ambitious tie up with IPL

The year 2020-21 saw record addition in dematerialised accounts at over 12 million. Ravi Kumar, Co-Founder and CEO, Upstox believes the pace of growth will continue. In an interview to Sundar Sethuraman, Kumar explains what has propelled the growth and the company’s ambitious tie up with the Indian Premier League (IPL). Edited excerpts:

Q. FY21 saw record additions in demat accounts. What has propelled the growth and do you expect this pace to continue?
 

A. Growing financial awareness, rising interest in equity participation, digital trading platforms that offer intuitive technologies at flat-brokerage fees, and easy internet access are key factors behind record additions of demat accounts in the current financial year. We strongly believe that this trend is here to stay and it's not just a lockdown phenomenon.  

Q. How many clients did Upstox add? How has its market share changed over a one-year period? Any targets you have set?
 

A. Since January 2021, Upstox added more than 600,000 demat accounts. We are now the second-largest brokerage in India with close to 3 million customers. On a monthly basis, we are adding an average 200,000 to 300,000 new accounts. Upstox crossed the 2 million customer milestone in October 2020, less than five months after hitting the one-million mark in June 2020. We expect the customer base to grow three to four times by the end of 2021. Our market share among brokerages in terms of incremental client acquisition has surged to 11.3 per cent as of January 2021 from 5 per cent a year ago.

Q. Upstox is said to have paid close to Rs 150 crore for the IPL sponsorship. That’s really aggressive. How will this tie-up benefit the company? You expect the growth in investor addition to go up because of this?
 

A. It is evident that the IPL has brought a massive disruption in the world of cricket, not just in India but globally too. Today, the stock trading business is also on the cusp of a massive disruption. The objective is to reach out to a larger percentage of digital natives and millennial customers who are ready for the next big churn in wealth creation. This integration of sports and finance is a natural fit between the two brands - IPL and Upstox. We expect the partnership will certainly bring us a lot more visibility than ever before as this is our biggest marketing partnership so far. We aim to reach the furthest points in the country just as IPL has done for cricket.

Q. The competition in the broking space is getting more and more intense with everyone trying to undercut on pricing. Don’t you think it is unhealthy from a profitability point of view?
 

A. That is the market dynamics, like in any other business. In terms of equity participation, India is still an underpenetrated country. Equity participation in India is currently at 3-4 per cent of the population, lowest among comparable global bourses. The demographics of our country are playing a significant role here. Customer interest from Tier 2 - 3 towns is heating up at a rapid pace. The number of young customers and women customers we have onboarded in the past year is phenomenal and gives us a lot of optimism. Our aim is to expand this base. The benefits will trickle down naturally. Profitability, as you know, is a natural corollary to market share.

Q. We have seen a lot of young investors taking to direct investing. What are some of the key trends with regards to the new crop of investors? Any insight on their behaviour pattern?
 

A. A significant trend emerging among retail investors is the rise in mobile trading. Over 85% of Upstox’s customers placed their daily trades on their mobiles. This trend continues well into 2021 backed by expanding internet connectivity, easy access to mobile phones, falling internet costs, and increased investor awareness.

At Upstox, we have more than 60 per cent of our customers are new to the market or have opened their first demat trading account. More than 75 per cent of our existing customer base is below the age of 35 years. We will continue to see a rise in the young customer base.

Q. After a spate of defaults, investors were seen preferring bank-backed brokerages. Does the change in market share reflect that? How do you plan to counter this?
 

A. The new-age customers have preferred the digital mode over the traditional brokerages. This can be gauged by the fact that the top-service providers are non-bank promoted. Millennial investors prefer on-the-go, mobile-based service providers.