The Hindu Business Line : Brokerages tighten belt to ride out crisis

You would expect a broking firm to be buzzing with activity at 1 in the afternoon, but nowadays, one can only see brokers sitting at their terminals waiting for some good news to revive the markets.

When asked how business is these days, a sub-broker at a Mumbai brokerage laughed: “What business, there is no business these days. We are now advising our investors not to buy with the markets behaving the way they are.”

Trading volumes on the BSE has dropped 40 per cent in the last nine months as investors stay away from the markets. Right from cutting increments to cutting jobs, broking firms are now looking at ways to optimise their costs.

“We are not giving any Diwali bonus this year, as there is no extra money to give. We have not given any increments either,” said Mr Sanjay Someshwar, a sub-broker with Ventura Securities.

Mr Motilal Oswal, Chairman and Managing Director of Motilal Oswal Financial Services, said that instead of doing annual reviews his company is now doing half yearly reviews and giving notices to those employees who are not up to the mark “so that they can improve themselves”.

The firm on Friday announced that its income from broking related revenues dipped 27 per cent for the quarter ending September 30, 2008.

There have been reports that Sharekhan has cut salaries by over 15 per cent and that Prime Securities has been downsizing.

“The firms that have lost the most are those that had ramped up their fixed costs between 2004 and 2007. They took up a lot of debt, hired huge analyst teams, which has led to an increase in their costs. Job cuts in the brokerage industry are definitely happening and companies are trying to cut costs in multiple ways. Employees have been asked to take trains instead of flights. When they go for cross-border meetings they are now made to travel economy class. In-house canteens in some brokerages have been done away with,” said Mr Saurabh Mukherjea, Head of Indian Equities, Noble Group.

One broker used the term “performance management” to describe the cut in costs at his office.

Ventura Secruties shifted out of south Mumbai, where rents are sky-high, beginning of this year. “Our Managing Director is being congratulated now as we were the first ones to move out of south Mumbai to the suburbs. We can at least save about Rs 30 lakh there a month,” said Mr Someshwar with Ventura.

If you now walk through the office buildings of south Mumbai you can see many notices stating that the broking firms have moved to the suburbs or to more economical areas.

Mr Oswal said his company is reducing costs in every possible way even if it means cutting down on stationery or on IT vendors. They are also consolidating offices. “We have closed two of our four branches in Chennai, where we now have two big branches.”