Comments
Although the acquisition cost is going up, brokerages with financial muscle are aggressively ramping up their franchise network. With margins under pressure, brokerages feel that it is economical to have a franchise than a sub-broker.
The smaller and mid-sized brokerages are shying away from the numbers games and are keeping their franchise count “more-or-less the same.”
For brokerages, margins have dropped by about 30 per cent, while franchise acquisition costs are increasing by 10 per cent every year.
“We have always been aggressive on franchises. We open 1,500 to 2,000 franchises a year and about 150 franchises a month. We are going to continue opening the same number of franchises,” said Vinay Agrawal, Executive Director — Equities Broking, Angel Broking, which has a network of about 8,000 franchises across India. The capital expenditure that it incurs is about three per cent of the franchise’s turnover.
The franchise drop-out rate, according to marketmen, is 15-20 per cent.
Uncertain scenario
However, due to uncertain market condition, brokerages agree that customer acquisition has been slow. “We have seen about 30 per cent reduction in activation,” added Agrawal. Franchises contribute about 45 per cent of Angel Broking’s revenue.
Motilal Oswal Securities is also aggressively ramping up its franchises. It has 1,500 franchises in 565 cities. “We are aggressively ramping up franchises. Every month we are opening 15-20 new outlets. Focus is on franchises, Internet and on ramping up bigger city branches. We are looking at maximising per unit revenue growth,” said Motilal Oswal, CMD.
However, brokerages such as Geojit BNP Paribas and Unicon Financial Intermediaries are not looking at franchise expansion owing to the bad market scenario.
“We are not aggressively looking at expanding our franchise network. Due to the business environment, we are only looking at selective expansion of the franchise network,” said C.J. George, MD, Geojit BNP Paribas. The Kochi-based brokerage has a network of about 200 franchises. Most of their franchises are in the South.
They prefer to keep franchises near to their branch offices so that they can maintain the standards of investor service.
Low margins
Unicon Financial Intermediaries, which has about 400 franchises in India, has brought down the number of people in its franchise acquisition team. “We are not looking at expansion due to low margins. In fact, we have down-sized our franchise acquisition team to 20 from 50,” said Gajendra Nagpal, Founder and CEO, Unicon Financial Intermediaries.
“Due to the uncertain business environment, the franchise drop-out rate has been significantly higher,” said Nagpal.
Although bigger brokerages agree that acquisition costs are mounting, they feel that they have to continue expansion. “Business cannot go on without optimism,” said a director at a leading brokerage.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.