BL Interview. Next disruption could come from regulatory changes, making broking business more capital-intensive: FYERS

2021 was actually a great year for us. The brokerage industry’s growth slowed because the stock market has been declining since October last year. We expect the traction to pick up with the upcoming Union Budget.

In FY22, we did over ₹100 crore (revenues). And with a 75 per cent growth (number of customers) this calendar year, we’re expected to increase by the same proportion, like another maybe 75 per cent growth in top line in FY23.

However, barring a few, most brokerages witnessed a decline or saturation in user additions in 2022. The two main things primarily attributed to this were a market decline and the work-from-office transition across the economy.

Apart from that, with the epic crypto bubble burst and the implosion of FTX, many youngsters have learnt the hard way and are gradually developing an interest in India’s capital markets.

Actually, it’s not a game of binary outcomes. Online brokerages initially disrupted pricing, but many banks and traditional players have also slashed brokerage to remain competitive. So, competing on price is a dead-end approach. From a technology standpoint, we’re just in the beginning days as an industry.

The reality of satisfying new-age customers’ evolving expectations is easier said than done. So, we continue to be product-focused, and our efforts largely revolve around the pressing requirements of active traders and investors. The next disruption could come from the regulatory changes, making this business more capital-intensive and resulting in substantial financial barriers for small- and mid-sized brokerages.

In 2023, Indian stock markets could be better placed than global markets, with relatively better economic parameters driven by a consumption-oriented population. However, the valuations aren’t cheap, interest rate hikes aren’t done, and geopolitical tensions persist. Currently, China is facing an unprecedented health crisis due to the resurgence of Covid cases. Against this backdrop, the China+1 factor can come into play, with India’s preparedness to be the manufacturing hub for goods and services.

The PM’s Gati Shakti programme will boost domestic economic activity in the capital goods and power sector. Indian economy is expected to clock a 7 per cent growth in GDP for FY23 and would be among the fastest, if not the fastest, growing economy.

The change in asset allocation towards India — the capital flows may actually be diverted to India to a great extent from other developed countries because the growth has mostly saturated in such countries. In capitalism, money chases growth and growth is in India; India is a democracy with a stable government and with reasonably stable policies.

IPOs have been failing mainly because of frothy valuations. Merchant bankers and promoters must work out appropriate pricing that leaves something on the table for new investors to be interested and subscribe. The valuation fiasco of the new-age tech companies of 2021-22 is still fresh in investors’ minds. Hopefully, the debacle has provided sufficient learning for promoters seeking to raise funds via a public offering.

As per primary market updates, more than 55 companies have received SEBI approval and are ready to launch their IPOs. TVS Supply Chain Solutions, Vikram Solar, Navi Technologies, Droom Technology, Yatra Online, and Biba Fashions are well-known firms in the queue, with issue types ranging from entirely OFS to a mix of fresh equity and OFS.

Additionally, 31 companies have submitted documents to SEBI for observations and approval. They include the likes of Snapdeal, Ebixcash, Joyalukkas, OYO, Go Digit General Insurance, Allied Blenders and Distillers, Mankind Pharma etc. Many of them have a larger OFS size in comparison to fresh equity. Unlike earlier years, 2022 highlighted the preference of retail investors for less OFS-oriented IPOs and where the offer price provides the comfort of valuations and listing gains.