Brokerages report strong earnings in December quarter

Indian brokerage firms continued reporting record earnings in the December quarter amid a buoyant stock market fuelled by increased retail participation. Revenue of top listed brokerages grew 65 percent on average in the December quarter, while net profit advanced by 70 percent.

Retail investors have flocked to the equity market in search of higher returns given the increasing need to secure their financial future amid the uncertainty caused by the COVID-19 pandemic. Analysts say that the equity markets are expected to play a key role in financial planning amid falling interest rates coupled with low returns from traditional investment instruments such as gold and real estate.

Investing in the stock market has become more popular in India since the coronavirus outbreak. In November 2021, NSDL added 4 lakh demat accounts, while CDSL added 30 lakh demat accounts.

Together, both the depositories added 221 lakh new accounts in the April-November period, with CDSL accounting for 192 lakh new demat accounts, according to SEBI’s December bulletin.

“Increasing share of retail participation can be seen from the robust growth in demat account opening and steady cash volumes. Among the brokerage firms, we are quite bullish on Angel One as with a total-tech client acquisition platform that is simultaneously engineered for speed and scale, Angel One has gradually morphed into a desirable acquisition machine,” said Mohit Nigam, head, portfolio management service, Hem Securities.

Angel One reported a 91 percent on-year growth in revenue to Rs 607 crore in the December quarter, while its net profit grew 124 percent to Rs 93.6 crore. Its broking revenue climbed 88 percent to Rs 415 crore. Even on a sequential basis, Angel One reported a 13 percent jump in revenue and 22 percent increase in net profit.

ICICI Securities’ revenue rose 52 percent year-on-year to Rs 941.63 crore while net profit was up 43 percent at Rs 380.21 crore. Broking revenue at the firm increased 39 percent to Rs 722.61 crore. On a quarterly basis, revenue and profit rose around 8 percent each.

On its part, 5Paisa Capital reported a jump of over 61 percent in revenue on an annualised basis to Rs 80.22 crore. However, profit declined nearly 77 percent due to a sharp surge in total cost, which rose nearly 76 percent to Rs 79.22 crore. Its revenue segment of fees and commission was up 50 percent at Rs 58.86 crore.

“Q3 results announced by some brokerage companies showed a strong growth in the brokerages income which is in line with expectation and trend of increasing retail participation in the stock market,” said Satish Kumar, research analyst at Choice Broking.

The strong results were also on the back of digitisation and people coming from Tier-II and Tier-III cities. Analysts said India’s young population is typically more technology savvy and, with increasing use of wireless broadband internet, internet and mobile trading should get a boost. Fintech companies have also played a significant role in the growth of investor base backed by low cost and high-speed internet.

“Full-service brokerages reported stable margin in Q3, though solely listed discount brokers namely 5paisa reported share decline in EBITDA (earnings before interest, tax, depreciation and amortisation) margin at 11 percent versus 19 percent in the year-ago period due to rise in operating cost,” Kumar added.

Traction in new client addition has remained strong for the above-mentioned brokerages, though 5paisa client addition growth remained above the average trend during Q3, Kumar said.