Market Research Report : Financial Brokerage Market in India 2012


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Financial brokerage market in India is going through sweeping changes with new players looking to be a part of the highly competitive brokerage market characterized by dwindling brokerage and exponential growth of brokers and sub brokers. On the other hand, many existing players have been forced to undercut operations due to lack of revenues while others still surviving on the basis of consolidation. The market is witnessing new guidelines by the regulatory authorities and new innovative offers by banks and brokerage companies.
The report begins with a brief introduction to the financial broking market. The market overview includes information regarding the Indian market scenario and equity volumes on a year on year basis. An indication of the prevailing brokerage structure is included as well as highlights of the business model employed by the brokerage firms. It covers information regarding the changes in brokerage fee structure due to changes in the market. The primary guidelines stated by SEBI regarding the brokerage market are highlighted. The market overview section also analyses the brokerage sector as a whole to understand the opportunities and competitiveness of the market through a porter’s analysis. The overall distribution of brokers and stock brokers has also been provided.
The following section explains the major drivers in the market such as increase of income levels in tier 2 cities, under penetration of equities which can be explored by the brokerage firms to increase their brokerage. Other factors include developing franchisees to gather more revenue without having to actually spend on infrastructure. Return of FII and IPO are other encouraging factors. Rising rate of FD and other traditional saving instruments are proving to be more in vogue due to the turbulent Indian market conditions which is acting as a major challenge for the market. Global uncertainties have created huge pressures on the market. Consolidation of smaller broking firms and retail investors staying away are other important barriers that the market faces.
The trends identified are trading in mobile and online platforms along with offline modes in order to reach out to the far flung customers, new players coming in the Indian broking space making the competition even more intensive including banking institutions. Other trends include diversification of the major players in other lines of business and new innovative offerings by broking units so as to lure customers. It has been seen that broking units are also trying to hard sell Demat account and bulk of the equity investments from retail customers are coming via mutual fund route. Additionally, large players are tying up with smaller players towards expanding their distribution network and to tap a larger market.
The competition section provides an overview of the competitive landscape in the market and includes a detailed pro

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Market Research Report : Financial Brokerage Market in India 2012

  1. 1. Financial Brokerage Market – India Financial Brokerage Market IndiaJanuary 2012
  2. 2. Executive Summary  Average daily volumes in equity reached INR XX bn in 20‐‐‐‐‐ Market   Stock market has seen fluctuations in the recent past and so have the earnings in brokerage Overview  Commodities and currency markets are steadily picking up Drivers Challenges  Rising income levels  Rising rate of FD proving to be attractive Drivers &   Under penetration of equities  Global uncertainties  Franchisee model fuel expansion h d lf l  Undercutting and consolidationChallenges  FIIs show strong return  IPOs showing strong return  Trading in other platforms Trading in other platforms  MFs pose less risk when invested for a longer MFs pose less risk when invested for a longer   Advent of foreign and new Indian  tem players  Lifetime offers by brokerage houses to lure  Trends customers  Hard selling of Demat account  Stock Brokers foray into real estate Stock Brokers foray into real estate   Tie‐ups between big and small brokers Tie‐ups between big and small brokers broking Major Players in the MarketCompetition Player 1 Pla er 1 Player 2 Pla er 2 Player 3 Pla er 3 Player 4 Pla er 4 FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 2
  3. 3. •Introduction•Market Overview•Drivers and Challenges Drivers and Challenges•Trends•Competition•Key Takeaways•Appendix A di FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 3
  4. 4. Stock markets have  been on a downturn due to global cues  affecting financial brokerage market negatively Market Overview – Stocks (1/2) Equity: Average Daily Volumes • In the stock market, various equity and shares of the Type 1 Type 2 Type 3 Type 4 listed companies are traded INR bn INR bn • It is also known as the secondary market 1,500 X • In India, capital markets, of which secondary market is a part of, is regulated by SEBI 1,000 W U a4% • On account of higher inflows from FIIs and FDIs, the a1% V a3% market has reacted well in 20XX XX 20XX‐XX 500 b1% a2% b3% b2% b4% c1% d1% c2% d2% c3 d3% c4% d4% 0 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ Geographical Distribution (Cash Segment) Turnover (Cash Segment) City 1 City 2 City 3 City 4 O Type 1 INR bn r3% Type 1 Type 2 Type 2 r2% 80,000 P 20‐‐ ‐ ‐‐ r1% N 20‐‐ ‐ ‐‐ g1% h1% k1% l1% m1% p1% e5% 60,000 60 000 e3% O i1% j1% n1% o1% 20‐‐ ‐ ‐‐ M e4% 20‐‐ ‐ ‐‐ g2% h2% k2% l2% m2% p2% 40,000 L i2% j2% n2% o2% e2% e1% f3% f5% 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ g3% h3% k3% l3% m3% p3% 20,000 f4% f1% f2% i3% j3% j n3% o3% 20‐‐ ‐ ‐‐ g4% h4% k4% 20‐‐ ‐ ‐‐ l4% m4% p4% 0 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ i3% j3% n4% o4%Source: FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 4
  5. 5. Prevailing Brokerage Structure – Indicative  Type: Equity Resident Indians Non‐Resident Indians Delivery Based  a% or min INR B or x% on transaction value ( Both  c% or min INR D or e% on transaction  Trades BUY/SELL) value (Both BUY/SELL) Type: Derivatives Futures Market f% or min INR G/‐ or ceiling of h% of transaction value (Both Buy & Sell) Type: Option Market Option Market Higher of i% of the premium amount or INR J per lot (Both Buy & Sell) Type: Currency Derivatives Currency  Account opening fees of INR K/‐ Derivatives Brokerage of INR L/‐ per Contract on carry forward trades and INR M/‐ each side on square up of  trades (statutory and other charges to be levied separately) Of the total commission pool of INR Y to INR Z bn, institutional broking contributes to p% of the poolSource: SAMPLE S FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 5
  6. 6. •Introduction•Market Overview•Drivers and Challenges Drivers and Challenges•Trends•Competition•Key Takeaways•Appendix A di FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 6
  7. 7. Drivers & Challenges – Summary  Drivers Challenges Rising rate of FD proving to be  Rising rate of FD proving to be Rising income levels attractive Under penetration of equities Global uncertainties Franchisee Model fuels expansion Undercutting and consolidation FIIs showing strong return IPO showing strong return FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 7
  8. 8. Trends – Summary  Trading in other platforms Advent of foreign and new Indian players Hard selling of Demat account Hard selling of Demat account Key  Trends ` Stock Brokers foray into real estate broking MFs pose less risk when invested for a longer tem Lifetime offers by brokerage houses to lure customers Tie‐ups between big and small brokers FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 8
  9. 9. •Introduction•Market Overview•Drivers and Challenges Drivers and Challenges•Trends•Competition•Key Takeaways•Appendix A di FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 9
  10. 10. Public: Domestic Company – Player 1 (1/3) Company Information Offices and Centres – India  Corporate Address Tel No. Fax No. Website Year of Incorporation p Ticker Symbol Stock Exchange Head Office Products and Services Products and Services Regional Office Regional Office Category Products/Services Category 1 Key People Category 2 Category 2 Name N Designation D i ti A SAMPLE  SAMPLE B C DSource: FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 10
  11. 11. Public: Domestic Company – Player 1 (2/3) Financial Snapshot i i lS h Key Ratios K i y‐o‐y change  Particulars  2010 2009 2008 Total Income (2010‐09) Total Income Net Profit / Loss Net Profit Profitability Ratios 150 15 Operating Margin Net Margin N tM i 10 100 Profit Before Tax Margin 5 Return on Equity 50 0 Return on Capital Employed 0 ‐5 Return on Working Capital 2008 2009 2010 Return on Assets Return on Fixed Assets R t Fi d A t Financial Summary  Cost Ratios • The company incurred a net loss of INR X mn in FY 20XX, as  Operating costs (% of Sales) compared to net profit of INR Y mn in FY 20XX Administration costs (% of Sales) • The company reported total Income of  INR A bn in FY 20XX,  SAMPLE  SAMPLE Interest costs (% of Sales) registering an increase of b per cent over FY 20XX registering an increase of b per cent over FY 20XX Liquidity Ratios i idi i • The company earned an operating margin of C per cent in FY 20XX a  Current Ratio decrease of d percentage points over FY 20XX Cash Ratio Leverage Ratios • The company reported debt to equity ratio of Z in FY 20XX, an  Debt to Equity Ratio increase of W per cent over FY 20XX Debt to Capital RatioKey Financial Performance Indicators  Interest Coverage Ratio Efficiency Ratios Indicators Value (XX/XX/20XX) Fixed Asset Turnover Market Capitalization (INR) Asset Turnover Total Enterprise Value (INR) Current Asset Turnover g p Working Capital Turnover EPS (INR) EPS (INR) Capital Employed Turnover PE Ratio (Absolute)Source: Improved Decline FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 11
  12. 12. Public: Domestic Company – Player 1 (3/3) Key Business Segments Key Geographic Segments Segment 1 Segment 2 Country 1 100% India is the only geographic  India is the only geographic 100% segment in which Player 1  has  been operating for the last X  50% 99.9% 99.9% 100.0% 50% 100% years 0% 0.1% 0.1% 0.0% 0% 20XX 20XX 20XX 20XX Key Recent Developments Description  News • Player 1 is a leading stock and commodity broking house with acknowledged industry Leadership in  SAMPLE  SAMPLE execution and clearing services Overview • It is a member of the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) through which it It is a member of the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) through which it  handles trading needs through a network of experienced dealers across various locations, and through  their comprehensive web enabled services • It facilitates the investment process and also provides value‐added services like research, stock ideas,  Services DEMAT, online trading and others to make the investment experience easy and rewarding • It also provides research and consulting services for taking the right investment decisionsSource: FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 12
  13. 13. Private: Domestic Company – Player 2 (1/3) Company Information Offices and Centres – India  Corporate Address Tel No. 156,117.2 Fax No. Website Year of Incorporation Head Office Products and Services Products and Services Category Products/Services Category 1 Key People Category 2 Category 2 Name N Designation D i ti A SAMPLE  SAMPLE B C DSource: Note: The list of products and services is not exhaustive FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 13
  14. 14. Private: Domestic Company – Player 2 (2/3) Financial Snapshot i i lS h Key Ratios K i Total Income Net Profit/Loss y‐o‐y change  Particulars  2011 2010 2009 2008 (2011‐10) INR mn INR mn Profitability Ratios 1400 250 Operating Margin 1200 200 Net Margin 1000 150 Profit Before Tax Margin 800 Return on Equity 100 Return on Capital Employed 600 50 Return on Working Capital 400 0 Return on Assets 200 Return on Fixed Assets 0 -50 Cost Ratios 2008 2009 2010 2011 Operating costs (% of Sales) Administration costs (% of  Sales) Financial Summary  Interest costs (% of Sales) Interest costs (% of Sales) • The company incurred a net profit of INR X mn in FY 20XX, as  Liquidity Ratios compared to net profit of INR Y mn in FY 20XX Current Ratio Cash Ratio • The company reported total Income of  INR A bn in FY 20XX,  Leverage Ratios SAMPLE  SAMPLE registering an increase of b per cent over FY 20XX Debt to Equity Ratio • The company earned an operating margin of C per cent in FY  Debt to Capital Ratio b i l i 20XX a decrease of d percentage points over FY 20XX Interest Coverage Ratio Efficiency Ratios • The company reported debt to equity ratio of Z in FY 20XX, a  Fixed Asset Turnover decrease of W per cent over FY 20XX Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed TurnoverSource: Improved Decline FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 14
  15. 15. Private: Domestic Company – Player 2 (3/3) Key Recent Developments Description  News • Player 2 is a leading investment bank offering a wide range of financial services and wealth management  l l d b k ff d ff l d lh solutions to institutions, corporations, high–net worth individuals and families Overview 156,117.2 • It has rapidly expanded its footprint to over X locations across India with international presence in  Country A, Country B and Country C • Player 2 has completed the first round of fund‐raising for the realty fund it has set up with Firm B, Y  Fund Raising Portfolio, collecting ~INR C bn • It has tied up with French asset management company, Z, to launch India‐focused quant‐based  Collaborations alternative investments products alternative investments products • It has been voted as the ‘ _ by M  in 20XX Awards and Recognitions • Player 2 has been ranked as ‘_’ by N in 20XX Player 2 has been ranked as  by N in 20XXSource: SAMPLE  SAMPLE FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 15
  16. 16. Thank you for the attentionThe Financial Brokerage Market – India report is part of Netscribes’ Financial Services Series. For more detailed information or customized research requirements please contact:Gaurav KumarPhone: +91 33 4064 6214E‐Mail: gaurav.kumar@netscribes.comResearch on India is a product of Netscribes (India) Pvt. Ltd. Research on India is dedicated to disseminating information and providing quick Research on India is a product of Netscribes (India) Pvt Ltd Research on India is dedicated to disseminating information and providing quickinsights on “hot” industries in India and other emerging markets. Track our new releases and major updates in these industries onAbout NetscribesNetscribes is a knowledge‐consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment &  g g f g p y p p fbusiness research, business & corporate intelligence, content‐management services, and knowledge‐software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes is a one‐stop shop designed to fulfil clients’ profitability and growth objectives.Disclaimer: This report is published for general information only. Although high standards have been used the preparation, Research on India, Disclaimer: This report is published for general information only Although high standards have been used the preparation Research on IndiaNetscribes (India) Pvt. Ltd. or “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes (India) Pvt. Ltd. and prior permission is required for guidelines on reproduction. FINANCIAL BROKERAGE MARKET IN INDIA 2012.PPT 16