Small brokerage firms are feeling the pinch of the prolonged subdued sentiment among retail investors. In the past few months, the turnover on the local stock exchanges has fallen-affecting the revenues of equity brokers. While large brokers that focus on institutional business are better-off due to surge in FII inflows, the revenues of smaller brokers focused on retail business has got adversely affected. Today, there are close to 1,000 Sebi-registered brokers in the country with top ten brokers earning ten times as much revenue as the next 30.
Retail investors who had burnt their fingers in the crash of 2008 are still staying away, despite recent run up in the market. ?Retail investors are investing but not trading, as a result of which brokerage revenues are not going up,? said Brics Securities CEO VR Srinivasan.
Some of the small equity broking houses, focused on retail business and making losses, might shut shop or be forced to sell. While none admit to an outright sale, some brokerages such as Networth Stock Broking admit to looking for a strategic investor. ?We are looking for growth capital and a strategic partner who believes in the business,? said Girish Dev, CEO of Networth Stock Broking. Srinivasan of Brics, while denying any sellout, said: ?We are still rebuilding our organisation after our non-compete clause with Lehman (Brothers) ended. It is too early to sell.? Lehman Brothers had bought the institutional equity group of Brics Securities in 2007 but gave back the control to Brics in 2009, after the financial crisis. Earlier this year in January, Edelweiss Capital signed an agreement to buy Anagram Capital for Rs 164 crore in an all-cash deal. Competition is also heating up. ?Commission rates have come down drastically in broking business,? admitted the MD of a small-sized broking firm, with industry rates coming down to 8 paisa for delivery and half paisa for trading and derivatives.