Ratan Tata-backed discount brokerage Upstox, which broke even in FY23, aims to grow its business on the back of rapidly increasing users from tier II and tier III cities in India, said co-founder Shrini Viswanath in an interaction with FE.
Traders and investors from cities such as Jaipur, Surat, Nagpur, Rangareddy, and Ahmednagar constitute nearly 85% of the company’s current user base of 10 million. “In the last five years, we’ve seen this pivotal change in the country with everyone having digital identity, affordable internet, and affordable smartphones,” Viswanath said.
Discount brokers such as Upstox, rival Zerodha, Groww and 5Paisa have gained significant popularity with retail investors, as they charge a reduced commission of `20 or less for allowing investors to buy and sell stocks in the market, compared to traditional brokers.
As the competition intensifies in the discount broking segment, Upstox has been looking to diversify its revenue stream by entering the lending business. However, Viswanath said the broker’s plan to obtain a NBFC licence is still a year away.
“Once we’re able to offer everything that a customer wants, from the asset side of things, we would next want to look into the liability side,” he said, adding that the company is likely to start with secured lending before considering unsecured loan products.
Mumbai-based Upstox currently allows users to invest in stocks, mutual funds and sovereign gold bonds on its platform and also allows trading on futures, options, currency and commodities. Within a month, it plans to introduce government securities and Treasury Bills on its platform.
In the financial year ended March 2023, its broking revenue jumped 44% to over Rs 1,000 crore, producing a net cash flow of about Rs 130 crore in the fourth quarter. In the next 5-6 years, the company plans to expand its user base to 100 million.
“We got a lot of people joining through referrals and friends, that seems to be one of the strongest growing segments for us,” Viswanath said. Upstox’s most profitable segment largely remains future and options trading, like most brokerages. However, Viswanath noted that its share in the overall pie has been shrinking.
With a $3.5 billion valuation, Tiger Global-backed Upstox is valued higher than rivals Groww and Zerodha, which are at $3 billion and $2 billion, respectively, even as the rivals have a larger user base. Earlier this year, Upstox also saw a series of senior level exits, including its head of human resources.