Currently, 80% of the customers the company acquires are coming to the capital market for the first time and they have never traded or invested in their life.
By Urvashi Valecha
As new customers queue up to dabble in the equity markets for the first time, Prakarsh Gagdani, CEO, 5paisa.com, tells Urvashi Valecha that the online broking firm aims to be among the top 2 or 3 brokers in the country. Edited excerpts:
You have added customers when the markets fell in March and in early April, can you elaborate on what their behaviour has been so far?
We started seeing the spike in our new account additions from February end because of the SBI Cards IPO but the market started selling down. Even then, more and more customers started coming to the market and this was a unique phenomenon. We saw that March was the highest in terms of acquisition and our growth in customer acquisition from February to March was almost 80% in a single month. A lot of new, first time millennial customers came to markets and opened their demat accounts quickly as they wanted to seize the opportunity to trade or invest. The same trend continues for April and May. Most of our customers are investors and not traders.
Earlier, you had said that the customers have opened the accounts but are not investing. Is the trend still the same?
Currently, we are seeing a 100% jump in individuals who are trading immediately after the account opening. So, if there are 10 individuals who have opened an account and two individuals were trading in the first few days earlier, it has increased, and that has become 4 or 5 individuals. So, most of the individuals on our platform are now active and investing.
How many of these customers are first time investors?
Currently, 80% of the customers we acquire are coming to the capital market for the first time and they have never traded or invested in their life. So that’s 80% of the incremental customer base, from that 70-80% of the customers are less than 35 years of age. A large section of that comes from tier III, tier IV and beyond kinds of towns.
Are the new customers are also investing in other asset classes, besides equities, using your platform?
There is hardly any alternative left. When it comes to rural areas and smaller towns, they have traditionally invested in real estate. Since the last five years, real estate has given a negative return and it does not look like it will improve further. Second is gold, in the last three years, the returns have not been great. It is only in the last 6 months that gold has gone up by 25% to 30%. Fixed deposit rates have gone down, now one gets the interest of 4.5% on them which is not enough. So, there are hardly any alternatives left. When the rural income is going up, investors want other avenues and that’s why they choose equities. There is almost a 100% surge in people buying digital gold from our platform in the last one-and-a-half month. Mutual funds (MFs) systematic investment plan (SIP) has improved by 25% month-on-month. So, MFs, gold and equity are the three products on our platform that are seeing a good amount of investor interest.
What is your view on 5Paisa’s March quarter performance? Do you see your company becoming profitable in the near future?
Our focus is to be in the top 2 or top 3 brokers of this country. We are in the digital space which requires us to have scale and be a market leader. There is no space for a fourth player, so our focus right now is only to acquire more and more customers. Though our focus is on growing our customer base, we are conscious of the cost and we are moving towards reducing losses. Profitability is on our sight but not our focus. We don’t plan on focusing on our profitability till we reach the top 2 or top 3 brokers, it is difficult to say when that will happen but, I will not be surprised if it happens in the next 12 to 15 months.
What is your view on the market for FY21?
There will be some volatility, the market is not expected to go up but, I don’t see the market going down from here on by 10% to 20%. It will be a range-bound market unless there is something very bad like large NPAs then it might be different otherwise I don’t see markets tanking.