The income level of brokerages declined substantially in the last financial year even as a bearish investor sentiment forced them to look at diversifying from their core activities to boost their top line. According to a latest report by Dun & Bradstreet India (D&B India), the aggregate income of the top broking houses declined 18.6% y-o-y to R3,205.49 crore during FY12. Meanwhile, the overall net profits of the broking companies eroded 38.3% to R427.38 crore.
Further, the analysis, which included 124 leading equity broking companies of India, showed that there was a decline in income from broking services, whose share in total income decreased from 74.1% in FY11 to 69.8% in FY12.
While the overall fee-based services and fund-based services of the broking companies showed a decline of 20.6% and 9.1% to R2,588.98 crore and R536.36 crore, during the fiscal, income from treasury operation services, which accounts for just 4.4% of total income, grew 16.3% y-o-y in FY12.
Interestingly, most brokerages do not think that the cash equity market will be among the fastest growing segments within the capital market. They have identified commodities, currency futures, and derivatives as the top three fastest growing products in the Indian securities market.
The last financial year also saw an increase of 13% in the number of e-broking accounts. ?Introduction of new technologies has resulted in rapid proliferation of internet-based broking. Easy accessibility and faster facilitation through various technological platforms have led to rapid growth of online trading,? stated the report.
On a different note, the debt-equity ratio for broking companies dropped significantly from 27% in FY11 to 7.6% in FY12. The debt-equity ratio for mid-size companies was on the higher side at 13.5% followed by small-sized companies at 7.9%.