Indian brokerage industry to see record revenues in FY22

Broking firms are set to clock record revenues in the current financial year, driven by higher retail participation and favourable systematic liquidity. According to rating agency Icra, the industry is likely to clock a total revenue of Rs 27,000-28,000 crore in FY2022, registering a year-on-year (y-o-y) growth of 28-33%. However, the revenue growth rate is expected to moderate to 5-7% in FY2023 with an expected industry total turnover of Rs 28,500-29,000 crore.  

The increase in the activity in equity markets since the beginning of the pandemic was driven by robust corporate earnings, favourable liquidity in both international and domestic markets, higher internet penetration, and retail participation, experts said. As of December 2021, the total number of demat accounts increased to 80 million from 55 million in March 2021. The net monthly accounts addition increased from 11.9 lakh in FY2021 to 28.33 lakh in the current financial year, while it was only 4.1 lakh per month during FY2020, said Icra in the note. Additionally, the average daily turnover also increased 126% to Rs 63.07 trillion during the nine months ended FY2022 against Rs. 27.92 trillion in FY2021. 

According to an analysis of 18 sample brokerage firms done by Icra, companies have reported 38% year-on-year growth in revenues. Further, the cost structure and operational efficiency of brokerage firms have also improved over the last few years — with a major focus on customer acquisition through digital channels and improvement in economies of scale. Brokerage firm Motilal Oswal Financial Services reported YoY growth of 46% and 47%, respectively, in Q2FY22 and Q3FY22, whereas ICICI Securities saw its revenues scaling up 26% and 52% during Q2FY22 and Q3FY22, respectively. 

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However, going forward, in FY2023, the revenues of the overall industry are likely to see some moderation as the revenue growth rate is expected to taper to 5-7%, with an expected industry total turnover of Rs 28,500-29,000 crore. However, Icra expects growth to remain contingent on capital market performance and maintenance of similar yields as seen in recent years. 

“We expect the markets to remain volatile, going forward, amid various domestic and international cues. While the transaction volumes have reported month-on-month growth, primarily led by the derivatives segment during the quarter, prolonged subdued capital markets could have a bearing on the cash segment turnover and other allied capital market businesses, which, in turn, could impact the industry’s earnings,” said Samriddhi Chowdhary, vice- president – financial sector ratings, Icra Ratings.