While many sectors have witnessed the worst period during the Covid-19 pandemic, the broking industry saw significant growth during the period and the growth in the industry was driven by the sheer increase in retail participation, therefore there was robust corporate earnings and favorable liquidity in both international and domestic markets.
Outlook Towards Demat Accounts
Increased financial awareness has now led to a 130% growth in the Demat accounts openings when the pandemic resulted towards a significant meltdown in the stock market, whereas another significant driver for increasing participation in the equity market was technological innovations, in which smartphones and affordable data have pushed trading and investing into the digital sphere, with the help of the implementation of eKYC and Aadhaar eSign, opening a Demat account has become a paperless and simple process, while in the financial year 2020 an average of 4 lakh Demat accounts were opened every month which has then greatly benefited the broking companies, and this number further increased towards 11.9 lakh in the financial year 2021 and is currently at 28.33 lakh for the current financial year, in which the industry is anticipated to generate total revenue of Rs 27,000–28,000 crore in FY22, representing a year-over-year rise of 28–33%, according to rating agency Icra, but it is anticipated that the pace of revenue growth will slow now down to 5-7% in FY23 with an anticipated total industry turnover of Rs 28,500-29,000 crore.
What do Broking Companies Do?
The financial brokers give business or individual clients the financial assistance, while the brokerage sector in India is shifting from a transaction-based to a fee-based one, providing services like wealth management and investment consulting, while in addition to advising services a greater emphasis is being placed on fund-based operations, such as margin finance and lending against shares, which enables brokers to be able to generate stable profits, while to assist clients in reaching their goals financial brokers have improved their marketing skills, and they provide a variety of goods and services that improve their rapport with customers.
Top Listed Stock Brokers in India
It is a subsidiary of ICICI Bank Ltd it began its operation in May 1995 and continues to grow its operation while expanding its client base and providing different types of services, while with a market capitalisation of Rs 14,396 Cr, it is the largest listed broking stock of 2022, wherein the company is diversified into the business of Retail and Institutional Broking, Distribution of financial products, Wealth management and investment banking, whereas the company has a client base of 7.56 mil customers with a CAGR of 16% from FY17-FY22, and for the financial year 2022 they had a client acquisition of 2.27 million customers which is the highest ever recorded in a year, and if one takes a look at the financials of the company, then it has shown a consistent increase in revenue from Rs 1,861 Cr in FY18 to Rs 3,435 in FY22, and along with the revenue the company’s profits have also increased from Rs 553 to Rs 1,383 in the same period, while the company has a ROCE of 27% and an ROE of 65% which is really a positive attribute of the company, and it also has a PE of 10.4 compared to the industry PE of 25.4 which indicates that the company is undervalued when it is compared to the industry, while the company’s debt has heavily increased in the last five years, and in FY22, its debt stood at Rs 7,846 Cr with a debt to equity ratio of 3.23 which is a major drawback of the company, while in the last two years, the stake of the promoters has been reduced by 4% and currently stands at 74.87%.
Motilal Oswal Financial Service Ltd
It was founded as a small broking sub-unit in 1987, while with excellent business practices and the implementation of cutting-edge technology, the company has blossomed into a 9000+ member team, and with a market capitalisation of Rs 11,411 Cr it is the second largest listed broking stock of 2022, wherein the company has diversified its business portfolio into broking, asset management, wealth management, private equity and real estate segment, the company is headquartered in Mumbai & has spread across 550 cities and has acquired a customer base of 4.8 million customers as of FY22, while when one takes a look at the financial statements of the company one can see that the company’s revenue has increased from Rs 2,751 Cr in FY18 to Rs 4,298 in FY22, while the profitability of the company has also increased from Rs 829 Cr in FY18 to Rs 1,616 Cr in the same period, the valuation of the company is undervalued compared to the industry with a PE of 8.71 which is a positive prospect for the company, even though the company’s debt has been increasing, it has maintained a debt to equity ratio of 1.08 which is relatively good for the company, while a slight drawback for the company might be that the promoters reducing their stake by 1.16% over the past year, and the promoter’s stake currently stands at 69.50%.
Angel One Ltd
It was formerly known as Angel Broking Limited which was incorporated on 8 August 1996 as a private limited company, and as of December 31, 2021, it has become the largest listed retail broking house in India in terms of active clients on NSE, wherein with a market capitalisation of Rs 10,686 Cr, it is the third largest listed broking stock of 2022, and it has a diverse range of financial products and service offerings which include broking services, investment advisory, margin trading facility, loan against shares, distribution of third-party financial products and investor education, while the company has achieved a client base of 9.2 million customers in India, which is the largest client base among the listed retail broking houses, and it has also acquired a 21.3% market share towards the overall equity turnover, and if one takes a look at the financials of the company, one can notice that the company has noticed significant growth after 2020, while the company’s revenue grew from Rs 748 Cr in 2020 to Rs 2,292 Cr in 2022, and the net profits of the company have also increased significantly from Rs 114 Cr to Rs 625 Cr in the same period, while another positive thing about the company is, that it has a ROCE of 35.5% which is the highest among the top companies and an ROE of 46%, while the PE of the company stands at 15.6 which means the company is undervalued when compared to the industry, although one negative point is that the company has a debt of Rs 1,258 Cr, and its debt to equity ratio stands at 0.79 which is a reasonable amount for the company.
Multi Commodity Exchange of India Ltd
It started its operations in November 2003 under the regulatory framework of the Securities and Exchange Board of India, being the first listed exchange in India, while with a market capitalisation of Rs 6,914 Cr, it is the 7th largest commodity exchange in the world, and it is also the first exchange to offer commodity options contracts, bullion index futures and base metals index futures contracts in India, and as of FY22 the company has attained 93.6% market share and has gained a monopoly in its segment, and it is spread across 1,018 cities and towns across the country, while if one takes a look at the financials of the company, one can see the company’s revenue has dropped from Rs 398 Cr in FY20 to Rs 367 Cr in FY22, and the company’s profits have also reduced from Rs 265 Cr to Rs 184 Cr in the same period, while the PE of the company is overvalued at 43.4 when compared to the industry PE of 23 , wherein the ROCE and ROE of the company stand at 14.4% and 11.2% which is comparatively low when compared to its peers, while another major drawback is that promoters do not hold any stake in the company, and a significant aspect of the company is that it is almost debt free with a debt-to-equity ratio of 0 & the company has a dividend payout of 61.9%.
List Of The 15 Top Listed Stock Brokers In India:
|Company||CMP||Market Cap (in Cr)|
|Share India Securities Ltd||1,182.75||3,773.75|
|Choice International Ltd||398.35||1,982.03|
|Geojit Financial Services Ltd||50.4||1,204.89|
|Dolat Algotech Lts||67.95||1,195.92|
Without a doubt, the industry has got a tremendous growth potential due to the vast number of consumers in the country, and this is a result of the nation’s huge 1.3 billion population, while the broking industry has a high potential for growth in the country, but one must be the aware of the challenges the sector may face, and these include the seasonality of the stock & the major portion of the market share taken by unlisted players like Upstox and Zerodha.