Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

FinTech Playbook - Discount Brokers - 'Nudging' the long tail of standalone brokers - HDFC Securities

Posted On: 2021-10-23 09:29:23 (Time Zone: IST)


With a pure broking revenue pool of >INR85bn, discount brokers, the "no-frills" challengers of the broking industry, are poised for a 10-percentage point (pps) increase in revenue market share (RMS) to 37% by FY25 on the back of their massive share of wallet in the increasingly relevant millennial population and rising mix of app-based trading. Given the current industry structure (low entry barriers, rising costs of compliance, and high competitive intensity), our analysis suggests that a bulk of the RMS gains would accrue from traditional brokers, especially the long tail of standalone brokers. We construct and introduce our proprietary wallet share quotient (HSIE-WSQ) to demonstrate that discount brokers have a decent 26% share of this wallet and have established a firm right-to-win (RTW) with this segment of consumers. Basis the results from our in-house survey and discussions with practitioners, we outline 13 vectors across four categories to construct our proprietary HSIE-RTW Quotient, a framework to help identify dominant franchises with an indisputable right-to-win. Finally, we outline a couple of potential endgames that are likely to shape the discount broking industry over the next 4-5 years.

Revenue pool to grow 2x by FY25; discount brokers slated for 37% RMS: Amidst a doubling of the overall broking revenue pool (INR230bn), discount broking revenues (pure broking) are expected to grow 2.8x to INR85bn by FY25 on the back of rising demat penetration (FYTD monthly demat adds at 6x vs. FY20), calibrated consolidation of pricing power, continued buoyancy in capital markets and the advent of highly-convenient app-based trading. Our analysis implies a 37% RMS for discount brokers within the overall pure broking revenue pool from an estimated RMS of 27% in FY21.

Discount brokers dominate share of millennials' wallet: Given the rising significance of millennials (~400mn, 34% of India's adult population and nearly 50% of working population), it is crucial for capital market firms to understand their investment habits. We estimate that millennials currently contribute ~14% of the total equity wallet. We construct and introduce our proprietary wallet share quotient (HSIE-WSQ) to demonstrate that discount brokers have a dominant 61% share of this wallet and have established a firm Right-To-Win (RTW) within this segment of consumers. However, as millennial incomes and aspirations grow over the next decade, over 10mn NTM (new to market) clients will be up for grabs for bank-led brokers.

Constructing the HSIE-RTW Quotient: Basis our discussions with global as well as domestic industry practitioners and consultants and our proprietary survey results (N > 50), we list 13 vectors to construct the HSIE-RTW (right-to-win) Quotient, a framework to identify the secret sauce for a dominant discount broking franchise. These vectors are classified under four pillars: (a) user interface (UI / UX); (b) platform responsibility index; (c) quality of customer franchise; and (d) product/service breadth for potential upsell.

Investment implications: Despite a work-in-progress tech interface, we identify ICICI Securities (ISEC) as the "franchise to beat" on the back of its early efforts on the open-architecture client acquisition funnel. We maintain ADD with a TP of INR975 (24x Sep'23 EPS). On the other hand, Angel Broking (NOT RATED) appears to have solved for the user interface but now needs to graduate towards building a quality customer franchise.


Click here to send ur comments or to feedback@equitybulls.com

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Mutual Fund Review - November, 2021 - ICICI Direct

Maintain SELL on Asian Paints - Demand rebound strong; profitability cut steeper - HDFC Securities

Mphasis - 2QFY22 Result Update - Growth Resiliency Continues; Raise Target Price - Reliance Research

Gateway Distriparks - Rail continues to drive earnings - ICICI Securities

JSW Steel - Start of EBITDA contraction cycle - ICICI Securities

Shoppers Stop - Beneficiary of faster than expected recovery - ICICI Securities

Asian Paints - Q2FY22 Result Update - ICICI Securities

TVS Motor Company - EVs now at the center of its global ambitions - ICICI Securities

Havells India - Strong demand across regions; profitability likely to be muted in H2FY22 - ICICI Securities

Tata Communications - Rising visibility on revenue growth - ICICI Securities

Angel Broking - Business momentum intact for strong earnings growth - ICICI Securities

Q2FY22 Result Update - Rallis India - ICICI Direct

Q2FY22 Result Update - Navin Fluorine - ICICI Direct

Q2FY22 Result Update - Shoppers Stop - ICICI Direct

Company Update - Mastek Ltd - ICICI Direct

Q2FY22 Result Update - JSW Steel - ICICI Direct

Q2FY22 Result Update - VST Industries - ICICI Direct

HDFC Life Insurance - Q2FY22 First Cut - ICICI Direct

Federal Bank - Q2FY22 First Cut - ICICI Direct

Company Update - Taj GVK Hotels - ICICI Direct

Q2FY22 Result Update - Indian Hotels - ICICI Direct

Inox Leisure - Q2FY22 First Cut - ICICI Direct

Supreme Industries - Q2FY22 First Cut - ICICI Direct

Q2FY22 Result Update - Biocon Ltd - ICICI Direct

PVR Ltd - Q2FY22 First Cut - ICICI Direct

Q2FY22 Result Update - Asian Paints - ICICI Direct

Quant Pick - RBL Bank - ICICI Direct

Q2FY22 Result Update - IIFL Securities - ICICI Direct

Q2FY22 Company Update - Bank of Baroda - ICICI Direct

Q2FY22 Result Update - Syngene International - ICICI Direct

Company Update - Sonata Software - ICICI Direct

Q2FY22 Result Update - Gateway Distriparks - ICICI Direct

Q2FY22 Result Update - Tata Communications - ICICI Direct

Q2FY22 Result Update - Havells India - ICICI Direct

Mphasis - 2QFY22 Result Update - Growth Resiliency Continues; Raise Target Price - Reliance Research

Maintain ADD on Havells India - Outperformance continues; miss on margin - HDFC Securities

Indraprastha Gas - Company Update - EV vs CNG; TCO Economics Favour CNG - Reliance Research

Tata Communication - Revenue growth remains muted - YES Securities

Havells India Ltd - Q2FY22 Result Update - YES Securities

ICICI Lombard General Insurance - Q2FY22 Result Update - YES Securities

Syngene International Ltd - Lack of near term triggers - YES Securities

Mphasis - Q2FY22 First Cut - YES Securities

IndiaMART InterMESH - Q2FY22 First Cut - YES Securities

Sterlite Technologies - Q2FY22 First Cut - YES Securities

Can Fin Homes - Q2FY22 First Cut - YES Securities

Havells India - 2QFY22 Result Update - Strong Revenue Growth; Higher Commodity Prices Impact Earnings - Reliance Research

TVS Motor - 2QFY22 Result Update - Healthy Exports Coupled with New Launches to Aid Higher Margins - Reliance Research

Maintain SELL on Jubilant FoodWorks - No big fireworks unlike in other discretionary names - HDFC Securities

Sonata Software - Strong execution - HDFC Securities

Navin Fluorine International - Muted performance - HDFC Securities


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020