Broking industry's revenues could rise 15-20% in FY18, says ICRA

MUMBAI: The broking industry could see revenues increase to Rs 18,000 crore-Rs 19,000 crore in the current financial year, logging a growth of 15-20%, backed by healthy volume growth and an increase in share of the cash segment, said rating agency ICRA in a note.

"Volumes are likely to grow by about 20-25% in FY2018, supported by positive investor sentiment and a benign capital market outlook," said ICRA.

The rating agency said the initial public offer pipeline for FY18 is likely to further support retail participation on the exchanges.

"The higher yielding cash volumes are expected to receive a boost with a likely increase in margin trading by brokerage houses pursuant to the recent regulation on lower margin requirements. This would also help support the income profile of full-service brokerage houses given the price competition from discount brokerage houses," said ICRA.

Equity turnover at the exchanges grew 35% in FY17, with the average daily turnover increasing to Rs 4 lakh crore in FY17 from Rs 3 lakh crore in FY16.
The positive market sentiment continues in the current financial year, with the average daily turnover increasing to Rs 5.7 lakh crore in the June quarter, 40% higher over the FY17 average.

“The increase in DII inflows provides greater resilience to the domestic capital markets. While the current capital market outlook is benign and the IPO pipeline for FY2018 is likely to encourage retail participation, a meaningful revival in corporate earnings would provide further fillip to the capital markets and boost FII equity inflows,” said Karthik Srinivasan, Senior Vice President and Group Head - Financial Sector Ratings, ICRA.

Srinivasan expects a further improvement in the profitability of brokers in FY18 driven by higher revenues following the uptick in the equity markets, higher interest income and control on expenses provided the brokers are able to maintain their credit costs in the margin lending business.