MUMBAI: HDFC Securities, which entered the discount-broking space a little over a year ago, expects its low-cost broking arm HDFC Sky to turn profitable in the next fiscal.
This is on the back of the runaway success it notched up in the past 13 months in terms of customer acquisition (over 1.1 million as of December) and the rising trading volume on the platform. The company is not planning any share sale, citing strong financial performance.
The full-service brokerage and its discount broking arm have added 1.2 million new customers this fiscal so far, taking the total to 6.1 million.
However, the number of active clients remains at 1.4 million. Of this, total additions - as much as 1.1 million - have been onboarded through the new platform.
“Discount broking is the future of broking in our country and full-service brokerages will get limited to just HNIs (high-net-worth individuals), going forward. This is because a large majority of investors coming to the market now are all choosing only discount platforms,” Dhiraj Relli, MD & chief executive of HDFC Securities, told TNIE.
“The message that customers are choosing discount brokers is clear from the huge number of customers we’ve added in just about 13 months alone—1.1 million, and this is also underlined by the much faster growth of similar other platforms,” he said.
On the profitability part, Relli said, “Next fiscal we should be making cash profit and in FY27 we should break-even.” This is despite the fact that he has no plans to increase the charges for retail customers on the Sky platform. Currently it charges R20 per order for buying and selling.
HDFC Securities, which offers the longest days of margin funding—as many as 270 trading days--has a large margin funding book of R7,500 crore and charges 13-15% interest on margin funding per month, making it a very profitable revenue stream. Relli expects to close the current fiscal with a revenue of R3,300 crore and a net income of R1,165 crore, up from R950 crore of net profit last fiscal.
“We don’t need capital at all. So there is no need for fund raising through an IPO. Last year also we raised R1,000 crore through a rights issue and had earned R950 crore in net income,” Relli said.
Overall, he said investors should not expect high returns from the market in 2025, as he sees only modest returns from Nifty.
“The Nifty shows only modest upside potential, as it is now trading at 23xFY25 and 20.5x FY26 consensus EPS, indicating modest upside potential in the next 12 months. This implies that investors may face a period of lower-than-expected returns, as the broader market may have already priced in some of the expected growth,” he said, adding the Nifty may touch 26580 points sometime next year.
Since the advent of the low/discount broking spearheaded by Zerodha—the most profitable brokerage for the past many years—full-service players have been losing market share and today discount broker Groww is the largest with over 13.1 million active customers followed by Zerodha at 8.1 million, Angel One at 7.6 million and Upstox at 2.9 million.
Groww unseated Zerodha last year to become the largest player and since then has had a runaway success in terms of customers but not in terms of profit or revenue, where Zerodha is the undisputed leader with R4,700 crore of net income in FY24.