In Conversation With,Vijay Chandok Managing Director and CEO, ICICI Securities Limited

In Conversation With,Vijay Chandok Managing Director and CEO, ICICI Securities Limited

Vijay Chandok
Managing Director and CEO, ICICI Securities Limited

“We Expect 2023 to be a Constructive Year for Equities”
 

How has the year 2022 been for your company and for the brokerage industry?
The year 2022 began against the backdrop of a strong CY21, which saw record participation from investors, growth in market activities and indices reaching all-time highs. However, towards the end of CY21, sentiment had begun to turn bearish with Federal Reserve hiking rates which resulted in the beginning of FIIs pulling out money. As we entered CY22, we had headwinds in the form of geopolitical tensions like the Russia–Ukraine war, soaring commodity inflation and continued tightening of money supply by central banks across major economies which resulted in the picking up of pace of withdrawal of FII money from the Indian markets.

As we speak, retail participation has also seen moderation from historical highs on the back of an uncertain market outlook as evidenced by slowing down of new client addition with average of ~35 lakhs per month in Q3FY22 as against ~20 lakhs per month in Q2FY23. In addition, there has been month on month weakening trend in NSE active clients, i.e. those who have traded at least once in the last 12 months on the NSE with 3.6 crore in October 2022 as against 3.7 crore in September 2022, indicating a downside of 2 per cent month on month, although continuing to remain higher than 2.8 crore in October 2021 as well as declines recorded in cash equity ADTO (average daily turnover) that came down ~43 per cent year on year to about ₹52,400 crore in October 2022 as against ₹92,700 crore a year back. 

The only notable exception to overall moderation impact was derivatives ADTO rising 93 per cent during the same period from about ₹143 lakh crore in October 2022 as against about ₹74 lakh crore in October 2021, although rising quarter on quarter at a slower pace now than CY21. While the current rate of new client addition, market turnover, addition in number of active clients, etc. may be lower from peaks, they are still substantially higher than the pre-pandemic levels. Just to give you a sense, a total of about 4 lakh accounts were getting opened monthly during the pre-pandemic period by the industry which in the latest quarter amounted to 20 lakhs per month.

We believe that this trend has been driven by some of the structural factors including emergence of a younger generation of customers who are digitally savvy, growth in digitisation that the country has witnessed, growing preference of financial instruments for savings and growing affluence, which will hold the industry in good stead going forward. In such an environment, our approach of broad-basing our business, focussing on market share metrics, granularisation of our revenue streams by adding newer products and services, improving the customer experience layer by scaling our technology and digital offerings, and pivoting the organisation as a leading wealth-technology platform has played out well.

Today, broking revenue is about a third of our overall revenue, as against two-thirds a few years back and newer offerings like wealth products, mutual funds, and insurance and loan products have begun to show scale. Our digital platform is a complete wealth-technology platform, offering full suite of investments, insurance and loan products – catering to wide spectrum of customer profile across their lifecycle needs. As on September 30, ICICI Securities saw its total client base expand cross 84 lakhs with 4.6 lakhs added during the July-September 2022 quarter. Total client assets on the platform was ₹5.78 lakh crore of which ₹3.1 lakh crore belonged to our 70,000+ private wealth customers comprising high net worth and ultra high net worth individuals and family offices. 

Amid the transforming landscape and our strategic focus on capitalising the business opportunity, we have remained firmly focused on upholding our ESG commitment through the year. During the fiscal, we augmented our investments in our people and our CSR programmes to promote the welfare of the communities around us amid the pandemic crisis. Our efforts to enhance our focus on transparency and ethics also continued to boost stakeholder confidence and ensure protection of their interests. The new set of investors who is now looking at equities and mutual funds with interest needs to be assured that their investments would be protected. Building this trust is very crucial.

What are your growth challenges and what is the outlook for the broking industry?
We are in a growing and yet extremely competitive industry. As explained earlier, while the growth rate has come off in the last couple of months, it is still higher than the pre-pandemic highs. Prolonged weakness in market typically results in slowing pace of customer acquisition. Hence, the overall health of the economy and vibrancy in the stock markets are crucial for our sector’s growth. In a growing market like India, failure to address the growth levers adequately can hamper growth. There exist opportunities across customer segments like millennials, Gen Z, working professionals, retirees, nouveau riche, and geographies. The opportunity to straddle across these customer categories with customised offerings is immense.

There is a big need to serve each segment uniquely through specific products and services. Not having the capability to offer each uniquely can hamper one’s growth aspirations. Our constant endeavour is to digitise and make available our products and services at scale across customer segments. In other words, we are tested on how well we can execute on innovation by marrying research, analytics and digital access for a safe and user-friendly trading and investing environment. A key growth challenge is to constantly evolve to provide a safe and conducive environment. Towards this we are investing a lot of resources in providing easily, freely and always accessible investor education content and making our research available to our customers in a democratic way. 

What are the emerging trends in the broking industry?
There is hyper competition in the sector, leading to consolidation of business amongst the biggest players. The top 10 players in volume terms have been consistently increasing their market share at the cost of those below over the last several years. There is a convergence in price with most players offering near equal rates, the key differentiator being the experience and value-added service one is able to provide. Another trend playing out is that the digital players have been able to garner scale and navigate the market landscape better. With the regulatory landscape becoming tighter and in favour of retail investors, those without adequate investments in technology for enhancing scale of business and also for managing the risks and controls will need to rethink their business models and will find the going tough.

The customer base is growing rapidly across segments with about 15 million Indians entering economic activity every year and also a large number of Indians superannuating. Similarly, with economic growth, there is a rise in the number of wealthy Indians. There is an increased need to service all these classes of investors at scale and with differentiated products, solutions and offerings. The successful players will be those who have a wide width of offerings and are able to effectively cater comprehensively to the needs of diverse customer segments from young Indians to the emerging affluent to the wealthy. The key here is to be able to offer wealth-technology solutions at a fast pace.

What are your top three strategic priorities right now?
We have been able to transform our business model from being predominantly an e-broker to a large wealth-technology franchise. We have been able to achieve this on our strengths including our expansive breadth of capabilities across customer and product segments, our trusted brand, our culture of continuous innovation and our investments in people and technology. As we look forward, we are endeavouring to enhance the scale of our business and our top three priorities are to focus on specific levers to help us do that. First, the journey of broad-basing our business by continuously diversifying the revenue streams will be carried forward with more product categories being introduced in an open architecture format. 

 Our endeavour is to scale up our wealth-technology business and also to create a financial marketplace of products and solutions to help meet the entire financial requirements of our large pool of customers across their lifecycle journey. Our second priority is to grow and retain our technology edge. Towards this we are investing in technology capabilities, both in the front and backend, in the areas of machine learning, big data, analytics, cyber security, regulatory technology, etc. Our third priority is people. We are continuously working to attract and retain the talent by providing a conducive and professionally challenging yet satisfying work environment. 

What steps have you taken to expand your market share?
In order to expand our market share, we have undertaken a couple of steps. As the first step, we have enhanced the scale of customer acquisition. This in turn has been done through a series of initiatives like enabling complete digital on-boarding of new customers, going open architecture by allowing any bank customer to be our customer as against only ICICI Bank till a couple of years back and expanding our partner network wide and deep. In the second step, due to our enhanced offering across product and service lines, we are engaging with customers more and across their lifecycle needs.

Through analytics and using big data and statistical models, we are able to predict with reasonable accuracy what product or solutions a particular customer may be interested in, based on his or her risk profile, age, and past behaviour on our platform. This is increasing our wallet share and overall customer lifetime value. As a third step, we are introducing more and more products features and tools in our digital properties like website and apps, making them absolutely best-in-class. This increases customer stickiness and attracts new customers through referrals. Recently we launched our AI-backed super app which offers never-seen-before capabilities.

This app is for all sections of customers whether for equity, trading, mutual funds, fixed income, commodity, global investing, etc. For specific customer segments, we are launching a series of tools which will aid them in their investment or trading journey. On our journey to become a digital financial supermall, we have expanded options for our customers when they are looking for insurance solutions across life, general and automobile by including more brands for them to choose from. Also, besides offering a variety of loan products like personal, home, LAS, etc., we are also giving our customers various lenders to choose from. 

Rate this article:
2.5

Leave a comment

Add comment

DSIJ MINDSHARE

Mkt Commentary28-Mar, 2024

IPO Analysis29-Mar, 2024

Expert Speak29-Mar, 2024

Mindshare29-Mar, 2024

Multibaggers28-Mar, 2024

Knowledge

General26-Mar, 2024

MF25-Mar, 2024

General18-Mar, 2024

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR