Full-service broking firm Kotak Securities, which has been working with franchisees since 2000, is on an expansion plan to on-board them now and has already done so with five so far this year and nearly a dozen are in the pipeline.
The brokerage from Kotak Mahindra Bank, which handles over 27 lakh demat accounts, has over 1,330 franchisees across the country now, some of which it wants to onboard now following which they will work as Kotak's Securities and their customers will be Kotak's.
"We've already on-boarded five such independent stand-alone brokerages such as Money Spell and United Securities and are in active discussions with nearly a dozen more and hope to conclude the discussions with the by March," Jaideep Hansraj, who recently assumed charge as the managing director and chief executive of Kotak Securities, told PTI. The move assumes importance as traditional, bank-led full service broking companies have been losing customers to new-age online only discount brokerages like Zerodha, Angel One (which was a stand-alone non-bank led brokerage but of late turned to a discount led online brokerage) Upstoxx among others.
Of the 10.5 crore-odd demat customers, a vast majority are with these discount brokers and were on-boarded since the pandemic when the discount brokerages made a killing getting under-30 customers. The mad-rush to Dalal Street was also induced by the pandemic driven lockdowns and the massive rally in the market. Competition from discount brokerages was so intense that HSFC Securities has announced a plan to open a separate entity for discount broking.
Those franchisees who opt to be on-boarded by Kotak will use Kotak's software and terminal along with branding, and also their customers will become Kotak's customers. Explaining the rationale for franchisee on-boarding, Hansraj said with such associations with us, the customers of mid-sized brokers get access to our technology-enabled solutions and a platform tailor-made for them along with eclectic product offerings in a bouquet of asset classes.
Our dedicated research team empowers those clients with robust research recommendations, updated market data, timely market analysis, research reports. From a customer's perspective, it's hugely beneficial for investors who operate through independent brokers to access our technology and research insights, all over an app, he added.
Hansraj said from these five tie-ups they've on-boarded 25,000 active new clients. Despite growth in discount brokers, Kotak has added nearly 5 lakh new active customers in FY22, at 1,286,197, up from 7,98,885 in FY21.
Through such tie-ups with partner brokers, Kotak also provides direct access to the US markets. Full-service brokerages are looking at customer addition and retention through such means as new-age brokers have been on average adding 0.5 million customers each since the pandemic while, brokerages like Kotak has been witnessing stagnancy or even a fall in active customers.
For instance, Kotak had 3,68,638 active customers in March 2018, which rose to 4,37,822 next year and further to 5,71,806 in March 2020, which, thanks to the lockdowns, jumped to 7,43,206 in March 2021 and zoomed to 12,56,001 in March 2022. But come FY22, the numbers have been on a steady decline or facing muted growth. Kotak's active customers inched to 12,81,875 in April 2022, which rose marginally to 12,90,410 in May 2022 but began to fall then as June 2022 saw it slipping to 12,67,424, and further down to 12,23,441 in July and steeply declining to 11,79,053 in August 2022.
Kotak Securities is present through 153 branches across 361 cities across apart from 1,332 franchisees, apart from having a well-entrenched presence in the Asia Pacific, European, Middle Eastern and American markets.
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