upstox: What made Upstox India’s second largest stockbroker after Zerodha

Upstox (a.k.a. RKSV Securities), which has just become India’s second-largest stockbroker, has been a story of young entrepreneurs making the most of India’s digital adoption in the financial markets space.

Such has been the speed of digitisation over the past few months that the company that took around 10 years to get its first 10 lakh active clients now aims to grow that number to 20 lakh over the next few months.

Data compiled by NSE showed discount broking firm Zerodha had 24.70 lakh clients at the end of September, making it India’s largest, followed by Upstox at 12.20 lakh. Traditional brokerages ICICI Securities, Angel Broking and HDFC Securities ranked after them in that order with 11.95 lakh, 10 lakh and 8 lakh active clients, respectively.

Ravi Kumar, Co-founder and CEO, Upstox, gives full credit to the government’s Digital India initiative for rapid rise in internet penetration in the country, whose benefit has started trickling down to his own business and those of others.

He said the digital initiatives taken by the government can help improve India’s equity penetration level sharply.

“Digital India has helped to take digital-only platforms deeper by enabling easy access to information about the stock market,” Kumar told in an interview.

He sees humungous growth opportunity in the domestic broking business, considering the small size of equity participation. “We can hit the milestone of 20 lakh active clients over the next few months,” he said.

Kumar attributed Upstox’s quick acceptance among clients to its customer-first approach. “Besides, good technology has been an essential ingredient of the business. This is enabling faster decision making and helping us reach out to people in Tier-2 and Tier-3 cities,” he said.

Kumar claims the majority of Upstox’s customers are millennials, and are from Tier- II and III cities, and 80 per cent of the customer base comes from towns such as Nashik, Jaipur, Guntur, Patna, Kannur, Tiruvallur and Nainital, among others.

Upstox does not call itself a discount brokers, a space where the space is getting squeezed with many traditional brokerages launching discount broking arms replicating the Zerodha model.

Kumar acknowledges the intense competition in the business, but feels India is a vast market and will open up room for more players. “Customers are very intelligent and are able to discern between a high-quality service that meets their needs and enhances overall user experience. Our DNA is digital-first in everything we do. It helps us grow and build a rich user experience,” he said.

Yet, he does not rule out some consolidation in the broking businesses going forward. “The differentiator will be in providing unique user experience, service-level offerings and unique educational tools,” he said.

Meanwhile, some brokerages are innovating and creating models, where the fee structure is determined by profit at the client level.

Sharekhan, now owned by French banking major BNP Paribas, in September announced its entry into the discount broking space with Espresso, which charges no fees if a trade ends in losses.

Kumar says key trends being noticed in the broking space of late are the rise of women traders and millennials’ participation, rising popularity of trading on mobile phones and participation in equity from tier-II and III cities.

Upstox claims a 32 per cent growth in account opening by women between April to June 2020, compared with that in the previous quarter. As many as 70 per cent of these women are new-to-market investors. Additionally, more than 35 per cent of women customers are housewives.

“Demand for financial independence, increasing need to share household expenses due to rampant pay cuts and layoffs, rising gold prices, low returns on bank fixed deposits and real estate investments and attractive stock valuations since late March have all led to a rise in the number of new equity investors in general and women investors in particular,” Kumar said.

“People are increasingly zeroing in on different avenues to invest in and looking at equity as one of the potential options,” he said.

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