Mumbai: The retail broking subsidiary of Anil Ambani’s Reliance Capital Ltd (R-Cap) plans to boost the number of employees by three-fourths and to double its franchisee and branch network to tap opportunities in a buoyant capital market.
Reliance Securities Ltd (R-Sec) plans to increase its employee strength to 1,400 in 18 months, from 800 now. This will be accompanied by a doubling of the number of franchisees associated with the firm to 10,000, and R-Sec’s own branches to 160, according to executive director Vikrant Gugnani.
“We are increasing our reach by doubling our franchisee network and branches, and investing in enhancing our technology and infrastructure in broking and distribution services,” Gugnani said in an interview.
Interestingly, most of the new talent R-Sec is looking to hire does not need to have prior experience in the broking business.
“We are looking for functional specialization. For instance, if we need a customer relations executive, then we will hire someone from the hospitality industry and invest in training the person in the broking business,” Gugnani said.
A case in point is the senior management at R-Sec, 16 of whom have been recruited this year alone from diverse backgrounds such as information technology (IT), banking, advertising and mutual funds, among others. Four more executive of the rank of vice-president and above are likely to come on board this year, said Gugnani.
R-Sec’s hiring drive has been spurred by bullish primary and secondary markets, and increased participation from retail customers. Since September 2009, the bellwether index of the Bombay Stock Exchange, the Sensex, has advanced 15% to 18,221.43 points. Some market experts say it could reach 20,000 by the end of the fiscal, powered by robust economic growth, a healthy monsoon and steady corporate earnings.
Primary market issues, meanwhile, are back in favour after a lull during 2008-09, driven by government divestments. Thirty applications for public stock offers are pending with the capital market regulator, the Securities and Exchange Board of India, or Sebi. State-owned Coal India Ltd is expected to raise Rs17,700 crore in India’s largest-ever new share sale.
Since September 2009, at least 400,000 new demat accounts have been opened at National Securities Depository Ltd, or NSDL, a depository house that manages shares in electronic form, indicating increased retail participation.
R-Sec’s hiring drive, perhaps the largest by a broking firm in recent times according to Gugnani, is part of a Rs300-400 crore investment plan the company has drawn up for the next three years to improve technology and risk management capabilities, and to introduce new retail equity products. The entire spending would come from internal accruals, he said.
Gugnani explained that during the slowdown in the second half of 2008, a number of employees in the broking business opted to switch to verticals such as life insurance that remained stable during the turmoil while the stock markets turned choppy.
Until recently, the broking and distribution functions were housed under group unit Reliance Money. The broking business was recently transferred to R-Sec, a new entity. According to an investor presentation on R-Cap’s website posted at the end of the March quarter, Reliance Money’s employee strength—including broking and distribution—was nearly 50% of what it was in September 2008.
Reliance Money is now in the business of distribution of financial products and money changing.
“The number of employees came down following the sale of our point-of-sale business, Wall Street finance business and natural attrition,” a company spokesperson said.
R-Sec had a customer base of 650,000 as of July.
At present, ICICI Securities Ltd is the largest broking house in the retail space with at least two million customers. The company’s distribution business is managed by at least 2,000 employees.
There are at least 900 equity brokers registered with Sebi and 100,000 employees working under these brokers.
Most of the listed financial services firms with broking businesses posted profits in the first quarter. Edelweiss Capital Ltd and India Infoline Ltd recorded net profits of Rs65.5 crore and Rs44 crore, respectively, in the June quarter.
R-Cap posted a net profit of Rs77.67 crore during the first three months of the fiscal.
Last week, Mint reported that a growing number of public offers and disinvestment mandates by the government were driving demand for investment bankers as well with expertise in the equity capital market.
According to Gugnani, the investments by R-Sec will start yielding returns in the next five years.
Raamdeo Agrawal, director, Motilal Oswal Financial Services Ltd, says that the final outcome of the services offered is most important in the retail broking space.
“At present, the market is inclined towards equity options, which is a hollow business for brokers. But Reliance has tremendous HR (human resources) capabilities, and I am sure they would spend the money on (the) right things,” Agrawal said.
Spending alone may not guarantee returns, experts cautioned.
“Retail broking doesn’t make much money and spending money doesn’t guarantee returns. With so much of turnover in the equity options segment, it is difficult to make money because the commissions earning in this space is almost nil. Only 12% of the total turnover is in the cash segment,” said a senior official at a financial services firm who did not want to be identified.