Mumbai: Weeks after entering the financial products distribution market with mutual funds, Paytm Money wants to offer shares of listed companies directly to customers. The firm is expected to submit its application within two weeks to either of the two exchanges, BSE and the National Stock Exchange (NSE), said two people familiar with the development, seeking anonymity.

Pravin Jadhav, whole-time director at Paytm Money, refused to comment.

Ashishkumar Chauhan, chief executive officer at BSE, said: “If they wish to apply for a broking licence, we would be delighted to welcome them."

On 4 September, Paytm Money had launched an app to offer mutual fund products to its clients. Close to 1.07 million customers have already registered for the service. At present, more than 10,000 customers a day are allowed access to the app to be able to buy and sell mutual funds.

By offering direct equities, Paytm Money aims to attract slightly more sophisticated investors. According to one of the two people mentioned above, if Paytm gets the stockbroker licence, it will be able to offer direct equities, commodities and derivatives.

There are 17.6 million depository accounts with the National Securities Depositories Ltd and 15.8 million depository accounts with the Central Depository Services (India) Ltd as on 31 August. There are close to 20 million mutual fund investors in India. According to NSE, 87,88,790 accounts are active with all stock brokers on the exchange put together.

Paytm’s entry could potentially shake up the markets and bring in new investors, given the lack of penetration of household savings in financial instruments, according to market experts. According to the Reserve Bank of India’s annual report, 0.9% of the gross national disposable income went into shares and debentures in 2017-18, up from 0.2% in 2016-17. “Potentially, they could introduce a lot more first-time investors in the stock market than we have ever done. That is mainly because they already have a captive audience," said Nithin Kamath, CEO of Zerodha, India’s second largest stock brokerage house by number of clients.

Paytm claims to have more than 350 million registered users.

“Paytm wants to target not just beginners when it comes to investing by offering them mutual funds, it also wants to cater to advanced investors who, it feels, can invest directly in equities," said the second person mentioned above.

The question is how will Paytm ensure that investors don’t churn frequently.

“India requires an investment culture at the moment, not a trading culture. Whoever can build this investment culture will be the winner in the long run. Brokers can go after volumes, but many of them do not go after the quality of these volumes," said Chauhan of BSE.

One of Paytm Money’s advantages is that it can offer products at low cost. It already offers direct plans of mutual funds, which do not involve distributor commissions and thus come at a lower cost. Besides, it does not charge any advisory fee. It remains to be seen if it waives off brokerage charges along the lines of Zerodha, which does not charge if you take delivery of stocks bought on its platform.

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