Dear Sheru,

I hope this communication finds you well. Last month, even as the stock market bounced back, the performance of our broking, mutual fund (MF) distribution, exchange margin funding (EMF) and Loan Against Securities (LAS) businesses remained weak. Before taking a look at the April numbers, let’s first learn about the things that went right last month.

• Our market share in the cash segment grew by 9% MoM in April this year.
• Our mini contract volume increased by 23% MoM on the back of a mini contracts contest run in April this year.
• Our MF AUM increased by 3% MoM in April this year.
• The trailing 12-month active client count was 6,79,071 at the end of April 2023. Though less than our March-end number, our performance on this metric (in terms of the % of growth/decline) was relatively better than that of both the overall industry and the full-service broking category market leader in the same period.
• Close to 7.7K branch-mapped broking clients were reactivated as part of MRP in April this year.
• Sharekhan launched IPO online subscription facility for HNI clients, introduced CUSPA on the website and rolled out the two-factor authentication facility for all MF transactions in April this year.
• In April, BR Rahul joined Sharekhan as the Zonal Head of the South Zone to build our branch business in the southern states of India.
• In the same month, we completed a three-month-long design thinking programme in which 58 Sherus from Head Office participated to find solutions to eight critical business challenges of Sharekhan.
• Based on the ideas that emerged from the design thinking exercise, the IT team has started work on the following three deliverables: a better mobile trading app, a super app for Relationship Managers and Business Partners, and an enhanced the DIY journey.

The Indian stock market bounced back in April this year, with the benchmark indices, Nifty and Sensex, rising by about 4% each month on month (MoM) on the back of positive domestic factors like a lower-than-expected inflation and a pause on interest rate hikes. As the market sentiment improved, in our equity broking business, we gained 9% market share in the cash market. However, as the options contests of the first quarter came to an end in April, client activity in options cooled off and our market share in the futures and options (F&O) market showed a fall of 36% MoM. Given that nearly 60% of our brokerage comes from the F&O segment, this affected the company’s average daily revenue, which declined by 4% MoM. The revenue performance was also affected by a 22% month-on-month (M-o-M) drop in new client additions and a 5% M-o-M dip in the daily client activity during the month. The markets have been maintaining a positive tone for the last one and a half months and are now trading just 4% away from their record high. May this uptrend rub off on our business! Gear up, Sherus.

In the commodity broking business, our monthly report card showed many red marks mostly due to less number of trading days, only 17 compared with the average of 21, due to holidays. Due to less trading days, the number of traded clients fell by more than 3% MoM and the monthly revenue dropped by over 18% MoM. Additionally, the average daily turnover (ADTO) decreased by nearly 9% MoM, the average daily revenue dipped by more than 1% MoM and the number of Business Partners active in the commodity segment contracted by 4.5% MoM in the same month. Our market share in the commodity market remained unchanged, though we lost market share in crude, natural gas and silver options and in gold futures.

Interestingly, our volume showed a growth of almost 23% MoM after we ran a contest on mini contracts in April. Good but not enough. Only 48% of our total commodity broking volume came from options in April when the figure was 70% for the Multi Commodity Exchange of India in the same period. There is obviously a lot of potential in the options segment, let us roll out more initiatives to boost our options volumes. I will also take the opportunity to congratulate Sheru Bajrang Pareek, Regional Commodity Manager, for doing an impressive work of boosting our options volume and winning the mini contracts contest.

The currency broking business was also affected by the decreased number of trading days in April as the monthly revenue contracted by over 14% MoM. In the same period, though our daily average turnover increased by 15% MoM, the daily average revenue remained flat MoM, the number of traded clients decreased by over 8% MoM, the market share did not grow MoM and the number of Business Partners active in the currency segment fell by more than 9% MoM.

Our MF assets under management (AUM) increased by 3% MoM to Rs.6,604 crore in April this year. The increase was in line with the performance of the broader equity market that recorded a growth compared with March this year. The gross inflow for the month stood at Rs.150.44 crore and the net collection, though down by nearly 47% from the previous month’s net collection of Rs.32.21 crore, was positive at Rs.17.02 crore. The inflows into systematic investment plans (SIPs) witnessed a marginal fall during the month as compared with the previous month, taking the total SIP collection to Rs.52.39 crore (as against Rs.52.56 crore in March 2023). We expect the momentum in the SIP collection to pick up owing to the extension of the SIP Rewards Dhamaka contest by a month.

Our EMF business remained flat in April on a month-on-month basis and we ended the month with EMF AUM of Rs.989 crore. The market is recovering slowly from the pressures of lower cash market volume and lack of market opportunities in February and March this year. Our Branch Network contributed almost 67% of total funding and the Business Partner channel accounted for the rest. In April, we also launched a spot incentive scheme for our Sales team for acquiring new funding in EMF. The scheme is now being extended and will now close on June 30, 2023. We hope the entire Sales team will make the most out of the opportunity and help build our EMF loan book.

Our LAS loan book increased marginally by 4.92% MoM and Employee Stock Ownership Plan (ESOP) book contracted by 1.41% MoM in April 2023.

New disbursements were up by 94.55% MoM in April and we achieved total disbursements of Rs.96.73 crore during the month.

With the interest rates stabilising now, clients have started availing of LAS again and we expect the performance of the business to improve going ahead.

Channelwise break-up of LAS disbursements in April 2023

The Mission Reconnect Programme (MRP) had another robust month in April this year. The trailing 12-month (TTM) active client count stood at 6,79,071 at the end of April 2023. Though less than our March-end number, our performance on this metric (in terms of the % of growth/decline) was relatively better than that of both the overall industry and the full-service broking category market leader in the same period. The MRP facilitated the reactivation of almost 7.7K branch-mapped clients during the month. What’s more, the efforts of the Business Partners resulted in the reactivation of another 3.2K clients in the same period. The trend remains that reactivations are also good for revenue growth. Close to 5.5% of the clients who got reactivated in April have also traded in futures & options already. Also, a large proportion of the reactivations have continued beyond just one or two transactions. Almost 37.4% of the reactivations that took place in April have conducted three or more transactions already. My best wishes to the entire front-line team as well as our Business Partners for the continued success. Let’s aim and plan to take this programme to newer heights.

The Operations team introduced the IPO online subscription facility for high net worth (HNI) customers in April this year. Pravin Darji and Yatish Sarwankar from the IPO division of Operations collaborated with Pritesh Gosar, Ajay Gonnade and the Web team from IT; and Tejas Khadilkar, Kruti Hariya and Premkumar L from the Product team to introduce the HNI category in the IPO section of our website, sharekhan.com. We hope the new facility will significantly improve the experience of HNI clients.

In another development, Ashok More, Chirag Narse, Ramchandra Salunke and Santosh Raorane from the Settlement division of Operations; Abhishek Sharma, Arif Shaikh, Pritesh Gosar and Sunil Sonawane from the IT team; Jitendra Shilotri, Arvind Kirtane and Rupesh Desai from the DP team of Operations; and Jignesh Doshi from the Risk team worked together to introduce CUSPA (Client Unpaid Securities Pledgee Account) in response to a regulatory change. CUSPA allows customers to pledge unpaid shares in favour of Sharekhan if they have an outstanding balance with us. Earlier, in such cases the unpaid shares would be kept in Sharekhan’s pool account and corporate action benefits would accrue to the customers with a delay. But now, unpaid shares will lie with customers and will be blocked by Sharekhan till the outstanding dues are cleared. As a result, all corporate action benefits will go directly to the account of customers without any delay.

In another collaborative effort, the Mutual Fund PDG team; Amit Parelkar, Kiran Varma and Amit Ghosalkar from MF Operations; the Online App and DFT teams from ADM – IT; Sadiya Khan and her team rolled out the two-factor authentication (2FA) facility for mutual fund transactions online last month. The SEBI made 2FA compulsory for all mutual fund transactions, for purchases and new SIPs, with effect from April 1, 2023 to protect the interest of investors. Under 2FA, all investors now follow a two-step security process for verification while doing mutual fund transactions.

I congratulate all these Sherus for the good work. These facilities have no doubt improved the customer experience in Sharekhan. Please keep it up and bring on more such transformations.

BR Rahul joined the Sharekhan family as Zonal Head – South Zone in April this year, filling another of the four Zonal Head positions under the new zonal structure in our Branch Network. Rahul is focussing on building our branch business in the South Zone. South India with its higher literacy rate compared with the rest of the country; sizeable population of digitally- and technology-savvy consumers; IT and automobile hubs and numerous start-ups, is very important for our business and we see huge potential in the southern states of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana.

Last month, we completed a three-month design thinking exercise whose outcome was eight minimum viable product 1 proposals to improve customer experience. We had started this exercise around mid January this year, under the Vision 2025 programme, to find solutions to eight key business challenges we are facing today.

These eight business challenges – eight essential parts of customer journeys -- represent the top eight business priorities of the company based on Vision 2025. Innovation being a key pillar of Vision 2025, we used an innovative problem-solving approach called design thinking to find the solutions.

Fifty-eight Sherus from across functions and hierarchies in the Head Office participated in the exercise called Design Thinking Lab. The participants were divided into eight groups, each group was briefed on one challenge in the customer journey and was asked to find a viable solution to improve the customer experience as well as Sharekhan KPIs around that customer journey. An external coach was hired to guide them through the design thinking process and teach them to apply the method to solve the company’s pressing problems.

All the eight teams had a remarkable journey and worked hard to propose a minimum viable product for the business problem assigned to them. I appreciate the time and energy these Sherus invested in the activity – their ideas were thought-provoking and will surely translate into enhanced customer experience. We now plan to implement these ideas in phases. In the first phase, we will implement five ideas; the remaining three ideas will be executed in the second phase.

I congratulate Satish Nagda, our Chief Transformation Officer, for leading the initiative and thank all Executive Committee members for mentoring the participants during the three months. We plan to continue to enhance customer experience using this approach and will keep you updated on our progress.

The IT team will play a big role in implementing the ideas that have come out of the three-month-long design thinking process. The solution to most of the business problems considered during the design thinking exercise is a new software application (app), an improvement in an app or an improvement in a process and will, therefore, require IT support. Currently, the IT team is working on three key deliverables. One, they will create a better mobile trading app focussed on options trading to improve the trading experience of option traders. Two, they will develop a super app for Relationship Managers and Business Partners that will give them customer insights and suggest actionable recommendations. Three, they will improve the DIY journey to capture customer persona and offer premium onboarding experience.

Apart from that, the team will help improve the trading experience of customers by rolling out a trading application programming interface, overhauling the entire trading website and upgrading the desktop trading platform, TradeTiger. They will also enhance the performance of the Order Management System and Risk Management System and the throughput to strengthen our trading system; simplify the data access process and provide a DIY report creation platform on that data; and enable the use of WhatsApp for marketing and customer service. I wish the IT team all the best and look forward to quick implementation of the ideas.

Thank you for reading my column, I hope you enjoyed the read.

Best regards,
Jaideep Arora
Chief Executive Officer
Sharekhan