Dear Sheru,

I hope you are having a great day. I must say the first month of the new year was not so good for Sharekhan, largely due to external factors like relentless selling of Indian equities by the foreign portfolio investors, the continuing Adani saga that dampened market sentiment and the hardening of interest rates that increased the cost of funds. All our key businesses including broking, mutual fund (MF) distribution, exchange margin funding (EMF) and Loan Against Securities (LAS) slowed down in January 2023. It will take a lot of hard work in the months ahead to regain the lost ground as well as to grow the businesses further. But when has hard work ever deterred us Sherus? The lessons learnt last year will no doubt ensure this year would be more productive for us all.

• In the equity broking business, we recorded a 2% rise in new client additions and a 5% gain in our market share in the cash segment in January 2023 compared with December 2022.
• In the currency broking business, the average daily turnover, revenue and the number of traded customers grew by over 6%, 16% and 10% MoM respectively in January 2023.
• Close to 8.8K branch-mapped broking customers were reactivated as part of MRP in January this year.
• Sharekhan successfully switched to the T+1 settlement cycle from the old T+2 settlement cycle in January 2023. The new system has significantly reduced the risk of open positions for us as well as for the exchanges.
• We inaugurated our Gigaplex office at Airoli in Navi Mumbai for the HO staff in January 2023.
• Sherus named the Transformation project as the Sankalp project in January 2023. 
• Our customers can now change/update their address online, without having to visit our branch/office. 

The Sensex and the Nifty declined by over 2% each month on month (MoM) in January 2023. The Indian stock markets underperformed the other global stock markets (most of which closed with gains in the first month of 2023) as the foreign portfolio investors continued to sell Indian equities and pressure on the banking, Adani group and new-age stocks dampened market sentiment. Our daily average revenue fell by 10% MoM as the daily client activity dropped by 11% MoM during January this year. The drop was in spite of a 2% rise in new client additions and a 5% gain in the market share in the cash segment. The good news is the Indian economy should continue to outperform the other global economies which should translate to improved corporate earnings performance in the year ahead. According to our Research team, the Union Budget 2023-24 had all the elements necessary to sustain the ongoing rebound in the corporate earnings. The market sentiment will also improve as the stock markets always recover from crises in the long run. So we will get plenty of opportunities in the year ahead to regain the lost ground. Right now, we should hand-hold the customers, who may be panicking in the face of high volatility, and guide them. We should also advise them to make the most of such event-driven volatility as we are experiencing currently. For instance, we should recommend trading calls to them depending on their risk appetite.

A lot needs to be done in the commodity broking business, which continues to slow down. In January this year, the average daily turnover (ADTO) from the business declined by over 14% MoM while the revenue dropped by over 15% MoM. We also continue to lose market share. We need to accelerate and move a lot faster than the industry forces to regain the lost market share. Not so long ago we used to command nearly 3% of the commodity broking market. The ADTO, the monthly revenue and the number of traded customers remain far below the historical average. In 2023, our focus should be on adding new customers and increasing our servicing capabilities at a faster pace through enhanced participation of the Relationship Managers to match the market growth and the industry average.

Meanwhile, we are slightly better off in the currency broking business, which traced a growth trajectory in the same period: ADTO up 6.64% MoM, the number of traded customers up 10.19% MoM and revenue up 16.53% MoM. However, the key to growth in this business too lies in broadening the customer base as currently the revenue comes from a handful of customers. We also need to step up the process of NISM-Currency certification in the Branch Network as well as among the Business Partners to gain adequate servicing capacity. The business needs more traded customers from the base (read customer activation in the Currency segment) as the base is substantially bigger than the commodity customer base. Also, we must ensure more and more Business Partners recommend commodity and currency trading to their customers. For this, we may want to first re-educate the Business Partners in the benefits of trading in commodities and currencies through physical and virtual events.

The Mission Reconnect Programme (MRP) had another robust month in January this year. The trailing 12-month (TTM) active client count touched 7,17,008 by the end of the month. Though less than the count at the end of December 2022, Sharekhan's performance on this metric was similar to the trend displayed by the overall industry as well as the market leader in the full-service broking category. The MRP facilitated the reactivation of almost 8.8K branch-mapped customers during the month. What’s more, the efforts of the Business Partners resulted in the reactivation of another 3.7K customers in the same period.

The trend remains that reactivations are also good for the revenue growth. Close to 6.6% of the clients who got reactivated in January 2023 have also traded in futures & options already. Also, a large proportion of the reactivations have continued beyond just one or two transactions. Almost 40% of the reactivations that took place in January 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 greater heights in this year.

Our MF assets under management (AUM) fell by 1.52% MoM to Rs.6,407 crore in January this year. The fall was less than the dip recorded by the broader equity market (the Nifty was down by 2.45% MoM during the month) on a month-on-month basis. The gross inflow for the month stood at Rs.114.74 crore and the net collection was positive at Rs.3.41 crore, which was a sharp decline after the net inflow of Rs.81 crore recorded in the previous month. The inflows into Systematic Investment Plans also continued to grow at a slow pace adding only Rs.9 lakh during the month, taking the total inflows to Rs.52.12 crore. Though the year seems to have started on a weak note, we are confident that the business will gain momentum in the months ahead. Moreover, customers come to us for financial solutions for realising their financial goals. Mutual funds are among the safer instruments and smart way of creating wealth. Let us continue to educate the customers and help them invest in mutual funds. This will help achieve our annual targets too.

Our business of EMF remained flat in January 2023 compared with December 2022 due to a lacklustre market and low participation from customers in the absence of opportunities for availing fresh funding. The EMF AUM stood at Rs.1,087 crore at the end of the month. Our Branch Network’s contribution stood at almost 66% of the total funding; our Business Partners accounted for the rest. We did well in the business last year. Let us grow the business and create some new records this year. The front-line’s focus should be on enrolling more new customers for EMF by highlighting the benefits of the facility, especially in light of the latest regulatory changes like the move to the T+1 settlement cycle and the blocking of the 100% margin obligation on the settlement day in the cash segment.

Our LAS and Employee Stock Ownership Plan (ESOP) books contracted by 7.12% MoM and 6.71% MoM respectively in January 2023. The contraction follows Sharekhan’s decision to raise the LAS and ESOP interest rates in the last few months in response to successive policy rate hikes by the Reserve Bank of India to battle inflation. The hardening of the interest rates has increased the cost of funds for us too. As a result of the LAS/ESOP rate hike, many customers repayed their loans and many others avoided taking new loans in January this year. The new disbursements also plunged during the month -- we achieved total disbursements of Rs.67.71 crore, which is a decline of 22.89% compared with the previous month’s total disbursals.

Channelwise break-up of LAS disbursements in January 2023

Last month, Sharekhan successfully moved from the T+2 settlement cycle to the T+1 settlement cycle following the Securities and Exchange Board of India’s decision to introduce T+1 rolling settlement in India with effect from January 27, 2023. Ours is the first country to move to the T+1 settlement cycle in the securities market. In the T+1 settlement system, investors buying stocks get the delivery of the shares in their demat account after one business day; similarly, investors selling stocks get the funds credited to their bank account after one business day instead of two business days earlier (in both cases). This major change in the settlement of securities trading on Indian stock exchanges has reduced the risk of open positions for both the exchanges and the intermediaries like Sharekhan. 

The migration of stocks from the T+2 to the T+1 settlement system was carried out in phases by the exchanges over a period of 12 months and we smoothly switched to the new system without any issues, thanks to proper planning. Every month when a batch of stocks was migrated to the new settlement system, our customers were informed of the stock movement. We also educated our Branch Network and Business Partners in the new settlement system through virtual workshops. For Sharekhan too it was a 12-month project that required a collaborative effort from multiple departments including Operations and Information Technology (IT). I would like to congratulate Anand Mokashi, Dharmesh Vasa, Ashok More, Ramchandra and Santosh Raorane from Operations – Settlement; Lucas Nazareth and Amit Doshi from Operations – Product Development Group; Arif Sheikh and Abhishek Sharma from IT Development; and Sunil Sonawane and Puran Singh from IT Foundation for a job well done.

In December 2022, we rolled out a facility to allow customers to change/update their address online. The facility has made life easier for customers in many ways. It offers them the option to fetch data from DigiLocker, an Indian digitisation online service provided by the Ministry of Electronics and Information Technology, Government of India. Customers no longer need to commute to a Sharekhan branch or office to submit physical documents or to create photocopies of their address proof. There are also no signature mismatch issues since the same signature is used everywhere and every time. The turnaround time for reflecting the change has also greatly improved to just a few minutes from three to seven days from the time of submission of the documents at a Sharkehan location. What’s more, customers can update their address anytime they want as now there are no time restrictions unlike earlier when branch timings were restricted.

That is not all, for Sharekhan the initiative has eliminated the data entry process and paperwork, and the need to rent digital storage space, thereby freeing manpower for more critical tasks and resulting in cost savings respectively. I congratulate the Sherus who implemented the project, will name them quickly: Kantiprasad Khairaliya, Sagar Badgujar and Mehul Vora from IT Development; Rajdeep Dutta from Operations – Product Development Group; Shweta Shirsat and Anirudha Bhoir from Digital Assets - UI/UX; Rashmi Fernandes from Customer Service; and Nivrutti Parab and Manoj Dhende from Operations – Account Opening. Again, a great example of successful collaboration in Sharekhan!

Transformation is a critical aspect of Vision 2025. We need to transform the way we work, do business and service customers in order to realise our ambitions. All improvements underway in the organisation are being implemented under the Transformation project and we found an inspiring name, Sankalp, for this critical programme last month. I am happy to say that the name was the result of a massive collaboration that involved a contest, a unique advertising campaign and a poll. I thank all Sherus who suggested creative names for the project by participating in the Vision 2025 Project ka Naamkaran Contest and those who helped us select the right name by taking part in the Sharetastic vs Sankalp poll. I congratulate Rohan Gupte from the Mumbai – Thane branch and Susmita Samantray from Sharekhan One, Bengaluru for coming up with the winning name. We currently have a contest running for a logo for the Sankalp project, ie Design a Logo for the Sankalp Project Contest, and we look forward to healthy participation from the Sherus and some really creative logo designs.

We inaugurated the new Gigaplex office of Sharekhan at Airoli in Navi Mumbai on January 24, 2023 in the presence of the Business Executive Committee members, other staff from the Head Office (HO) and guests from BNP Paribas India. The new office sprawls over an area of more than 81,000 square feet and has been designed to accommodate nearly 1,000 people. The interiors are tastefully done; new concepts have been introduced, such as Wellness Room, Plug-and-Play Room and Prayer-cum-Meditation Room; and the workplace is flexible, enables collaboration and smart working, and boosts efficiency while allowing part of the HO staff to work remotely. The new workplace is the outcome of a project undertaken in 2020 to facilitate the implementation of the Work from Anywhere (WFA) Policy in the HO in keeping with our vision of transforming Sharekhan into a great workplace. The project also aimed to consolidate our real estate in Mumbai and very soon we are going to have only two HO locations, the Ruby office and the Gigaplex office. I congratulate Stefan Groening, Sponsor of the WFA project; all project leaders including Niraj Randeria from IT Production; Abhijit Sarkar from Administration and Procurement; Sumeet Chugh from Finance; Suresh Babu from IT Risk; Rajesh Shetty from Human Resources; and Danny Nathani from Brand & Communication; and their respective teams for collaborating successfully on the project and for the great outcome.

That’s it for today. Take care of yourself and your loved ones, and stay safe.

Thank you.

Best regards,
Jaideep Arora
Director and Chief Executive Officer
Sharekhan