For private circulation only |
December 30, 2022 |
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Dear Sheru,
I trust all is well with you and you are having a productive day. I pen the last column of the year with a mixed feeling of satisfaction for what we accomplished in these 12 months and excitement for the new year and the promises it holds. There is also a touch of nostalgia as we leave behind the year and everything that was part of it. Year-end, as I say, is introspection time. So today, I shall talk about the lessons we learnt in 2022 while going about our business along with the plans for 2023. I will also take this opportunity to wish you and your family a happy and prosperous new year.
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| November 2022 update |
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- In the equity broking business, our market share in the futures and options segment increased by 1% MoM in November 2022.
- In the same period, our daily average trading volume in the commodity broking business grew by 12% MoM, leading to a 14% growth MoM in the daily average revenue.
- The trailing 12-month active client count was 7,61,841 at the end of November 2022. Though less than our October-end number, our performance on this metric (in % growth/decline terms) was relatively better than that of both the overall industry and the largest player in the full-service broking category.
- Close to 13K branch-mapped broking clients were reactivated as part of MRP in the last month.
- Our EMF AUM increased by nearly 4% MoM in the last month.
- Our LAS book grew by 6.2% MoM and our total disbursals in the business grew by more than 100% MoM in November this year.
- We rolled out the company’s Code of Conduct in Hindi for the benefit of Hindi-speaking staff in November this year.
- We also updated the company’s Mobility - Internal Job Postings Policy last month.
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The Indian equity market gained more than 4% month on month (MoM) and our daily client activity increased by 11% MoM in November this year. However, our daily average revenue dipped by 1% MoM, we lost market share in the cash segment and barely managed to maintain our market share in the futures and options segment; and our new client additions decreased by 14% MoM in the same period. Client addition in the overall industry has also been stagnant which has resulted in a decline in new client additions for us. Just a few days of the last month of 2022 are now remaining, let us put in our best efforts and try to close the year on a good note.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- We need to focus on acquiring quality accounts.
- We should profile new clients as quickly as possible in order to provide the right set of products to them and to activate them.
- We must respond according to the market trends – as turnovers shifted from cash to derivatives in 2022, we learned that focus on the options business and addition of more products could help us gain our lost market share.
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- Regaining our market share across segments -- growing the options business would be a key factor for achieving market share in the futures and options market
- Improving the pay-back period for new clients with more focus on acquiring quality accounts
- Using EMF as a tool to increase cash turnover, thereby improving the market share in the cash segment
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In the commodity broking business, our daily average trading volume grew by 12% MoM in November 2022 due to increased participation by customers in options. This led to a 14% growth MoM in the daily average revenue in the same period. However, the increase in participation was not as much as the growth in options recorded by the commodity market and consequently, we lost market share during the month.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- We were unable to expand our market share in the commodity and currency markets because of a slowdown in new client additions and weak participation by customers in options.
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- Acquiring new accounts
- Focussing on commodity options
- Increasing client participation by getting more manpower – more front-line staff to connect with clients and guide them as well as more participation from the Business Partners
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The Mission Reconnect Programme (MRP) had another robust month in November this year. The trailing 12-month (TTM) active client count stood at 7,61,841 at the end of November 2022. Though less than our October 2022-end number, our performance on this metric was relatively better than that of both the overall industry and the leader in the full-service broking category. The MRP facilitated the reactivation of almost 13K branch-mapped clients during the month. What’s more, the efforts of the Business Partners resulted in the reactivation of another 6.1K clients in the same period.
The trend remains that reactivations are also good for revenue growth. Close to 3.5% of the clients who got reactivated in November have also traded in futures and options already. In addition, a large proportion of the reactivations have continued beyond just one or two transactions. Almost 30% of the reactivations that took place in November 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 2023.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- The clients who transacted just a year or two ago are more likely to be won back as compared with those who transacted many years back.
- The farther a client moves from his last transaction date, the lower the probability of the client’s reactivation.
- The clients with good sized portfolios are more likely to be won back as compared with those without any portfolios.
- Clients who log in to digital assets, though not trading, are more likely to be won back as compared with those who are disconnected on the digital assets as well.
- Like the size of a portfolio, the number of scrips in a portfolio is also a good indicator of the likelihood of a client getting reactivated.
- These variables get used in the mathematical propensity models to identify clients with a high likelihood of being won back.
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- Having a balanced focus on both "reactivate inactive clients" and "plug the leak".
- Working on the clients who are not yet inactive for 12 months but transacted 6 to 12 months back to prevent dormancy
- Working on the digital triggers with higher success rates and larger quantum (digital footprint of clients has been used for creating triggers to identify potential clients to be reactivated)
- The Customer Relationship Executives focussing majorly on activity enhancement
- Building a content and communication strategy to handhold and educate clients; and helping them access information and advisory services and transact through digital platforms across asset classes
- Using a digital analytics-backed approach for profiling and product cross-selling
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Our mutual fund (MF) assets under management (AUM) rose by 1.38% MoM to Rs.6,589 crore in November this year. The growth was slower than the gains recorded by the broader equity market (Nifty was up 4.14% MoM during the month) on a month-on-month basis. The MF collection in the industry was at par with Sharekhan’s collection, which grew by 2.21% MoM, taking our market share to 0.16% during the month. The gross inflow for the month stood at Rs.77.54 crore and the net collection was negative at Rs.63.78 crore due to redemptions to the tune of Rs.141 crore. The inflows into SIPs grew by Rs.82 lakh during the month to Rs.51.92 crore from Rs.51.10 crore in the previous month.
In 2022, we faced a few challenges pertaining to the migration of our MF platform to the BSE StAR MF platform along with many new regulatory changes. However, we still managed to grow our AUM by 8.73% since the beginning of January 2022. We are all set for 2023 with the completion of our transition to the BSE MF platform, our aim for the new year is to focus on asset gathering including SIPs and product diversification by giving our investors new and better investment opportunities across different product lines.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- IT preparedness is critical for facing regulatory changes with confidence.
- The time to get back on track needs to improve in cases where regulatory changes affect our business model.
- Need to increase communication with the customers and the front-line in case of any major changes in the system to allay concerns and to handhold.
- Must explore ways to use digital modes to reach out to clients and offer them multiple and convenient communication channels.
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- Improving asset gathering across products by cross-selling and up-selling
- Improving MF SIP book significantly to Rs.80 crore by end of the year
- Achieving product diversification
- Developing online interfaces for our products to offer quick and convenient user experience
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Our business of Exchange Margin Funding (EMF) registered a growth of about 4% MoM in November this year. We ended the last month with EMF AUM of Rs. 1,058 crore. Our Branch Network’s contribution stood at almost 67% of the total funding; our Business Partners accounted for the rest.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- Market dynamics are changing very fast including clients’ preferences, their technology adaptability and new generation competition (discount broking and banking broking). Therefore, we also need to keep pace with the changes to remain in the race.
- Vision 2025 is very important in this respect as it focuses on five critical areas including diversification that will keep Sharekhan in the top league.
- Sharekhan needs a fixed source of income and EMF will play an important role going ahead.
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- Increasing the EMF book size and achieving the business targets defined by the management to take EMF to the next level, keeping in mind Vision 2025
- Improving and innovating EMF as a product through important changes to cater to the needs of the customers as well as that of the front-end
- Completing some important projects that will give a different shape to EMF by helping mitigate the open pain areas and boosting the funding business
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Our Loan Against Securities (LAS) book increased by 6.2% MoM while our Employee Stock Ownership Plan (ESOP) book contracted by 1.3% MoM in November 2022. We achieved total disbursements of Rs.153.68 crore, which is an increase of 102% from the previous month’s disbursal of Rs.75.37 crore.
Channelwise break-up of LAS disbursements in November 2022
| Channels |
Disbursements |
| Direct channel |
2% |
| Branch Network |
23% |
| Business Partners |
6% |
| Direct selling agents |
13% |
| Employee Stock Ownership Plans |
56% |
| Lessons learnt in 2022 |
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Priorities for 2023 |
- The year 2022 saw a constant increase in interest rates which also led to an increase in the cost of funds. We need to constantly review the interest rates we are charging to customers and revise the same as and when needed.
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- Improving the lending book and the net interest margins
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The year 2022 being the first year of implementing the biggest transformation in Sharekhan’s history, it was very challenging but I am happy that we were able to overcome most of the challenges. The targets for the Sharekhan One segment were ambitious, but considering the market conditions, I think we did fairly good. The Sharekhan One team is more settled and confident about its new role and responsibilities, thanks to the training we organised for them in the first quarter of 2022.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- The more we meet clients, the more information we have on them and the better we understand their earnings, excess investible funds and the products they are looking to invest in. This helps us guide them and offer them the right solutions or investment products.
- We also need a separate website and a mobile application to make it convenient for the clients to connect with us.
- We must tweak the Key Performance Indicators and incentive plan if needed to channelise the team’s efforts in the direction that is aligned with the overall business plan.
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- Getting a wealth platform, a website and a mobile application
- Organising a second round of training for the Sharekhan One team
- Adding more products
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The Super Investor segment got off to a fantastic start in 2022. Only 70 Investment Specialists (average) were able to sell over Rs.520 crore in investments in 2022. While this was predominantly in MFs, it consisted of all gross sales in PMS, fixed income and model portfolios. Having a strong proposition in place with consistent and broad-based engagement definitely helped. We have renewed relationships with many old clients who welcomed this approach from Sharekhan.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- A little help goes a long way. Clients responded well to the support they were provided by the team and this led to a growth of 50% year on year (YoY) in the broking and managed broking revenue from the segment. Further, our PMS and MF AUMs increased by ~15% YoY.
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- We are taking heart from our success in 2022 and redoubling our focus on asset gathering – we hope to exponentially grow the MF and PMS AUMs of the segment over the next year.
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It being the first year, we were prepared for a lot worse then what we faced. It was a paradigm shift for people and implementing segmentation itself was a herculean task. The stock markets also did not support us in 2022 and we saw a lot of clients losing interest in trading, which is reflected in the current mood where the markets are at an all-time high but there is not so much joy across clients. We had to deal with a lot of changes operationally and also in terms of mindset. While we faced attrition amongst the existing clients, we were able to grow the list of potential clients and also add new clients. We managed to arrest the falling market share in the second half and also did well in fixed deposits, InvesTiger and option strategies.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- The key focus of Relationship Managers during the market hours should be on volumes and talk time.
- The time spent on acquiring/servicing new customers is very low.
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- Increasing volumes and market share especially in options
- Acquiring new clients for the segment
- Retaining the existing traders
- Adding AUM especially in MF using the SIP method
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The strategic ambition of the Retail segment is to offer ease and accessibility to the masses through digital offers, leveraging analytics and people support to upsell and upstream clients. The Retail team aimed to identify potential among the unexplored customer base mapped to the segment and rightly so, the team has upgraded more than 23K clients to Sharekhan One, Super Investor and Super Trader segments in 2022. In addition, the segment has been contributing significantly, in terms of activation, reactivation, cross-selling MF SIPs and up-selling InvesTiger offering. In CY2023, the team is transforming further to focus on asset gathering and managing clients through digital journeys.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- Clients are more interested and need small ticket-sized managed stock baskets, which came rightly in the form of InvesTiger this year.
- Segmentation gave the Retail team an opportunity to promote higher-level privileged services to customers as per their suitable profile.
- We realised that data analytics is the cornerstone of retail sales and servicing plan.
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- Educating clients to use digital platforms for execution and servicing
- Introducing curated client life cycle-based programmes for up-selling and cross-selling
- Focussing on asset gathering, specifically MF SIPs
- Identifying the potential for early upgradation of the clients to the other segments
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Being one of the key drivers of the transformation that is underway in Sharekhan, the Information Technology (IT) team had a very busy and hectic year. It launched Infinity, a programme to transform the IT team to provide the foundation to deliver the Vision 2025 objectives. As part of the programme, the team brought in new blood to strengthen its composition and reorganised itself to meet the new demands of a changing Sharekhan. They also collaborated with the other teams to optimise internal processes as well as to improve customer experience by introducing new features and removing the pain points. All staff computers were equipped with Microsoft 365 to encourage collaboration and boost efficiency. In their recently concluded Techno Tigers 2022 offsite, more than 100 Sherus put their minds together to identify more ways to help Sharekhan transform and realise Vision 2025. And yes, the Techno Tigers also found time to orange the world for a noble cause. Way to go!
| Lessons learnt in 2022 |
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Priorities for 2023 |
- Go to campuses to recruit if hiring directly from the market proves to be difficult.
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- Training developers on new technologies
- Delivering business asks faster
- Focussing on building a strong foundation for a digital transformation
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Each year has its unique challenges for Human Resources (HR) and 2022 was no exception. It established the New Normal at work and life, and provided unique opportunities. Employee well-being continued to be our top priority as the pandemic lingered. Hiring talent remained a challenge especially in IT and retention of talent was a challenge too. Our HR team remained quite busy on account of activities, some of which I will mention here:
Change management programme: The team in collaboration with the Transformation team conducted Vision 2025 workshops for Senior Leadership to talk about the changes taking place in Sharekhan and the ways to manage the same. It also organised orientation to Vision 2025 sessions in which leaders of Sharekhan oriented the top managers to the long-term plan of the company, the ensuing changes and how to manage them. The cascading of the Vision 2025 was successfully done till the last mile across Head Office and the Branch Network.
Reorganisation: The HR team along with the business heads implemented the segmentation approach in Sharekhan with dedicated teams for the four new customer segments. The process of skilling and reskilling for these segments started last year and will be an ongoing exercise. The overall reorganisation under the new Vision 2025 plan is in progress and more organisation changes will be announced going ahead.
Preparing the groundwork for a remote working policy: One big project of HR team this year was drafting of the work from anywhere policy to improve staff well-being, increase employee retention, attract new talent and boost productivity. The revamped policy, “Remote Working Policy”, for the Head Office will be implemented in the new year along with the inauguration of the new office at Gigaplex - Airoli in Navi Mumbai.
| Lessons learnt in 2022 |
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Priorities for 2023 |
- Employee well-being to be central to all HR initiatives.
- More work needs to be done in effectively implementing Sharekhan’s Code of Conduct in the organisation to promote compliance and ethical behaviour; more training and communications articulating the rules of conduct are needed.
- Intra-team rapport had suffered during the pandemic. Having more facetime with people is important and team-building activities including group CSR activities can go a long way in keeping the Sherus engaged.
- Two-way communication is critical not only during crises or in remote working environments but also in normal situations as it increases employee engagement and builds trust. New two-way communication channels like Open House and Vision 2025 workshops have proved to be successful and should be continued.
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- Sustaining the Vision 2025 momentum through change management interventions
- Completing the reorganisation plan under the Transformation plan of Vision 2025
- Attracting the right talent in the key business areas; streamlining campus and internship initiatives
- Skilling and upskilling talent through training
- Retention of talents through more managerial interactions and career conversations with HR
- Continue focus on employee well-being, employee feedback through pulse surveys, two-way communication involving interactive sessions with senior management and more team-building initiatives
- Rolling out the Remote Working Policy for Head Office
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The HR team published Sharekhan’s Code of Conduct in Hindi last month for the benefit of those who are more comfortable communicating in the language. The Code of Conduct is the cornerstone of our organisation’s culture. It applies to all managers and employees of our company and associate companies. The Code of Conduct is going to be our guide as we work towards realising Vision 2025. By offering its translation in Hindi, we hope to increase the understanding of its contents and boost the practice of compliance and the desirable culture in Sharekhan. Please note the translation is an additional benefit offered to the staff and English remains our main language for internal communications. Click this link to browse the Hindi translation of the Code of Conduct:
https://www.sharekhan.com/MediaGalary/Newsletter/Code-of-Conduct-Hindi-final-260922.pdf
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Our HR team updated Sharekhan’s Mobility - Internal Job Postings Policy last month to make the selection process completely confidential till an employee is selected for the position available. As per the updated policy, the current Reporting Manager and above hierarchy will be informed only after the candidate is selected. If we want to attract and retain talent, we must offer our staff mobility opportunities within the organisation and the updated policy will facilitate the process of hiring internally, improve employee engagement, and save time and cost too. To know more read the updated policy on ShareKonnect. |
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With new variants of Coronavirus popping up across the globe, the Indian government plans to make RT-PCR test for the detection of COVID-19 mandatory for international passengers arriving from China, Japan, South Korea, Hong Kong and Thailand. We are monitoring the situation and will keep you updated about any new developments. For now, continue to follow some of the good practices of the pandemic era to stay safe. So wash hands with soap and water for at least 20 seconds; cough away from others into your elbow or a tissue; throw used tissues in trash; and maintain your overall health. Also upload your final COVID vaccination certificate on ShareKonnect if you haven’t done so yet. Whether you are working from home or office, you must upload it on our Human Resource Management System and our HR team has already communicated to all staff how to do it.
Take care of yourself and your loved ones, stay safe and enjoy yourself on the new year’s eve without having to worry about going to work on January 1, 2023, it is a Sunday! 😊
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Thank you.
Best regards,
Jaideep Arora
Director and Chief Executive Officer
Sharekhan
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