For private circulation only

January 08, 2020

Exactly three years ago, on January 6, 2017, we had declared our first four-year growth plan, Vision 2020, while celebrating the coming together of Sharekhan and BNP Paribas at Amby Valley. Our vision was to become a leading digital savings and investment platform in India. Our goal was to grow the broking business and diversify the revenue stream by becoming a significant player in mutual fund distribution and other investment products. We wanted to become a leading brand of BNP Paribas in India’s retail broking space. We also aimed to fully integrate with the group to strengthen our systems and data security as well as to align with the global best practices. We all have worked very hard to implement the vision with a lot of energy and commitment.

Today, as I look back on the journey of the last three years, I see hits and misses. When we had launched the vision we had not foreseen a challenging business environment ahead. The stock market remained subdued in 2018 and 2019. We also faced fierce competition from discount brokers and had to suffer a significant reduction in the mutual fund commission. Internally, we faced challenges in adapting to the new way of working of the BNP Paribas Group which, no doubt, has many benefits in the long term but resulted in a short-term pain due to formalisation and a more structured way of working. To add to our woes, as the business slowed down, we also had to manage cost.

The good news is our integrated physical and digital model for the broking business has been able to withstand the onslaught of the discount brokers and after some initial difficulties the business managed to hold the market share and is now turning around. This has been possible because of a whole host of initiatives rolled out in the last three years under the Vision 2020 plan.

The broking business is now working on a new value proposition of an integrated physical and digital model. We are repositioning the company’s brand to reflect this change. Soon we will also launch a Do-It-Yourself customer journey and a new service model to compete with the discount brokers.

Highlights of the broking business

• The launch of Roar, an onboarding programme for customers, has improved the first-month activity of customers.
• The roll-out of the Net Promoter System has helped us connect with customers better.
• The Front Foot Programme has led to the reactivation of over 34,000 clients and provided momentum to the active client growth.
• Even in tough times our market share in the cash market was maintained but we took a hit on the derivatives market share in comparison to 2017.
• Our customer base has grown to touch nearly 2 million customers.
• We have successfully relaunched the commodity broking business.
• The currency broking business is growing by leaps and bounds on the back of a new currency scalping product.

We have successfully implemented a new business model digitally and through the physical network of branches and franchisees. We should be proud of the fact that 10% of our customers are doing mutual funds. We have mutual fund assets under management (AUM) worth Rs3,800 crore and are among the top 13 in the industry in terms of new SIP counts and among the top 50 in terms of AUM. All this has been possible because of the hard work of all the branches and a dedicated team of 200 Mutual Fund Specialists and Investment Specialists; numerous digital initiatives supported by data analytics; and the efforts of the back-end and Operations teams. The last year was challenging due to regulatory changes like the total expense ratio reduction and the discontinuation of upfront commission. However, we look forward to continuing the business.

Highlights of the mutual fund distribution business

• We have adopted a new business model based on internal segmentation of customers to broadbase the customer base and simplify the business.
• The new business model has introduced two new customer segments, Sharekhan Select and Sharekhan Plus.
• We have equipped the front-line with training and tools like sales enablers, Focus fund enablers and videos to help them do their jobs better.
• We have created a new channel, Mutual Fund Specialists, to cross-sell and upsell mutual fund products as well as increase the penetration of Systematic Investment Plans (SIPs) among the retail customers.
• Driven by a host of new digital initiatives, the digital business now contributes 66% of the total lump sum transactions with the value contribution standing at 35%.
• Even for new SIP orders, about 40% contribution comes digitally.

Mobile has truly become a leading digital channel and customers are responding well to our efforts to bring everything on this platform. Our mobile application, Sharekhan App, has seen 3.15 million downloads, enjoys a four-star rating and accounts for around 30% of our total annual brokerage revenues. In a typical month, about 79% of the total orders comes from the digital channels out of which 45% comes from mobile. What’s more, 64% of the digital orders from new clients also come from mobile. In the past three years, we have packed our digital channels including Sharekhan App, TradeTiger and sharekhan.com with competitive features like biometric two-factor authentication and MPIN. We have also digitised the exchange margin funding business, rolled out the IPO Online facility and introduced new digital features like BigTradePlus Order and One-Click SIP which have been instrumental in generating additional revenue and bringing in new customers.

Key digital initiatives

• The commodity trading facility has been relaunched on all digital platforms including Sharekhan App, TradeTiger, sharekhan.com, Sharekhan Mini and DialNTrade.
• We have introduced the Unified Payments Interface-Initial Public Offering integration on the mobile application (app) and the website.
• Exchange margin funding has been digitised and made available on Sharekhan App, TradeTiger and sharekhan.com.
• New order types including BigTradePlus Order have been introduced on all digital platforms.
• One-Click SIP has been introduced on the mobile app and the website. It is an easy and fast way to start multiple SIPs in the mutual fund schemes recommended by Sharekhan.
• The pre-log-in journey on the website has been revamped for the mutual fund customers.
• The Smart Search feature has been introduced on the mobile app and the website for mutual funds and equities.
• 24 educational videos have been published on the website in collaboration with DSP BlackRock AMC to educate investors in various mutual fund concepts.
• Bio-metric two-factor authentication and MPIN processes have been introduced on the mobile app to strengthen the security.

The education business has always been a key differentiator and we have scaled it up in the last three years to support our ambitions. Thus, we have expanded our presence to multiple cities, become a provider of both trading and investing education, and introduced new courses, at foundation and advanced levels, across price points to adapt to the needs of our target personas. To balance the high-end courses in our basket we have now built a low-cost mass-market digital education channel called Moneyflix, which will be launched this year and will be available on both mobile and web. We are confident the education business will help us acquire not only new clients but also clients who would be more loyal and active.

Highlights of the education business

• We are present in six major cities of India with four full-fledged centres and two sales offices as against just one centre and a sales office in Mumbai three years back.
• We have 13 courses on trading and investing education across price points.
• On the investing side, we have introduced courses such as Stock Investor, Wealth Essentials, Proactive Investor and Proactive Investor Extended Learning Track.
• We have developed all the content, content management system, website and mobile app for the digital education portal/app, Moneyflix, and are ready to roll it out this year.

A well diversified business was another of our ambitions. The last two years have shown how diversification can help us sustain even when some of the core businesses slow down. The cross-selling of products to add value to customers has automatically created a new revenue source without having to find new leads or build new relationships. After its relaunch under the brand LAS in 2018, the Loan Against Securities (LAS) business has expanded steadily. The success of LAS has given us the confidence to expand our loan offerings and we now also provide financing for public issues and employee stock options. Thanks to a renewed focus on Portfolio Management Services (PMS), the PMS AUM has nearly doubled since January 2017 mostly on the success of Sharp. The product has consistently outperformed the Nifty and crossed Rs50 crore in AUM driven by client additions. Currently, we have three PMS products including Sharp, Prime Picks and Diversified Equity.

Highlights of the diversification efforts

• Our cross-selling ratio stands at a respectable 10%.
• The LAS book has grown 3.5 times since the relaunch and now contributes 36% to the total loan book.
• We have successfully launched Sharp, a third-party PMS product, and it has given returns of 24% since inception.

One of the key successes of the integration exercise has been aligning our Human Resources (HR) with group HR. We have successfully introduced a host of group policies, procedures, platforms and programmes including the group training platform MyDev, the Leaders of Tomorrow talent programme, Block Leave and Global People Survey (GPS) in the company. GPS has been a success from the very start with a high response rate. The platform has allowed the staff to share their feedback, ideas and suggestions with the management to make Sharekhan a great place to work. In addition, we have formed a Corporate Social Responsibility (CSR) committee and implemented the CSR Leave policy. We have also aligned our expat management, performance appraisal and compensation review processes with the group standards.

On the IT side, we have made major investments in security to make our IT platforms more secure. We have strengthened the IT ecosystem by implementing the group IT governance policies and procedures, and projects like IT Remediation, IT Risk Assessment and BNP Group Security Standards.

In Compliance, we are in the process of implementing the global Know Your Client (KYC) project to align ourselves with the global KYC standards. To manage all kinds of risks, we have formed new teams like Operational Permanent Control, Operational Risk Control, IT Risk and Inspection Generale. We have also introduced a Project Management Office function to improve the efficiency of project execution. The integration exercise is well on course.

Now as we enter the last leg of the Vision 2020 journey, I would like to thank each of you for working hard and to the best of your ability. I would also like to thank the BNP Paribas Personal Investors Corporate and Territory teams who have provided valuable support and leadership all the way. Now we need to move forward and continue to work to make Sharekhan a strong digital savings and investment platform in India that the group can be proud of. This year we should focus on closing the Vision 2020 projects and at the same time work towards formulating the next four-year growth plan, which I will announce whenever it is in place.