Falling equity market volumes, fewer initial public offerings and rising costs have made staying afloat difficult for capital market intermediaries.
However, IDBI Capital is looking to maintain its profitability by cutting losses in retail broking, and lending greater focus on corporate debt restructuring and SME IPOs, says Abhay L. Bongirwar, MD and CEO, in an interview to Business Line .
Excerpts.
We have a revenue expectation of Rs 125 crore and a profit before tax target of about Rs 57 crore for FY14, which is higher than last year. We are not making money in retail but have been successful in curtailing losses. We lost Rs 18 crore in FY12, Rs 15 crore in FY13 and are poised to restrict our losses in FY14 to about Rs 4.5 crore.
In terms of regular clients how does that work out?
If 2,500 people regularly give us brokerage of Rs 2,500 a day, we break even. As on date, we have about 1,800 people regularly giving us brokerage between Rs 1,800-2,000 daily. Our client base is about 65,000.
Our brokerage is predominantly from the cash segment with clients from the middle- and higher middle-class preferring online broking. We use the IDBI Bank network to tap retail clients. The bank gives a three-in-one account to its retail clients willing to invest. It provides a savings and demat account, while IDBI Capital offers the trading account.
What is the latest on your investment banking business?
We did two SME listings on the NSE — Thejo Engineering and Opal Luxury Time Products. Mitcon Engineering and Consultancy Services will be done shortly.
What needs to be done to revive interest in equities?
Domestic institutional investors have to give buoyancy to mid- and small-caps.
If banks and insurers participate in market-making, then liquid stocks will emerge. This would work as banks fund their working capital and give them term loans. I am very hopeful on listing without IPOs. If we do not have confidence in our SMEs then how will FIIs invest?
What should be done to prop up the secondary debt market?
Credit rating requirement is the biggest issue. DIIs do not invest in papers below AA or A+. Mark-to-market loss provisioning requirement is putting off banks.
Ninety per cent of corporates get excluded once the benchmark becomes A+ or AA. But, they need the money. You find only BFSI (Banking, Financial Services and Insurance) papers, especially private NBFCs (coming to us). The point here is lower the NPA, higher the rating. Manufacturing companies are just not there.