In an interaction with Arun Poddar, Executive Director and CEO, Choice International Ltd

The brokerage sector in India is shifting from a transaction-based to a fee-based one, providing additional services such as investing and wealth management, states Arun Poddar, Executive Director and CEO, Choice International Ltd.

What is your outlook on the Indian financial services sector? Which emerging trends are you witnessing in the broking and distribution and NBFC sectors in the post-pandemic world? 

India's financial industry is expanding rapidly, both in terms of the robust development of current financial services organizations and the entry of new entities into the market. The Indian government has implemented several measures to liberalize, regulate, and improve this business, such as establishing a Micro Units Development and Refinance Agency, a Credit Guarantee Fund Scheme for MSMEs, and rules for banks addressing collateral requirements (MUDRA). 

The brokerage sector in India is shifting from a transaction-based to a fee-based one. As a result of this transformation, brokerages are increasingly providing additional services such as investing and wealth management advice. There is also a greater emphasis on fund-based operations like margin financing. This assists brokerage businesses in generating long-term profits. They are also broadening their product and service offerings to build customer ties. 

Can you shed some colour on Choice International's H1FY23 financial performance and your outlook for the next few quarters? 

The company’s revenue has grown by 26 per cent on a YoY basis to Rs 1572 million in H1FY23, while the EBITDA has decreased slightly in H1FY23 to Rs 350 million as a result of the company’s aggressive branch and footfall expansion in India as well as the expansion of the agent network across the country to cater to the growth from tier 3 to tier 6 cities. 

Therefore, we anticipate expenses to be slightly higher for the remaining half year as well. But, at the same time, we are expecting that our revenues will also grow multi-fold, so we are hoping to maintain an EBITDA margin of 22-25 per cent for the next quarters.

What is your segment-wise revenue mix and how do you expect it to evolve over the next 2-3 years?  

The segment-by-segment revenue breakdown for H1FY23 shows that 67 per cent of the revenue came from broking services, 21 per cent from advisory services, and 12 per cent from NBFC services. 

In the next three years, we anticipate that the Broking Services will generate 60 per cent of the revenue, with 70 per cent of it coming from Stock Broking and the remaining 30 per cent coming from other Broking Services, with the Insurance Distribution playing a big role. Around 10 per cent of the revenue will come from NBFC and Advisory services will contribute 30 per cent to the top line. 

How do you plan to leverage the burgeoning ecosystem by broadening your product portfolio? Also, what is your strategy for penetrating the untapped markets specifically in Tier II, Tier III and beyond cities? 

As a company, we believe in the importance of personal interactions in financial services and are working in a "PHYGITAL" mode to acquire and serve clients. Our goal is to improve the quality of service and reach markets in Tier 3, 4, and 5 cities. Many people in these areas are interested in participating in the capital markets but lack access or knowledge to do so.  

That's where we come in - by helping and guiding these individuals, who join as our business partners and help their peers get involved in the capital markets. We believe this approach will allow us to better serve these markets and help more people take part in the opportunities provided by the capital markets. 

Can you shed some light on your efforts to augment investment in your mobile platform ChoiceFinX (formerly Jiffy), artificial intelligence, machine learning capabilities and other newer technologies?  

ChoiceFinX (formerly Jiffy) is an app that offers a comprehensive range of financial services, including investment in the stock market, mutual funds, insurance, bonds, and fixed deposits. Our goal is to provide users with everything they need for everyday finance and complete investing solutions in one convenient place. 

Signal, one of ChoiceFinX's many features, is an automated research tool developed by us that allows users to assess stocks by leveraging a variety of timeframes and indicators to find the best intraday and short-term trading opportunities with potential pricing. We have taken great efforts to ensure Signal is a fully automatic engine with no human interface, which is its most crucial feature in my opinion. 

Robotic process automation (RPA) has allowed us to significantly reduce redundant work by 20 per cent and automate 50 per cent of our operations jobs. This has enabled us to manage three times as much client operations work. By fully automating and implementing end-to-end interactions with exchanges and depositories, we've been able to reduce the time spent onboarding and creating clients by 90 per cent. Additionally, automating the process has resulted in a reduction of the manual process from three hours to just one minute.