The IIFL-backed 5Paisa Capital Ltd, one of the leading online financial services provider, has said it is set to list shares on bourses in next 3-4 months. "We plan to become the first discount brokerage firm to be listed on Indian bourses. IIFL Holdings decided to hive off 5paise.Com and has already approached exchanges to demerge 5Paisa Capital and list it on the exchange after completing the formalities in the next 3-4 months period," 5Paisa Capital CEO Prakarsh Gagdani told PTI here.
As per the proposed scheme of arrangement, IIFL will invest Rs 100 crore into the company. Also, shareholders of IIFL will get 1 share of Rs 10 each of 5Paisa for every 25 shares of IIFL held, Gagdani said. The firm, which claims to offer the lowest brokerage of Rs 10 per order, sees huge opportunities in discount brokerage market.
"We see huge opportunities in growing the discount brokerage market in India, which is likely to contribute 40% of retail turnover of Rs 1.5 lakh crore in 2-3 years. Discount brokers are online stock brokers offering cheap brokerage plans to the retail and institutional investors in the country," Gagdani said.
The concept of discount broking in India was fetched from US, where 70% of retail volume happens through discount brokers, he said. As per data, the count of regular brokers has been declining over the past three years. Discount brokerage has been gaining popularity with retail investors as they offer a flat brokerage rate irrespective of the trade size as compared to traditional full-service brokers who charge a certain percentage of the trade value.
As per Sebi statistics, the number of brokers in the cash segment has almost halved to 3,199 as on March 31, 2016 from 6,147 in 2014-15. As per an ICRA report, online volume for the discount brokerage houses as a percentage of overall retail volume rose to 30% in first half of FY16 from 27% in FY15.
Besides cost advantages, the discount brokers have been able to leverage the growth of technology and Internet penetration to tap retail investors in the remote parts of the country.
According to Gagdani, online brokerage has been growing at the rate of 100% quarter-on-quarter and its annual daily turnover has already crossed the Rs 1,000 crore mark. It is now looking at acquiring more than 50,000 customers by the end of next year.