Tuesday, October 19, 2010

Broking cos eye overseas markets to tap India craze

MUMBAI: Domestic stock-broking firms are eyeing overseas markets as they try to diversify their revenue streams by tapping retail interest for Indian shares .

Taking memberships on overseas exchanges, forming joint ventures and buying out foreign brokerages are some of the routes being adopted by these firms to expand their global footprint. The basic idea is to tap NRI-related businesses and distribute India-focused investment products to foreign investors.

The markets being explored by brokers include Sri Lanka, Nigeria, Turkey, Vietnam and Tunisia, besides several east European nations, which are tipped to emerge as investment hubs of the world. “Sri Lanka is a land of tremendous business opportunities, especially after the war. We expect the Sri Lankan economy to grow at an accelerated pace from current levels,” said Nirmal Jain, managing director, India Infoline Group, which recently got approvals from the Colombo Stock Exchange to start broking operations in Sri Lanka. The brokerage firm plans to start institutional broking and research on companies that are listed on the Lankan bourses.
Another aspect drawing brokers to Sri Lanka is the high-yield debt regime in the country. Brokers are keen to help rich Indian investors to invest in Sri Lankan bond issuances, which bear 10% to 12% as average yields. The country also has an equities market that could generate decent returns.

“The Sri Lankan stock market has been one of the fastest-growing in the world in relative terms. Post the civil war, the country has become an attractive frontier market,” said Shachindra Nath, group CEO, Religare Enterprises , which recently acquired 50% in Sri Lanka-based Bartleet Mallory Stock Brokers. Religare has offices in several Asian countries, including Japan, and a few European cities.

Geojit BNP Paribas, SMC Sanlam (with operations in South Africa), ICICI Securities, Anand Rathi Securities and Kotak Securities are other brokerages that have significant overseas business.

Brokerages are keen on taking aboard Indians (also persons of Indian origin — PIO) wanting to invest in the Indian equities market. Such a link-up with the diaspora not only helps Indian brokerages diversify their revenue streams and strengthen distribution network, but also get long-term investible funds.

“We’ve presence across the UAE and are in the process of getting approvals to start broking/distribution operations in Saudi Arabia, Kuwait and Oman. We will go to other Asian countries once the government allows foreign retail investments in the Indian market,” said CJ George, managing director, Geojit BNP Paribas Financial Services , which operates under the name Barjeel Geojit Securities in the Gulf countries and claims to have opened over 75,000 broking accounts.

Wealth management arms of these brokers convince rich investors (residing in India) to invest in overseas asset classes in the name of regional diversification of investments. NRI-related income of top overseas linked broker could be anywhere between 8% and 10% of their overall revenue. Distribution forms a major part of the revenues of brokers as they charge 2% to 6% as commission while selling offshore investment products, PMS schemes and private equity investment products to investors.

source - economictimes.indiatimes.com

No comments: