These are certainly not the best times for a brokerage firm as the retail investor is staying away and volumes are not growing. Dinesh Thakkar,chairman and MD,Angel Broking told Sandeep Singh of The Indian Express that it is time now for the industry to go for consolidation and for retail investors to start enetring into the market and invest in blue chip companies for the long term as the valuations are attractive. Excerpts:
Do you think this is the worst time that you have seen in the markets?
I think Harshad Mehta scam was the worst thing that happened. However,if you compare in terms of economic scenario and global issues then it is the worst. Also the duration of the volatility is a concern.
How do you see the impact of a depreciating rupee?
It is going to hurt us in the short run,but a depreciating rupee in the long run will adjust our current account deficit and help increase our export. So that way it will be beneficial but there will be some pain in the short-run.
What would you say to retail investors now?
As of now,I think it is a good time to invest for 3-5 year time horizon and investors should invest into blue chip stocks with a staggerred approach. I don’t think the markets will fall much from here however the returns in the long run would be good.
How are the pressures on the brokerage revenues?
There is no growth but its is not very painful as people have learnt over the last few years. Everyone wants to maintain their margin,create efficiency in their cost so that they are able to serve more customers at less cost. The industry is facing some pressure because the base is high as at this base everyone requires growth to manage your talent.
We are getting some business from the traders which are active but investors are not active.
Do you see consolidation within the industry?
I think that the industry is ripe for consolidation because it makes a lot of sense to consolidate and achieve more efficiency in terms of cost but the problem is that the industry players are stuck for various reasons.
What are you looking for,merger or acquisitions?
We are open to both mergers or acquisitions and are looking at medium to large players. We have 9 lakh customers and we are looking for players that have between 5-9 lakh customers. We have been talking to various players and were interested in some players we wanted to acquire or merge with us but somehow it is not happening. We continue to look around as I think it is the right time to grow,to increase the size,to merge with companies which are synergistic.
Where is the problem?
Since everyone is optimistic about future,people are willing to wait rather than losing their management control and that is stopping mergers and because of low valuations,no one wants to quit. Some don’t want to lose management control,in some cases the company (merger target) has an investor with it who does not want to sell at this time. In other cases companies have diversified in non-core and they are unable to hive off the non-core business. So there are various issues. There is a general thinking that if they wait for two years and if there is a bull run then it may be a right time to do that.