'We acquire close to 30,000 customers every month'

Kotak Securities, a subsidiary of Kotak Mahindra Bank, which was established in 1994, is one of the largest stock broking firms. In an interaction with Uma Kannan of Deccan Herald,  Kamlesh Rao, Managing Director and CEO of Kotak Securities says there is a huge increase in the number of people using mobile phones to do financial transactions. Edited excerpts:

Kotak Securities  recently launched 'Chat to trade' for customers to simplify trading as easy as chatting. How is it going on at present?

We have just launched the beta version. First, customers have to register their mobile number and a one-time activation is required to avail of this facility. Customers could request for service on WhatsApp with a message, details of previous transaction too can be viewed. We did this because we think people prefer this medium nowadays, and they want to do things on the platform that they are most comfortable with rather than you giving them an app and making them download the  same.

How many customers will shift to the new medium of trading?

We expect about 15-20% of customers will shift to this medium. Our next launch will be 'Robo Advisory', as customers don't like being pushed by people, who suggest on stocks over the phone. We have already put the infrastructure in place, our actual Robo Advisor is ready, we are only making sure "she" understands the language a little better.

It is  due for launch in the first week of April. Whatever  customers ask for, only those questions will be answered. It also makes economic sense for us when a machine can take care of a lot of people. But in India there are many languages, some will say what's the price of Reliance, others will say "Aaj Reliance Kitna hai", without using the word price. Some people say buy Reliance, some say "uthale". So to interpret "uthale" also as buy Reliance, is taking a lot of time and energy to make sure the system is able to understand it.

What percentage of people prefer Kotak Securities on the mobile platform?

On mobile, we have a market share of about 20%. What drives mobile is the fact that now people are used to doing financial transactions on mobile. We have stopped adding branches long time back,  and we don't add physical branches now, because in B-class and C-class towns, the penetration of consumption of ecommerce is growing at 70-72% and when ecommerce grows, financial savings or products also grow at roughly half the number because financial people already have a mindset that they are dealing with money in the bank account.

Our market share in B-class towns now is about 150 basis point higher than the A-class towns. We will focus more on the mobile platform, and we ensure that the technology that we use makes it simpler, bigger and faster for our customers. Everything will be on mobile-first. We will try to make mobile the most cost effective engine and try to provide as much information as possible to a customer in a clutter-free format and leave the decision on the customer what he/she wants to do.  

What is the percentage of Retail Investors in your portfolio now?

Our percentage roughly between retail and retention would be about 50-50. There is a big growth in the market on account of increased volume online. If you look at the January-March quarter of last year versus third quarter of this year, the offline volumes in the market have remained flat, they have grown from 5% to 8%. The web volume has grown by 60% in 12 months, and in another 12 months, this value will more than double.  

What's your year-on-year growth?

This year, we had a growth of 60% higher than the last year. Market growth was about 40%. Market has grown 100% on mobile. A bulk of areas that we are focusing on is technology. If  the market does well, the broking business has better leverage. But the area that we are working on is branding this market by doing SIP. We will soon be launching this new product where the customer can directly invest in the schemes of mutual funds, and we will be providing a platform for this.  

As far as customer acquisition is concerned, we acquire close to 30,000 customers every month. This number used to be exactly 15,000 a year  ago.

What kind of impact are you foreseeing with this  long-term capital gains tax announced in the Budget?

People who prefer long-term will not change because of long-term capital gains tax. We have enjoyed the benefit of not having a long-term capital gains tax for too long. You can argue and say, if it would have not happened it would have been good for the market, but I think the way it has happened, it's the best thing. Probably, if you are used to zero and you have to pay 10% then there's a problem, but the bigger worry is with the FIIs (Foreign Institutional Investors). The worry is not the 10%, the worry is when they did not have to pay tax, they did not have to file any returns. Now if  they have to pay tax, then they have to file returns.

The dependence on FIIs to DIIs (Domestic Institutional Investors) has completely changed. If you go back to 2008, for every Rs 100 that came into the market, 75% was FIIs and 25% was of domestic institutions. For the last 18-20 months, it has become exactly the reverse. Today, for every Rs 100 that gets into the market, Rs 70 is DIIs and  the rest is FIIs.

What do you think about Bitcoins? Going forward, do you think it can be a part of the market?

I hope it does not come anywhere to the capital market. One of the biggest reasons why customers lose money, is that they put money in those places that they don't understand and my advice has always been that when you don't understand something just stay away. If you don't understand, make an effort to understand, or your broker/ advisor can help you in understanding the market.  

DH News Service