Brokerage houses in the country, reeling under the pressures of high costs, low volumes and shrinking revenues, are in the market for buyers.
“There are almost 9,000 brokerage houses in India and many are looking to sell out. While consolidation is long due, what is stopping it now is the unreal valuation/expectation of the sellers,” said the head of a fund house who did not wish to be named. "I have been approached by some of these broking firms but the valuations they are asking for is unreal."
The brokers have been hit by three factors — absolute drop in volume, drop in revenues as a result of direct linkage of commissions with market value of stock, and fall in revenue on account of shift in trading from cash to futures and options (which yield less brokerage).
While smaller firms are facing the heat, and eyeing possible buys by big brokerage firms, the older and larger firms are expanding their businesses.
"A couple of big players are looking for consolidation," said the head of another brokerage house, on the condition of anonymity. "A big player looking to sell off has already appointed some investment bankers to fix the deal," said the official.
“We are developing alternate products like currency futures and expanding in insurance distribution in a big way,” said CJ George, managing director, Geojit Securities. “This is helping us.”