“If you look at the industry, there is already a lot of consolidation happening at the process end one by one, as technology takes over,” Sridhar said, when asked if he was foreseeing a lot of consolidation down the road in the fast-growing industry.
He said in a rapid-paced market, the entire world has switched to mobile phones, with technology and digital aspects becoming ubiquitous, and they require very high investment.
“All of that will basically mean if you want to be a successful broker, screen and technology are the two things that can get you there,” he told ETMarkets.com in an interview, adding that technology was not everyone’s strong forte.
PayTM Money is one of the latest entrants in the stock broking space, and made its debut in 2020. Its foray came in at a time when a record number of first time investors flocked to the market in 2020, as work from home became the new normal amid the Covid-19 pandemic. Also, job layoffs and salary cuts prompted individuals to try and make a quick buck in the stock market.
Over 10 million new investors opened demat accounts during the year gone by, more than double the number for the year before when 4.8 million new investors had entered the market. On an average, more than 70,000 investors, mainly those below 20, opened demat accounts daily in December.
“Maybe if you fast-forwarded to 7-8 years, maybe there will be 3-4 players at the top, which will be very large in size and then what will emerge is I would call boutique brokers, who will offer a very specific proposition,” Sridhar said.
He said nice areas such as catering to ultra-HNI options trader or a broker focused on high frequency trades may emerge, as the discount broking space evolves over time.
“Those unique positioning, unique small ecosystems will emerge. You will have four, five at the top, and the rest will slowly one by one either become boutique firms or simply vanish,” he said.
Paytm Money’s parent firm counts billionaire investor Warren Buffett’s Berkshire Hathaway among its backers. In September 2018, the Oracle of Omaha’s company bought a 3-4 per cent stake in Paytm parent One97 Communications for about Rs 2,500 crore.
Sridhar said competition for him was less about peers, and more about how to grab the untapped market. “I do not think the competition is among the brokers. It is actually with other sectors altogether,” he said, adding that while hundreds of millions of Indians were doing digital payments, only a fraction of them were investing in capital markets.
“What really worries me is how can we take this 12-13 million active users to 30-40 million at least in India over the next two, three years, because the overall market has to grow for everybody to have meaningful businesses,” he said.
Sridhar said he admired the impact Robinhood had on American investors, and what XP has done in Brazil. “So, that is my real competition and that is my true benchmarking,” he said.