Valuations are subjective, profitable growth the key: Axis Securities MD and CEO Pranav Haridasan

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New-age firms got a reality check once they were subjected to volatile markets. They are returning to profitability as the conversation has shifted from metrics to structural growth. In an interview to Siddhant Mishra, Axis Securities MD and CEO Pranav Haridasan says despite increasing volumes, we cannot get too speculative as a market. Excerpts:

How do you see the Indian markets at this juncture?

Over the last 15-20 years, India has been a market that has promised a lot, but not lived up to expectations. This time, we are seeing an amalgamation of factors — cleaner balance sheets, better corporate governance, a better macro set-up and the non-linearity in growth — which hold tremendous value.

We believe that compared to other EMs, India is structurally in a sweet spot. Most of the larger companies, and now, new-age tech players, have started showing green shoots of profitability. We see a significant movement in the capital markets, which retail investors find comforting. Thanks to these factors coming together and capital market activity reviving, recent weeks were quite encouraging.

Are stretched valuations too big a concern?

Valuation is a subjective metric that can be managed effectively when companies know how to create profitable growth. Correction in valuations during IPO listings will always be up for debate; what matters is whether the company can sustain the momentum, like established players, such as Infosys, have done over the decades. From that perspective, we are beginning to see some favourable developments.

Did new-age tech companies promise too much?

A large amount of the private equity money that came into these entities pushed business strategies to a particular direction, resulting in an overheated market. We observed this phenomenon not just in India, but also in the US. Over the last few years, these companies raised capital at stretched valuations.

Now, there is definitely some stability in terms of valuations. The fact that the conversation has moved from focus on metrics to what is traditional, such as creating profitable/structural growth, shows we are in a good space.

How the brokerage business evolved over time, given the entry of discount brokers and surging demat accounts?

Discount brokerages have done well in terms of building platforms and bringing better technology to the market. But the focus has been primarily on the derivatives market, where we see significant growth in trading volumes. However, creating profitable trades is challenging in the options market.

As a bank-led broker, we believe in encouraging long-term wealth creation. Our strategy has been focused on cash volumes, building long-term wealth-enhancing products for customers, and scaling up our advisory business.

Despite a stable last year, the overall cash volumes haven’t picked up significantly, and the UCC addition we saw in the previous three years has moderated. However, over the last couple of months, we have seen a renewed interest in the cash market.

To create a strong capital markets structure, we must ensure that customers do not burn their fingers this early, in a nascent stage. We all have a responsibility to drive investor awareness and education.

This surge in active users has helped bring volumes to the market, so isn’t that a boon?

Most definitely. However, it is equally crucial that investors and traders are in the market for the long haul. A substantial and committed user base over some time leads to improved market breadth and reduces impact cost for investors. We should, however, be careful not to get too speculative as a market. We believe that in this context, the regulator has done a fantastic job of curbing excesses.

Regulators across industries are intensifying focus on corporate governance. Is the pace of regulation too much for the industry to keep up with?

Have we improved in terms of corporate governance over time? Yes, substantially. Look at bank balance sheets, for instance. As far as execution is concerned, there is merit in more industry-led discussions around implementation timelines and tech and infra build-out to ensure accuracy and stability. Feedback is significant so that it helps set up realistic timelines.

What are your plans for the businesses?

Over the last two-three years, we have significantly scaled our business in customer additions and offline and digital platforms. Our key focus remains building scale while driving profitability, leveraging our significant banking presence digitally and via our branch networks. We have also invested substantially in technology and for enhancing our digital footprints. Even as we build a robust platform and digital capabilities, we will continue to focus on our wealth management solutions. We want to leverage our fantastic performance across our advisory and managed products business to create meaningful investment propositions and value for our clients.


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