TECH-FIRST BROKERS HIT A SNAG; FOXCONN’S BHARAT FIH IN TROUBLE
Happy Thursday! Online stock brokers, who used low fees to attract customers, now face an uncertain future with Sebi’s new rules. More on this in today’s ETtech Morning Dispatch.
Also in the letter:
■ Banks, fintech to integrate with ONDC
■ Global IndiaAI Summit Day 1
■ Social media cos on new data law How Sebi action will impact profits of discount stock broking firms like Zerodha and Groww
Tech-first stock brokers, which built their business models on zero or very low charges for their services, are facing business uncertainty as a result of Sebi’s ‘True to Label’ circular issued on July 1.
Driving the news: Fintech executives pointed out that brokerage charges could go up across the spectrum as platforms deal with the removal of the rebate that exchanges offered them in lieu of a higher volume of transactions.
The likes of Groww, Upstox, Angel One, and Zerodha could see stress on their toplines unless they decide to completely pass on the charges to their customers. The gross revenues of many of these platforms are expected to be hit, potentially impacting their valuations as well.
Sebi action: On July 1, market regulator Sebi released a circular passing a set of instructions to stock exchanges and stock brokers. This is set to come into effect from October this year.
- Stop charging slab-based fees to brokers
- Brokers should collect only the fee they need to pass on to the exchanges and not get any rebate
- The new charges should be structured in a way that end customers benefit.
Also read | Groww, Upstox eye lending, payments to expand revenue base
Impact: Zerodha chief executive officer Nithin Kamath said that he could look at increasing brokerage service charges and bring back charges on equity deliveries. Tejas Khoday, cofounder, Fyers, said that he expects a 15% to 30% impact on the revenues of discount brokers across the spectrum. Subramnya SV, cofounder of Fisdom, said that brokers who built their business models purely on zero brokerage might need a reset from October.
Also read | New-age brokers ride on futures option to the bankFoxconn’s Bharat FIH is facing turbulence due to top-level exits
Foxconn group company Bharat FIH is in a rough spot, with three of its independent directors having left its board in the last three months, sources told ET.
Trouble ahead: Interglobe Aviation chairman Venkataramani Sumantran and Sify Technologies cofounder Ramaraj R left the company board in March, and former IT and telecom secretary Aruna Sundararajan resigned a month ago, people in the know said.
One of the people cited the company’s lack of direction as the main reason for the resignations.
Falling business: Foxconn has zeroed in on its India operations, especially contract manufacturing, but through other subsidiaries. Little of that work has come Bharat FIH’s way, according to the person cited above.
The company’s facility in Sri City, Andhra Pradesh, is also staring at a shutdown due to a massive drop in orders from Chinese smartphone maker Xiaomi, a key client, the sources said.
Growing disquiet: The disquiet within the Indian unit had been building up after news broke in January of the exit of its then country head Josh Foulger, who had helped the Taiwanese contract manufacturer and its customers, including Xiaomi, expand operations in India.
Experts believe that Bharat FIH, which entered India in 2006, needs a pivot to other sectors to stay in business, which it is unable to engineer. ONDC to add banks, fintechs to take credit services to last mile
The homegrown Open Network for Digital Commerce (ONDC) is set to integrate banks such as HDFC Bank, IDFC First Bank and Karnataka Bank, alongside fintech firms like Fibe, in the coming months, sources told us.
Plan of action: Through this integration, participating banks will offer unsecured personal loans and Goods and Services Tax (GST)-based invoice loans, targeting small merchants and retailers in financially underserved regions across the country.
Current pilots: ET earlier reported that ONDC has already started conducting early pilots for credit disbursals by integrating Tata Group super app Tata Neu and credit marketplace Paisabazaar to source customers and lenders, such as DMI Finance and Aditya Birla Finance, to provide loans.
Large-ticket plans: ONDC plans to introduce business-to-business (B2B) credit services, offering large loans of Rs 1-1.5 crore. However, these products are still in the pipeline and will be built once the consumer and business credit piece goes live. The protocol for these services is expected to be published by August, with a pilot launch set for December.
More segments: The platform is expanding into the insurance and investment segments as well. Initially offering marine, health, and motor insurance, it is now developing a protocol for life insurance. On the investment side, ONDC plans to go live with investment products within a month, starting with mutual funds. Global IndiaAI Summit | Govt, industry discuss all things AI
Representatives from the government and industry stakeholders discussed the adoption of artificial intelligence (AI) and its impact on the first day of the Global IndiaAI Summit.
Govt’s backing: Minister for Electronics and IT Ashwini Vaishnaw reiterated the government’s focus on AI and assured investment into the creation of a public platform that offers access to compute power, high-quality datasets, and standardised protocols.
“We'll be creating an AI Innovation Centre that will focus on getting high-quality datasets, which can add more value to the efforts of researchers and startups,” he said.
OpenAI on India: OpenAI vice president Srinivas Narayanan spoke at the event and said the company is “keeping India in mind in whatever important decisions that we are making”. He also said OpenAI is committed to India’s Rs 10,000 crore AI mission.
Pragmatic AI: Debjani Ghosh, president of technology industry body Nasscom, pointed to the pragmatic phase of AI. “While AI is undoubtedly transformative, it is not magic. We humans will play a crucial role in making AI real,” she said. Other Top Stories By Our Reporters
Social media cos list out worries as Centre readies data protection law: Social media intermediaries have pointed to undoing behavioural tracking of children, verifiable parental consent (VPC), and targeted advertisements as the biggest concerns with the data law. The Rules for the Digital Personal Data Protection (DPDP) Act, which will provide teeth for enforcement of the law, are expected soon, and companies are hoping the government will address their concerns.
Indian Twitter rival Koo shuts down after failed acquisition talks: Indian social media app Koo, once seen as a rival to micro-blogging platform X, is shutting down, its founder, Aprameya Radhakrishna, said in a post on LinkedIn on Wednesday.
Food delivery market size to cross Rs 2 lakh crore by 2030: Bain-Swiggy report | India’s food delivery segment is expected to cross Rs 2 lakh crore by 2030, growing at a compounded annual growth rate of 18%, a joint report by Bain & Company and Swiggy said.
Persistent Systems buys US software firm Starfish Associates: Indian mid-tier IT firm Persistent Systems (Persistent) today announced the intent to acquire 100% stake in US-based software firm Starfish Associates for $20.7 million (around Rs 173 crore).Global Picks We Are Reading
■ Britain’s brewing battle over data centres (Wired)
■ Technology and cyber crime: how to keep out the bad guys (FT)
■ Half of Singapore’s e-commerce scams now happen on WhatsApp, Facebook, or Instagram (Rest of World)
