 Large capital market players, such as, Reliance Capital, Edelweiss, India Infoline, Religare and IndiaBulls have diversified and are now lending to retail, small and large companies to stabilise earning and offset profitability pressures.
The loan books of these broking firms are expected to grow 24 per cent and cross the Rs 31,000-crore mark by March 2013, according to Crisil.
In 2011-12, profits from lending are expected to exceed those from the capital market business. The lending book is projected to grow at a compounded annual growth rate of 30 per cent over the next two years. In tandem, the profit contribution from the lending business may triple to more than 60 per cent in 2012-13, from 20 per cent in 2009-10.
In an analysis of nine financial groups comprising 34 large capital market players, Crisil said the profit from fee-based businesses may be lower in the next couple of years, compared to the levels seen in 2008-09.
These financial groups initially diversified into capital market-related, fee-based activities like distribution and wealth management, loan against shares, margin financing and promoter funding (capital market lending). However, later, these shifted to retail lending businesses like gold loans, home loans and loans against property. A need to mitigate the effect of weak equity trading and a slowdown in investment banking prompted the diversification. Some of these companies also extend credit to companies and small and medium enterprises.
|
