Brokerages cut salaries to tide over bearish phase

IST,Prashant Mahesh & Apurv Gupta, ET Bureau

MUMBAI: There is more gloom ahead for employees in the broking industry. With all cost-
cutting measures yielding limited results and no improvemen

t in the business environment, broking firms are resorting to the most painful austerity
measure: most of them are either reducing employee strength or salaries, or, in some cases, both.

Many broking outfits had deferred their decision to cut pay till Diwali. Now that the festive
season is over and there are no signs of improvement in sentiment, broking firms have decided to
go ahead with pay cuts. For instance, Motilal Oswal has cut salaries of its employees in the retail
broking business by 10-20%. Those drawing over Rs 6 lakh as annual salary face a cut of 20%
while those drawing below the figure see a reduction of 10%.

Confirming the move, Motilal Oswal Securities chairman and managing director Motilal Oswal
said, “We have cut salaries of a few people in the retail broking business.” The company also
plans to rationalise its branch network in certain cities to cut costs. “However, branch
rationalisation will not lead to job cuts,” says Mr Oswal. Last month, retail broking house
Sharekhan cut salaries across the board by 5-15%.

Anand Rathi Securities group chairman Anand Rathi says the times are tough and cost-cutting is
a continuous exercise. “At our end, we are restructuring business and combining two branches
which are close by, but, at the same time, opening new branches as well. There has been no
downsizing of an abnormal nature in our firm. If people are leaving on their own, we are not
discouraging them,” Mr Rathi says.

Executives across several levels at B&K Securities, which is primarily into institutional broking,
have seen their pay cheques shrink by 20-25%. “A big part of the problem was broking outfits
building fancy research teams, hiring for future, and paying higher-than-market salaries to retain
talent,” a broker familiar with the developments says.

According to market sources, India Infoline is looking at restructuring the package of its sales
staff to lower the burden of employee cost.

Market watchers say the scenario is quite grim across securities firms, be it domestic or foreign.
The industry may witness a 5-10 % reduction in workforce over two quarters if things do not
improve from hereon, they say.

Till last year, broking firms had been on a reckless expansion spree, adding branches and
manpower across cities. The move was partly driven by the lure of high valuations, as overseas
players were keen to buy stakes in domestic broking outfits. With turnover having dropped
sharply, the outfits are now struggling to sustain their branch networks, some of which were not
profitable to begin with.

Quite a few of these players are said to be in the process of scaling back on their franchisee
network and, in some cases, reducing manpower in some departments. ET had earlier reported
how some broking houses had started converting branch offices into franchisee offices to tide over
infrastructure costs.