Indian Unicorns 2022: Upstox Becomes the Second Largest Online Stock Brokerage in India

Like with the US, India’s stock market had a bumper year in 2021. Interest rates in the country kept depleting, but the markets were surging. 14.2 million new stock Demat accounts were opened in FY21 in India and they grew 26% to 51.5 million accounts. Most new investors are attracted by the record-high stock index levels and the continued ease in opening a Demat account in the country. Upstox is among the latest unicorns to benefit from this growth.

Upstox’s Offerings

Founded by Kavitha Subramanian, Ravi Kumar, and Shrinivas Viswanath in 2010, Mumbai-based Upstox is an online stockbroking firm that provides its users with innovative investment options, securities brokerage, and stock trading services, and gives retail investors the opportunity to trade in the equity market through its platform. Upstox uses its technology tools to cut costs. Its low brokerage fee model rests on prudent use of design technology, providing flawless, glitch-free technology to make trading quicker and convenient.

It focuses on the younger demographic of the country. Its tech-based trading platform comes with a simpler UI/UX targeting first-time investors. As of July 2021, more than 70% of its over 2 million new customers were first-time investors and under-36. Upstox is looking to expand its user base to over 10 million by March of 2022.

Recently, Upstox announced a partnership with the Tamil Nadu Premier League. The partnership will contribute to increasing financial literacy as well as promoting the investment culture across the state. With Upstox’s tech-enabled and intuitive platform, customers will be able to realize the earning potential from financial markets. It also announced a partnership with the ICC that will allow Upstox to take advantage of a large fan base to educate and engage new and existing customers.

Upstox’s Financials

Upstox earns revenues through brokerage and allied services fees charged from users on its platform and through interest on bank deposits. Brokerage fee accounts for 80% of its revenues.

Revenues were INR 124.9 crores (~$20.7 million) for fiscal 2020. It continued to invest in market expansion and saw its expenses balloon in 2020 as well. Net loss was INR 37.99 crores (~$5 million) in fiscal 2020 compared with a profit of INR 13.06 crores (~$1.75 million) in fiscal 2019.

Upstox has raised $29 million in two rounds of funding led by Tiger Global Management, GVK Davix Technologies, and Kalaari Capital. Its latest round was held in November 2019 when it raised $25 million from Tiger Global. The company was working through an additional funding round of $150-$200 million led by Tiger Global Management at an estimated valuation of $3 billion, marking its entry into India’s booming Unicorn club.

The Indian financial market has attracted a slew of fintech startups. Upstox competes with traditional banking and financial institutions that also offer stock depositary services, traditional share brokerage firms, and several other startups like Groww, Paytm Money, Zerodha, and many more. In fact, Bangalore-based Groww is also backed by Tiger Global, and had seen its valuation triple in six months to $3 billion after it raised $251 million in a round led by Iconiq Growth in October 2021. According to India’s National Stock Exchange (NSE) data, Upstox had the second-highest number of active users among all of the stockbrokers last year. It was second only to another startup, Zerodha. Another report estimated that Zerodha held 18.9% market share last year, followed by Upstox with 10.9% market share.

Upstox plans to grow beyond a stock brokerage firm to become a wealth management platform in the next five to ten years. It is exploring mutual funds, insurance, loans, and other financial solutions including fixed deposits and international trading.

Like with other Indian unicorns, it appears that the investors are betting on the relationship the company is creating with a valuable customer base with the idea that customer lifetime value is likely to be astronomical. As Upstox adds more products, its monetization prospects will grow. But I worry about Death by overfunding. With investors willing to push money into the country, a lot depends on the ability of the founders to manage to keep their wits about, and not get consumed by the lure of these valuations.

Photo Credit: Sergei Tokmakov Terms.Law from Pixabay

This segment is a part in the series : Indian Unicorns 2022