In 2009, when the stock trading platform RKSV Securities (later renamed ) was launched, users had to download, print, fill out and courier a 30-page form to the startup’s office. Investing was tedious, time-consuming and complex.
However, India’s booming fintech industry – fueled by a rapid increase in the number of first-time internet users and the launch of Aadhaar – has seen a rise in digital investment vehicles in recent years.
In fact, the Mumbai-based online broker has surpassed 10 million users in the past month, beating competitors like , Angel One and .
In November 2021, Upstox joined the unicorn club after raising $25 million in a Series C round led by Tiger Global with a valuation of $3.5 billion. In comparison, Zerodha is valued at $2 billion and Groww at $3 billion.
“When we started Upstox, we certainly didn’t expect it… the industry is growing at such a tremendous rate,” co-founder Shrini Viswanath tells YourStory.
The startup’s growth in recent years has been driven primarily by high returns on global stock markets, loose economic policies and the pandemic.
Upstox, he adds, has grown 2-3x every year for the past three years.
The origin story
Today, Upstox consists of a 550-strong team led by Shrini, Ravi Kumar and Kavitha Subramanian, who joined the company as co-founders in 2016.
RKSV Securities was founded in 2009 by Shrini and brothers Ravi and Raghu Kumar. The three, who had just returned to India from the US, decided to fill in gaps in the process when they saw how difficult it was for ordinary users to start trading or investing.
They spent two years doing algorithmic trading and understanding the market. The idea was “to make this a lot easier for the masses,” says Shrini, so everyone can interact with the financial markets.
The startup launched its retail offering in 2012.
But opening a trading account back then took about two weeks. It was also a lengthy process for companies like Upstox. Forms had to be mailed out to users, who then filled out all 30 pages and sent them back. If a customer overlooked a small detail, the process would have to be repeated again.
At the time, most discount brokerage firms — those who fill buy and sell orders without investment advice — had similar offerings with one or two trading platforms.
Differentiation was the price that brought many traders to Upstox. “The early adopters tended to be people who took action and found the value proposition worthwhile,” says Shrini.
Upstox charges no brokerage fees for stock delivery trades and up to Rs 20 per order for intraday, futures and options (F&O), commodities and currencies.
Based on feedback from early users, the team began experimenting and launched their app in 2016.
The trading service became paperless. Users can simply download the app, provide their basic details to complete the KYC (Know Your Customer) process and start investing in financial markets – stocks, derivatives and mutual funds – with just a few clicks.
This further differentiated Upstox (and other digital brokers) from traditional players who used technology as an afterthought at best.
The fast growing market
Over time, several factors helped online discount brokers continue to grow their businesses.
The largest was Aadhaar. In 2016, Upstox launched an E-Aadhaar account opening, making it even easier for users to create accounts on its platform. In fact, out of the over 89.7 million Demat accounts in India as of March 2022, 64.3 million were opened after March 2016, according to data from the Securities and Exchange Board of India.
“It was a great help to ensure that the identity given by financial institutions, [user] verification, and everything became massively easier. So the 30-page form was slowly reduced to 15, and eventually to what it is now: zero,” says Shrini.
Cheaper smartphones and internet, made possible by the “Jio revolution”, also helped. A May 2022 Nielsen report revealed that India had 646 million active internet users as of December 2021.
Added to this are improvements in the digital payments landscape – the increasing acceptance of UPI and digital wallets. This helped Upstox cut the time it took to deposit users’ funds and invest in the exchange from two days before to just a few seconds.
Currently, 90-95 percent of all trades processed by the startup are mobile, Shrini says.
“Even our most professional traders prefer to trade on the go, and they always want more features that you can fit on the 6-inch screen,” he adds.
There has also been a surge in casual investors in Upstox’s user base, i.e. people investing for the longer term. In comparison, traders tend to invest for the short term and only hold stocks for a few months.
However, the market landscape and competition have certainly changed over time. As more fintech players enter the trading space, pricing is no longer the differentiator. “It’s all about the product,” says Shrini.
For example, Upstox is in the process of adding features for traders like new ways to trade options and insights. The aim is to make the app simpler for investors, without a lot of technical jargon.
In 2018, the startup set up an e-Delivery Instruction Slip (e-DIS) facility to allow Demat account holders to sell and transfer securities without having to provide their stockbroker with a “POA”.
At the time, Upstox was one of the first companies to allow e-DIS trading via One Time Passwords (OTPs) so investors didn’t feel stuck transferring funds.
“That’s the norm today. No one would dare send you a paper form,” says Shrini. “Those little things that started us added up to what we are today – a completely paperless experience and digital identity verification.”
Aggressive growth pathways
Upstox claims that of its 10 million customers, about 80 percent are millennials and nearly 70 percent are first-time investors.
More than 85 percent of its customers belong to Tier II and III cities, with states such as Maharashtra, Uttar Pradesh, Madhya Pradesh, Rajasthan and Assam being the most important markets.
To date, the startup has raised over $54 million. Investors include Tiger Global Management, Kalaari Capital, GVK Davix Technologies and industrialist Ratan Tata.
Upstox has invested aggressively to attract users and accelerate its growth. It reported advertising expenses of Rs 37.15 crore in FY21, over 51 per cent higher than the previous FY20.
In 2021 it partnered with the International Cricket Council (ICC), Indian Premier League (IPL) and Tamil Nadu Premier League (TNPL), which also helped to expand its client base.
While the startup has yet to file its FY22 financials, its business promotion expenses in FY21 totaled Rs 113.47 crore, a 5-fold jump from FY20. Its FY21 revenue nearly tripled Rs 429.12 crore but the net loss rose 89 per cent to Rs 71.68 crore.
“We have a plan to become profitable in the next two years. We can speed it up or slow it down. It’s just a matter of how much we’re supposed to scale,” says Shrini.
As other market participants break even, he is bullish on the revenue model and the market.
road ahead
The goal now is to add 20-30 million users to the platform by FY23 and 100 million over the next 4-5 years, says the co-founder.
While this number is consistent with recent Upstox growth, there’s a lot to note: Rising inflation and interest rates, along with tightening economic policies, are worrying investors around the world. And the financial markets are bearing the brunt.
The S&P 500 Index, which tracks the 500 largest companies in the US, has fallen 14 percent in the past six months. On the other hand, NASDAQ is down 25 percent over the same period.
In India, Sensex, which tracks the top 30 companies listed on the Bombay Stock Exchange (BSE), has fallen 13 percent since November 15.
These stats become even more important when you consider Upstox’s revenue model. It earns by charging a flat fee for each intraday order from its users. Shrini claims that more than 50 percent of the platform’s 10 million users are active.
“Psychologically, it’s not easy (for users),” he admits. However, he remains optimistic about user growth in the coming months.
“There’s always a market, whether it’s going up or down. Volatility is important. And even when there is a bear market, there is always an opportunity for traders,” adds Shrini.
His strategy to counter these concerns is to educate users while providing them with a variety of asset classes so they can make safer bets.
Edited by Saheli Sen Gupta
Comments are closed.