The firm will have to compete alongside established fintech startups and, while at it, ensure it maintains a one-arm distance between its unregulated crypto arm and Lemonn to keep its compliance clean.
PeepalCo, the parent firm of cryptocurrency unicorn CoinSwitch, on Tuesday forayed into the stock broking services, through a new entity named ‘Lemonn’, in a bid to democratise wealth creation. The entry will place Lemonn alongside other fintech giants including Zerodha, Groww and Upstox.
While the incumbents are already catering to the existing investors, Lemonn is betting big on the fact that less than 10 per cent of India’s population currently invests in the stock markets leaving a lot of room for new entrants.
Experts agreed about the opportunity that lies ahead for Lemonn despite existing players. “The Indian organised app-driven trading and financial investment platform market is still in nascent stages and is a blue ocean opportunity for the growing young population,” said Ritesh Bendre, analyst at Counterpoint Research.
Lemonn may try to attract some users who use diversified platforms for investing and rope in CoinSwitch’s existing crypto investor base, he added.
The app will help new investors in discovery and decision-making by providing expert ratings for more than 200 stocks by aggregating advisory reports from analysts. It will also provide zero-trading brokerage for the first three months. The company is considering multiple revenue models including charging its users a flat broking fee or annual subscription charges after the first three months.
“Millions of Indians find stock markets complicated even today. Despite the post-pandemic growth, only about 6% of Indians invest in stock markets. We aim to bridge this gap, by making stock investing engaging, informative, and effortless,” Ashish Singhal, Co-Founder and Group CEO, PeepalCo group, said.
However, the task is cut out for Lemonn to carve out a place alongside incumbents in India’s booming app-driven investing landscape.
Zerodha, one of the country’s top stockbrokers, revolutionised stockbroking when it charged a flat brokerage per trade, as opposed to a per-lot brokerage charged by the then-incumbent brokers when it entered the market more than a decade ago. Its competitor and another unicorn startup Groww simplified the process of buying and selling stocks, with an easy-to-use app.
“Lemonn’s brokerage per trade and application User Interface (UI) will be key to success. Smooth, glitch-free experience will be key,” Bendre said.
Currently, Lemonn allows only equity trading to its users. However, the platform will offer investment in Futures & Options, IPO trading and Mutual Funds on an incremental basis over a period, the company said during the media roundtable.
Singhal told Outlook Start-Up that there will be no data-sharing between CoinSwitch and Lemonn since the former functions in an unregulated space, unlike the stockbroking services.
However, Lemonn will place its advertisements on the CoinSwitch mobile application and run marketing campaigns elsewhere to acquire its customers. But the investors will have to do the KYC separately once they log into the Lemonn app, the company clarified. CoinSwitch has recorded two crore registered users, so far.
PeepalCo will continue to fuel CoinSwitch and Lemonn using the $300 million it raised in the last three to four years, Singhal said, adding that the parent firm has a runway to run both firms for five years.
Maintaining A One-Arm Distance
The entry of the parent firm of a crypto start-up into the highly regulated sector comes at a time when the Union government and the regulatory bodies including the Reserve Bank of India have maintained a cautious stance around the unregulated nature of cryptocurrency and its susceptibility to being used for illicit activities and money laundering.
PeepalCo’s foray into the stockbroking business comes almost 10 months after it first announced plans to enter the sector that saw rapid growth post the Covid-19 pandemic. The company's top leadership attributed the delay to the discussions with regulatory bodies to ensure compliance.
“It has taken us a while to land the right entity structure and to create the absolute one-arm distance, (put in place) people, physical infrastructure including the app and software. I believe, if you want to build sustainable successful companies, compliance has to come first,” said Devam Sardana, Business Head, Lemonn.
Lemonn will be housed as a separate business division under Peepal Co, alongside the crypto arm CoinSwitch, with its own managing and operations teams.
Singhal told Outlook Start-Up that there will be no data-sharing between CoinSwitch and Lemonn since the former functions in an unregulated space, unlike the stockbroking services.
However, Lemonn will place its advertisements on the CoinSwitch mobile application and run marketing campaigns elsewhere to acquire its customers. But the investors will have to do the KYC separately once they log into the Lemonn app, the company clarified. CoinSwitch has recorded two crore registered users, so far.
PeepalCo will continue to fuel CoinSwitch and Lemonn using the $300 million it raised in the last three to four years, Singhal said, adding that the parent firm has a runway to run both firms for five years.