Brief Background About the Company
5paisa is a financial services company with a focus on “discount broking” services, providing financial products through an online technology platform and mobile application. 5paisa is a depository participant of CDSL and also a trading cum clearing member of BSE and NSE.
Services of 5paisa
Discounted stock broking services
Clearing and Depository Services
Mutual fund distribution
Distribution of other financial products
Recently, company has formed a wholly owned subsidiary namely 5paisa P2P Limited (“5paisa P2P”) which will operate as a peer-to-peer lending platform. An in-principle approval for registration as NBFC peer-to-peer lending platform (NBFC-P2P) from RBI has been received.
Discount Brokerage Industry
These brokers offer services at low and fixed brokerage fees, irrespective of size of order and provide such services via an online platform. Discount brokers typically do not provide any cost intensive facilities and services such as physical offices, research reports and relationship managers. Currently, there are more than 15 discount brokers in India. As per the annual report from the company during the period FY 14 to FY 18 the market share of discount brokers has increased from 1% to 8%. USA was the pioneer in discount broking where currently about 70% of the retail broking is conducted through discount broking.
What is exciting about the company
Company has declared the financial results for the period December 2019 the revenue of the company has increased by 50% in a single quarter while the cost has increased by only 5%. Press release and financial results have been attached.
Discount brokers are gaining market share rapidly, effect of this can been seen in the quarterly results of ICICI securities
The growth of discount brokers can be seen on the following links
Discount broker active clients 2018
Discount broker active clients 2017
5paisa has increased the clients 3 times from 2017 to 2018
I have tried to pullout the financials of other discount brokers from the ROC data. Zerodha and RKSV are the main competitors of 5paisa. I could not found the data for Zerodha but i have found the data for the RKSV (Balance sheet has been attached). As per the link
( Gunning for profits of Rs 120cr, bootstrapped Zerodha is getting bigger for the pond ) zerodha has reported the profit of Rs 120 cr on the turnover of Rs. 220 crores in the financial year 2017-18, which is very impressive at the same time zerodha has grown aggressively after 2017-18.
RKSV has grown 100% from FY 2017 to FY 2018 (financials extracted from the ROC data has been attached). The turnover or RKSV has grown from 13.24 in FY 2017 to 26.78 FY 2018, while its expenses have grown only marginally. The company also reported profits in FY 2018.
I have extracted the financials of other zerodha group companies same has been attached herewith.
Recently company came with the open offer for raising around 100 crores.
The proposed utilization of Net Proceeds is set forth below:
(in ₹ million) Sr. No. Particulars Amount
- Business and operations expansion 240.00
- Manpower expenses 141.60
3.Margin maintenance with stock exchanges 450.00
4.Investment in our Subsidiary 50.00
5.General corporate purpose
New Clients Acquired as per offer letter
The Company proposes to push the process of customer acquisition through an aggressive marketing drive. Company targets at acquiring additional 200,000 clients in a time frame of 12 months. Company therefore earmark proceeds of ` 240 million i.e. 50% higher budget than the Fiscal 2018 for branding and business development purpose. We intend to achieve 4X growth in customer base with an increase of just 50% in acquisition expenditure over the previous year. The estimate considers the growing recognition of the brand and increasing benefit of customer growth by word of mouth.
Company has reported losses of Rs. 23 cr on the turonver of Rs. 49 cr (TTM revenue) as the same time RKSV has posted the handsome profits on turnover of Rs. 26 cr.
I have no idea about the management of the company.
In my opinion company can report good amount of growth in the coming years as the industry expands. The company can be multibagg
er from 3-5 year perspective.
I own 2% of my portfolio in the 5paisa which has been recently been acquired
This my second topic on the value picker.
this is not an investment advice,
Link for open offer document
Press release Q3
Annual Report report and fiancials
RKSV AR and Financials 2017-18.pdf (2.0 MB)