Angel One: Metamorphosis into a Fintech? (Previously Angel Broking)

Nimit · May 26, 2023, 7:37pm

Brokerages (specially the online model) don’t have hard assets and client’s cash balance is in their trade payables or cash holdings. They also don’t have any receivables because it is a fee business, therefore their working capital requirement is very low.

PE is what Mr Market thinks is right. If you think it is too cheap then go long.
In general brokerages PE hover between 5 to 20. The business is considered cyclical because of retail participation during and after bull phase and slump during bear.

django · July 13, 2023, 3:24pm

Good results from Angel One for FY24 Q1. This further helps build confidence in the stock. Hope this continues in coming quarters. Looking forward to their conference call.

@Nimit Thanks for your thoughts. It’s a good way to think about the valuations.

I am just hoping Angel will consolidate its position in the industry. I think in 3-5 years, top 2-3 players will capture majority of the online brokerage market and Angel is a strong contender to be one of them.

Revenue-wise, main players in Indian brokerage industry are
Zerodha, Angel One, MOSL, IIFL Sec, Upstox, Groww… in that order.
Zerodha is by far the biggest which I do not see changing.

For Angel One, what can be hoped for is slowly increasing its market share - which is evident from their recent ppt and then maintaining their margins.
With this also, there should be considerable room for growth for years to come as more and more retail investors come into the market.

Will keep holding.

Nimit · July 14, 2023, 1:52pm

I have a thought on why Angel will displace Zerodha. Although it won’t happen in immediate future.

I went through Zerodha’s tech blogs and they mention that their core software engineering team is of just 30 members (as of 2020).
I must say that their technical blogs are solid and I loved their approach and emphasis to build everything with a long term perspective. This stands in stark contrast to the short sighted mindset prevalent in my team and other teams I have heard of at my company. (ps. I work as a software developer in a FAANG!).

However I personally believe that a small, albeit focused, team of software engineers can’t keep up with the growing requirements of new features, compliances and maintenance work. Their CTO has mentioned that their recruitment process is highly selective and rigourous. Anybody leaving the core team will create a big hole which will take a new joinee months to catch up.
Attrition rate at Zerodha is almost Nil from what I have heard, but this is taking chances!

Disc: Invested, although the above thought isn’t the reason why I have invested.

Venkat_Rakesh · July 16, 2023, 5:29am

AngelOne is now prohibited from adding any new Authorized Persons (sub-brokers) for 6 months and to face inspection of operations of all APs.

Angel has the highest number of APs (21,000) among brokers.

Venkat_Rakesh · July 16, 2023, 5:31am

Can someone explain what are the implications from this in the short term.

sivaram · July 16, 2023, 11:51am

new customer onboarding might be impacted. only the existing set of subbrokers can add new customers?

django · July 17, 2023, 7:58am

This is certainly not good.
Hope to see some positive action and update from Angel to ensure such things do not repeat.

Regards,

AKJInv · July 18, 2023, 4:13am

Angel One Data Point:

Hope it get helps:

Client Addition and AP Data:

Fy20: 11k Authorized Persons
4 lacs - Digital
1lacs - AP

Fy21 - 15k Authorized Persons
19 lacs - Digital
5 lacs - ( AP Acquisition)

Fy22 - 18k Authorised
38 lacs - Digital
15 lacs - ( 3.6lacs traditional) - AP

FY23 = 22k AP

Total Acquired: 46 lacs ( No breakup given ) [Asked for the data, waiting for response]

Fy22 because of AP there was good addition.

No broker company has these many AP.

So this would be sufficient to grow addition of user IMO (
Can be wrong too.)

In addition to above data:

AP growth is 25% YOY.

Brokerage Revenue from AP: 25% over 3 years
Brokerage Revenue from Direct Client: 40 - 50% CAGR over 3 years

True business potential should be shown in this times, 22k AP and Large client base.

Incrementally more share from Direct Client (Anyways 6 months, shouldn’t be material impact)

Closely tracking.

lazy_investor · July 18, 2023, 8:57am

New customer onboarding can happen through existing sub-brokers(APs) but they can’t add new sub-brokers to their platform. Before angel one went digital it had a vast network of offline sub-brokers through which they used to add new clients. Now it contributes around 30% to the overall revenue through these channels.
They have faced this penalty due to non-compliance and they were even warned before for this: Allegations about Angel One’s Poor Supervisory & Compliance Practices Regarding ‘Authorised Persons’, NSE Lets the Broker Off with a Warning

I don’t think it will have a significant impact on the business in the long run as existing sub-brokers can add new clients as well and this price crash might even be an opportunity.
However, they need to up their game w.r.t compliance as the business is entirely based on trust and complying with the regulators.

vish100 · July 21, 2023, 12:41am

I guess secular rev profile is not applicable for equity intraday and equity futures as that brokerage is % based (capped at Rs 20) - so any impact on ADTO will impact this revenue

mahendra_kumar_sai · July 24, 2023, 3:01pm

Why is no one questioning continuously falling promoter holding in the company, it’s almost at below comfort levels.

Kaustav_Gupta · July 25, 2023, 1:02pm

That is just optical. 2 people belonging to promoter group have been reclassified as public shareholders (Rahul Lalit Thakkar and Anuradha Lalit Thakkar). Share-holding by both of these remains intact (~5.1% combined). And minor effect due to ESOPs.

vish100 · July 26, 2023, 12:45am

Since retail share in ADTO is only 20%, the % based fee from ADTO will not be affected much by retail traders. 80% is from non-retail which I see as institutions and HNIs and that will be sustainable. So Angel I guess is not prone to the vagaries of churn of the retail traders as much as one would like to believe - makes sense?

vish100 · August 7, 2023, 3:13am

Does anyone have a break up of intra day vs non intra day order volumes - and also how many clients do just intra day and their intra day order volumes? The reason I ask is that for intra day, brokers are now offering 0 fees (e.g. Kotak) and many intra day traders are considering switching to 0 brokerage.

praveen_potnuru · August 7, 2023, 3:56am

Their ADTO for cash orders is so low compared to FnO. So, cash whether intraday or delivery is not significant, and no need to look at

vish100 · August 7, 2023, 6:54am

FnO can be intraday too - isn’t it?

ranvir · August 24, 2023, 5:37pm

Angel One Q1 concall highlights -

Unique SIPs registered with Angel One in Q1, Q2,Q3,Q4 FY 23 and Q1 FY24-

0.5lakh, .48 lakh, .57 lakh, 1.08 lakh & 4.3 Lakh !!
Company in No2 in no of SIPs in the mkt
Total Demat accounts in India Today-8.6 pc of population vs 1.7 pc in FY12 !!

NSE ADTO and Trade volumes going up every single year without exception since 2007. No exceptions despite multiple Mkt corrections !!!

Q1 financial outcomes(YoY)-

Revenues-811 vs 684 cr, up 18 pc
Breakdown-
Broking-557 vs 470cr
Interest income-144 vs 121cr
Other-108 vs 92cr

EBDAT - 305 vs 249 cr

PAT - 220 vs 181 cr

Client funding book size - 1139 vs 1594 cr

Avg per client exposure - 1.08 vs 0.97 lakh YoY

Angel One’s incremental client addition in last 4 FYs ( FY 20-23 ) - 5 lakh, 23 lakh, 51 lakh, 46 lakh. Another 13 lakh added in Q1

Mkt share in new client addition - 21 pc !!!

Angel One’s Mkt share in total NSE active client base - 14.3 pc ( as on June 23 ) vs 8.8 pc in Mar 21 - a staggering 545 bps Jump !!!

Segment wise Mkt share(ADTO) -

F&O - 24.6 pc
Cash Mkt - 13.4 pc
Commodity - 56.9 pc !!!

In the process of rolling out Loan Products distribution business from their super app

Angel’s total client base stands at >1.5 cr
Q1 annualised RoE @ 39 pc

Share of revenue Jun 24 vs Jun 22 vs No of years of client acquisition-

29 pc vs 55 pc @ < 1 yr
29 pc vs 18 pc @ 1-2 yrs

22 pc vs 8 pc @ 2-3 yrs
12 pc vs 9 pc @ 3-5 yrs
9 pc vs 10 pc @ > 5 yrs

This data is encouraging as more mature clients are now contributing to far higher share of revenues

Company has a large base of affiliate partners @ > 21k

Budgeted cost for ESOP this yr is 50-55 cr

In the process of obtaining final approval from SEBI for AMC business

Angel is now No 3 in no of NSE active clients. Angel’s Mkt share is around 14 pc vs Mkt leader (Zerodha) @ around 20 pc

Current Qtly revenues from distribution of Financial products is aprox 8 cr

Intend to grow this multi-fold in the next few yrs

In discussion with top banks, NBFCs for distribution of Personal loans. Company to also assist them in providing them customer data using AI models to better access the customer’s risk profile

Company in process of looking out for a new CEO. May take some time to find the right candidate

Company to go live to support BSE’s Bankex and Sensex derivatives by start of Q3

Disc: hold a tracking position. May add more on dips / better results

Joshkumar · September 5, 2023, 12:19pm

piyush_narang · September 15, 2023, 5:17am

i did some high level calculation here… They should do 1,000 cr topline in Q2FY24 ie. 30% y-o-y growth…given the TTM PE of16x, i expect the stock to move higher by from these levels…

they have now intergrated loan products and SIP ++ lot of other products, that could boost topline additionally

any thoughts?

Debojit_Kangsa_Banik · September 15, 2023, 5:35am

Technically it is encountering major resistance on 1950 mark. May form cup with handle before breaking out.

May be market will decide the next rally after next quarters result, given they cant add new sub brokers.