Potential interim dividend in play.
Dec 2024 quarter results and PPT
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There is a drop in both profits as well as revenue which was expected after sebi’s actions. Let’s see what management has to say in concall.
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From 423 cr PAT in Q2 to 281 cr PAT in Q3. Even though Angel One & other discount brokerages did nothing wrong but … ouch! The SEBI regulations wiped out 1/3rd of their profits.
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The way I see it, would you rather have returning customers in the long run or one time customers who loose money in f/o?
Let’s not forget that new F&O rules were applied from 20th November - for half quarter. More impact can be seen in next quarter?
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That’s what I was thinking as well. More pain in the short term before it can get better.
All discount brokerages rely on retail traders. It’s just the way it is. And also, full service brokerage are not that lucrative either compared to discount brokerages.
e.g. ICICI Securities did around ~5000 crore of revenues vs. Zerodha ~8000 crores of revenues in FY24 despite the fact that Zerodha actually has lower no of demat accounts than ICICI Securities.
Angel One | Concall Note
a. Impact from new norms - True-to-label + F&O norms Is higher than earlier expected
b. Expect one-time hit of 18-20% to topline
c. Will monitor impact from new norms for 1-2 qtrs, before deciding on price hike
d. True-To-Label impact should not be more than 2%
e. Do not see any long-term impact on life-time value of customer
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Angel One | Management Interview
a. CMD DInesh Thakkar said They Will Not Take A Price Increase For Next 2-3 Quarters
b. Growing Customer Base May Mitigate The Need For Price Hikes & Offset Regulatory Impact
c. Expect Margin To Get Back To 50% Level Even Without A Price Hike
d. 18-20% Impact On Topline Due To Regulatory Changes
e. Growth In Customer Base Of 40-45% Not Slowing Down
Management Interview - https://youtu.be/KKeMBiOhCps
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My view is a bit negative (vs what the management is guiding). Here are the facts:
a) His entire assumption hinges on new customer addition. But the new customers are not trading; the activation ration has been continuously declining MoM (down from 27.5% to 26.3%, which means the incremental activation ratio is just 10-12%, which basically means, out of 10 customers getting added, only 1 is actively trading vs 2-3 earlier). or maybe the old customers are moving out of the system. Once the F&O regulation impacts are seen fully by Jan-Feb, we will also see market moderation, so its unlikely that we will see new client addition at the same pace as we saw in the last year.
b) Of the customers who are trading, they are trading less: No. of orders/clients/days has reduced from 0.36 to 0.20 in 6 months; this will reduce further in Jan-Feb. So basically one client is contributing half of the revenue they were contributing earlier.
c) Distribution income is just 28cr/quarter, and it will take atleast 1-2 years for the segment to meaningfully contribute, but all the cost are upfronted (Salary, licensiing, client acquisition cost, etc.), so margins will suffer (we has seen that in last two quarters)
e) They took price hike in cash segment and have clearly seen a loss in market share from 17.4% to 16.5% over the last 4 months, despite an increase in active client market share. This clearly shows that customers are not as sticky as we perceived it to be. Also, Zerodha/Dhan has started to turn aggressive. So probably that’s the reason Angel One is not keen on taking price hike in F&O segment.
To sum up, I see near-term headwinds in terms of slower client addition, lower trades per client, lower activity in the market in general, and higher costs due to scale-up of wealth/distribution business.
Disclaimer: This is my near-term view and might change in 2-3 quarters
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