Angel Broking Ltd

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About the Company

Angel One (Formerly Angel Broking) is one of the largest retail broking houses in India in terms of active clients on NSE as of June 30, 2020 (Source: CRISIL Report). It has a network of 11,000 Authorised Persons and has had more than 4.39 million downloads of Angel Broking mobile application and nearly 1 million downloads of Angel BEE mobile application as of June 30, 2020. It manages ₹ 132,540 million in client assets and over 2.15 million operational broking accounts as of June 30, 2020.

Q2FY23 Updates

Financial Results & Highlights

Detailed Results:

1. The company had a good quarter with revenue growth of 39% YoY and 9% QoQ & PAT growth of 59% YoY and 18% QoQ.
2. 70% of gross revenues, 5.2 billion is contributed by broking revenue, which can further be split between F&O, cash, commodity and currency segments contributing 82%, 13%, 4%, 1% respectively in broking revenue.
3. Demate market share as of September 2022 is 11.3% from 7.5% in March 2021.
4. Q2 FY’23 operating margin came at 52.4%.
5. Turnover market share of 21%.
6. Active ratio declined by approximately 250 bps quarter-on-quarter
7. Board has approved 35% of the quarter’s consolidated post-tax profits as the second interim dividend to shareholders
8. Share of total net income from flat fee clients to the consolidated total net income grew 1.5x to 85% in Q2 FY’23 from 58% in Q2 of FY’21. 
9. Consolidated earnings per share stood at Rs 25.6 per equity share on a quarterly basis.
10. The period ending client funding book was at Rs 16.7 billion
11. Borrowings increased to Rs 30 billion at the end of the quarter
12. Annualized average return on equity stood at 45.5%.
13. Continued investments in development of the Super-App and augmentation of our IT infra, that is data center in DR site, led to an increase in our fixed assets by Rs 540 million to Rs 2.2 billion as of September 2022. Management stated that the borrowing is temporary in nature.

Investor Conference Call Highlights 

1. India added another 6 million-plus demat accounts during the quarter, thus expanding its demat base to approximately 103 million as of September 2022; with 435 million unique PAN card holders as of March 2019, management says enough growth opportunity available.
2. Angel one continues to onboard over 1 million clients per quarter, for the last 6 consecutive quarters, with more than 93% coming from Tier 2, 3, and beyond cities. 
3. The company garnered about 19% share in incremental demat accounts opened in India during Q2 FY’23.
4. The company rolled out the first phase of its Super-App on iOS, which is Apple, and the web platform to a limited set of clients, which was progressively offered to the entire iOS population. 
5. The average revenue per client at the end of the quarter stood at Rs 430 for the quarter, which is declining from Q2FY21 at Rs 714. Management states the major reason for this is new entrants coming into the market with lower ticket sizes.
6. Management has given the objective of operating business on a 45% to 50% operating margin
7. Management has given guidance on the cost for employee stock options for FY’24 around Rs 47 crore. And for FY’23 in the range of about Rs 25 crore, Rs 30 crore.
8. The company’s acquisition of new customers in Tier 2, and Tier 3 cities is entirely digital.
9. Management stated the reason for increasing average average daily turnover and decreasing ARPU, that is ARPU is calculated on the entire base, new customers increase the base, and they  may not be immediately trading.
10. Management stated 90% of marketing expense of the company is elastic and depend on market conditions.
11. Management expect the current split between cash and F&O to be same for the next 2 quarters.
12. Super-app launch will be done by FY’23 and in FY’24 company would start getting benefit of the app launch.
13. The reason management gave for the high market share in the commodity segment is that Angel one was the first entrant in terms of providing options on a mobile, mobile platform, and web platform.
14. Company’s 80%-84% of the clients are less than 1 lakh in exposure, and about 10% or 11% are between 1 lakh to 5 lakhs.

Analyst’s View

Angel Broking is one of the front runners of the online broking space in India. They have been in the broking business for over 25 years now and have time and again shown remarkable adaptability by pivoting their business model and transforming from a traditional physical broking house to an AI/ML-led digital-only broker that has its eyes set on becoming a fintech platform. Angel continued its great run with a 39% YoY rise in revenues and a 59% YoY rise in profits. The company continues to source almost 95% of its new additions from tier 2 & 3 cities and is focussing on the launch of the super app in the next few quarters. The super-app that the company is going to launch will make a huge difference and will greatly improve customer experience. Angel is also looking to differentiate itself on service quality and customer journey and the ability to allow for small-ticket investment profiles which will be instrumental for expansion in Tier 2 and beyond cities. It remains to be seen what impact will the turbulent state of global markets will have on the broking industry and whether Angel will be able to maintain its growth momentum amidst the highly competitive space with seemingly everyone in the financial sector from traditional banks like HDFC Bank & NBFCs like Bajaj Finance to fintech unicorns like Paytm & Zerodha looking to get a slice of the pie and go a similar way to become fintech giants. Nonetheless, given the sustained momentum Angel has in this crowded space and the history of successful pivots along with the vision of the new tech-oriented CEO, Angel Broking may prove to be a reliable bet in the ever-rising fintech space.

Q4FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company had another excellent quarter with 63% YoY growth in consolidated revenues and 101% YoY growth in consolidated profits.
2. It has a 10.1% share in NSE Active Client Base in Mar’22. Angel has a total client base of 9.2 million as of Mar ’22 across 98% of pin codes in India.
3. Q4 saw the top 5 digital brokers hold around 68% share of Incremental NSE Active Clients. The top 5 brokers now have a share of 58% In Cumulative NSE Active Clients Base.
4. Overall equity market share of Angel has risen to 20.9% in Q4FY22 vs 20.8% a year ago. F&O market share has risen to 21.2% in Q4FY22 from 20.9% a year ago.
5. Cash market share has gone down to 13.7% vs 16.3% a year ago while commodity market share has risen to 42.4% vs 25.5% a year ago.
6. Total gross customer additions in Q4 were at 1.4 million.
7. ~94% Of Gross Client Addition Contributed by Tier 3 & Tier 2 Cities in Q4FY22. 
8. Around 92% Of Gross Clients Added Under Flat Fee Plan.
9. The total client base grew 18% QoQ. Average daily turnover grew 24% QoQ in Q4 while the number of trades grew 17% QoQ.
10. Segment revenue breakup was 69% from Gross Broking, 16% from Interest, 4% from Depository, 1% from distribution, 8% from ancillary transaction income and 1% from other income.
11. Gross Broking split was 78% from F&O, 18% from Cash, 4% from Commodity & 1% from Currency.
12. Cost to net income was at 50.3% for FY22 vs 54.2% in FY22.
13. The company’s borrowings have risen to Rs 1257.6 Cr in March’22 from Rs 1171.5 Cr in March’21.
14. Angel has cash and cash equivalents of Rs 4,875 Cr as of 31st March 2022.
15. It had a book value of Rs 191.2 per share.
16. Angel announced an interim dividend of Rs 9.25 per share with a 37% dividend payout.

Investor Conference Call Highlights:

1. The emergence of FinTech players and the dynamic changes they brought to the economy were largely responsible for the rapid transformation of financial landscapes.
2. The company’s lifetime app downloads were higher by 19% to 22 million downloads.
3. The company’s ranking in incremental active clients on NSE during the last couple of months improved to second, outsmarting many aggressive competitors.
4. The company is in the penultimate phase of its new mobile app, the forerunner to the much waited super mobile app.
5. For the expansion of its tech capacity and infra, the company is building a new state-of-the-art data center and global disaster recovery capabilities.
6. The company has taken some improvements in its KYC journey like allowing clients to choose between the monthly and quarterly settlement of funds and the option to add a nominee.
7. The company has included the direct mutual fund product in its distribution business, which went live last week on the Angel BEE app.
8. The average revenue per client for the quarter was INR 513. This was primarily due to a higher share of new market clients, which were about 85% of the gross acquisitions for the quarter.
9. The company hired talents from Uber, Ola, and Amazon and yet had a reduction in the workforce as the company focused on hiring high-skilled 10x engineers that give 10x output as compared to normal engineers.
10. The management states that the average revenue per user is in a slight decline and is stabilizing because of the gestation period of the users who are new and getting used to the platform.
11. The management believes that the new clients have a great potential for the company ahead as they are mainly between 25-29 years old which shall provide lifetime value to the company.
12. The company will incur INR 60 crore as ESOP costs over the next four years. In FY22 this cost was INR 15 to 16 crore. 
13. These ESOP costs are being incurred for granting RSUs to employees, increasing their skin in the game, thus helping company productivity and results.
14. The company is taking a data science-oriented approach to increase its client activation rate.
15. The company is the market leader in the commodity space mainly because of its early adoption of commodity options to the mobile platform for its customers. 
16. Commodity futures exchange volumes seem to be stagnating at 20,000-25,000 crore a day whereas commodity options have grown to 15,000 crores a day of which Angel was a big beneficiary.
17. Most other brokers require their clients to earmark their funds towards the commodity segment, which is not the case for AngelOne. This enabled clients to take commodity trades fuelling the company’s market share growth to above 40%.
18. The management continues to have a sharp focus on its core business of broking even though it sees opportunities in different products. It believes that it is very easy for them to launch 10 different products and do a poor job in all of them, thus is razor-focused on winning broking. 
19. The management plans to be in the 50% to 60% client activation rate for the next FY.
20. The process for AMC is one and the company expects to receive the in-principle approval in a few months.
21. The Super-app which the company will be launching will be of great importance as it will have new features and capabilities being a solid product for the clients.
22. Angel is looking to include customer experiences in the super-app that were not done at the time but are mainstream today. Another reason for doing so is to better position themselves for the newcomer customers in the market today.
23. The super-app will remain an important focus of the management for some time as it will have a huge impact on the customer experience and will greatly impact the customer activation rate.

Analyst’s View:

Angel Broking is one of the front runners of the online broking space in India. They have been in the broking business for over 25 years now and have time and again shown remarkable adaptability by pivoting its business model and transforming from a traditional physical broking house to an AI/ML-led digital-only broker that has its eyes set on becoming a fintech platform. Angel continued its great run with a 63% YoY rise in revenues and 1.4 million new customer additions in Q4. The company continues to source almost 94% of its new additions from tier 2 & 3 cities and is focussing on the launch of the super app in the next few quarters. The super-app which the company is going to launch will make a huge difference and will greatly improve customer experience. Angel is also looking to differentiate itself on service quality and customer journey and the ability to allow for small-ticket investment profiles which will be instrumental for expansion in Tier 2 and beyond cities. It remains to be seen what impact will the turbulent state of global markets will have on the broking industry and whether Angel will be able to maintain its growth momentum amidst the highly competitive space with seemingly everyone in the financial sector from traditional banks like HDFC Bank & NBFCs like Bajaj Finance to fintech unicorns like Paytm & Zerodha looking to get a slice of the pie and go a similar way to become fintech giants. Nonetheless, given the sustained momentum Angel has in this crowded space and the history of successful pivots along with the vision of the new tech-oriented CEO, Angel Broking may prove to be a reliable bet in the ever-rising fintech space.

Q3FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company had another excellent quarter with 92% YoY growth in consolidated revenues and 126% YoY growth in consolidated profits.
2. It has an 9.7% share in NSE Active Client Base in Dec’21. Angel has a total client base of 7.8 million as of Dec ’21 across 98% of pin codes in India.
3. Q3 saw the top 5 digital brokers hold around 66% share of Incremental NSE Active Clients. Top 5 brokers now have a share of 56% In Cumulative NSE Active Clients Base.
4. Overall equity market share of Angel has risen to 20.9% in Q3FY22 vs 16.1% a year ago. F&O market share has risen to 20.9% in Q3FY22 from 16.1% a year ago.
5. Cash market share has gone down to 14.2% vs 17.6% a year ago while commodity market share has risen to 36.4% vs 26.8% a year ago.
6. Total gross customer additions in Q3 were at 1.3 million.
7. ~95% Of Gross Client Addition Contributed by Tier 3 & Tier 2 Cities in Q3FY22.
8. Around 92% Of Gross Clients Added Under Flat Fee Plan.
9. The total client base grew 19% QoQ. Average daily turnover grew 20% QoQ in Q3 while number of trades grew 18% QoQ.
10. Segment revenue breakup was 68% from Gross Broking, 16% from Interest, 6% from Depository, 2% from distribution, 6% from ancillary transaction income and 2% from other income.
11. Gross Broking split was 74% from F&O, 22% from Cash, 3% from Commodity & 1% from Currency.
12. Cost to net income was at 50.9% for 9MFY22 vs 52.4% in 9MFY22.
13. The company’s borrowings have risen to Rs 1229.6 Cr in Dec from Rs 1171.5 Cr in March.
14. Angel has cash and cash equivalents of Rs 4,533 Cr as of 31^st December 2021.
15. It had a book value of Rs 172.9 per share.
16. Angel announced an interim dividend of Rs 7 per share.

Investor Conference Call Highlights:

1. Q3FY22 was very good for the broking industry with 10 million new Demat accounts opened in the quarter. This was the highest India has added in any quarter in the past, taking total demat count to 81 million as of Dec’21.
2. The management highlighted that during India’s 4 major cycles when NIFTY 50 & NIFTY Midcap 150 delivered negative returns, India’s Demat account base grew at 15% CAGR and trade volumes grew between 2-27%.
3. The company has catapulted its business model to a completely digital platform and simplified price structures from turnover-based to order-based.
4. The median age of new clients has dropped to 29 years.
5. The company has emphasized digital marketing and improving its activation engine to accelerate customer acquisition.
6. To enhance the overall client experience, the company will continue to scale up artificial intelligence, machine learning, data science skill and deploy them in their Super App.
7. With a focus on increasing reliability, they have invested in the ruggedization of backend systems, improved error handling capabilities on apps, scaled up and fine-tuned the hardware, and have undertaken a complete rewrite of a few systems. This has led to improved availability and a reduction in contact ratio.
8. On the data science side, they have developed a new machine learning model-based forecasting to improve the top-of-funnel quality, resulting in higher lead conversion for clients.
9. The company has also built a propensity model to improve client activation, the result of which is evident from an uptick in client activation to 39% in Q3FY22 from 37% in Q1FY22
10. The company upgraded the KYC journey to offer clients a seamless experience by improving optical character recognition and introducing new stylus signature options for account opening.
11. Angel has pioneered the real-time process of identifying bank account details, during onboarding, by using a mobile number, an industry-first initiative.
12. The company also upgraded the in-app journey by letting go of the obsolete and cumbersome hamburger menu and replacing it with a far simpler Discover tab in the app. This eased navigation to different sections of the app with minimal clicks.
13. The company witnessed a multi-fold jump in clients accessing mutual funds, IPO, ARQ, GTT, options simplified, etc., now, leading to a step up in their net promoter score and Google Play Store rating.
14. The company is also building the new native mobile app on clean architecture principles, to leverage cross-platform technologies wherever suitable. This new app is in beta and is expected to be launched over the next few months.
15. Angel’s share in the commodity segment was at our historical best of over 38% in Dec’21.
16. The company closed Q3 with the highest ever-gross revenue of INR 6.1 billion, registering a 12.8% sequential growth.
17. Net booking revenue from clients who are less than two years on their platform continues to remain high at 75% in Q3 FY2022
18. The net broking revenue under the Flat Fee plan grew to a significant 83% of the overall net broking revenue.
19. Over the last 11 quarters, since they became a full-fledged digital player, they witnessed a 5.8x and a 51x growth in the overall client base and net booking income from the Flat Fee clients respectively, offsetting an approximately 0.3x reduction in their quarterly ARPC.
20. Share of net total income from our Flat Fee clients to the consolidated total income grew six-fold to 81% in Q3FY22 from 14% in Q1FY20.
21. Other expenses rose to INR 1.4 billion, due to incremental spending in acquiring clients, technology, depository charges, and CSR.
22. The company continues to add digital talent to the business, leading to a 12.6% sequential growth in Employee costs.
23. The management highlighted that robust profitability and efficient capital utilization led to significant improvement in annualized average return on equity to 43.7%.
24. The management is confident of maintaining the cost to income at current levels near 49%.
25. The management states that it is looking to provide different kinds of customer journeys for the new mobile app depending on the type of investment persona that the customer is projecting.
26. It will also ensure that a lot of handholding will be done for 1st timers to make them as comfortable and knowledgeable about the process as possible.
27. Technology spending in 9M was at Rs 100 Cr and capex was Rs 6 Cr. The remaining Rs 94 Cr was in opex.
28. The management remains confident of maintaining Angel’s high market share in the commodity segment.
29. The broking business will be the prime focus for the company for the next 12-24 months according to the management.
30. The management is not much concerned about ARPU which was bound to go down due to the rise of the flat fee structure. But this has corresponded with a monumental rise in the number of customers and thus has not been harmful to Angel.
31. ARPU also has room for a further decline as the median customer age falls but this is what Angel wants to do as it will help the company get customers from less penetrated age segments.
32. Around 80% of customers acquired in Q3 were new to the market.
33. The company is on track to launch the super app in Q1FY23 according to the management.
34. The management states that Angel is looking to make the new super app despite the existing app in the market as it was first built in 2018-19 and Angel is looking to include customer experiences that were not done at the time but are mainstream today. Another reason for doing so is to better position themselves for the newcomer customers in the market today.
35. The full-strength super app should be ready 8-10 months from the initial Q1FY23 release according to the management.
36. The management reiterated that the lifetime revenue of customers should be at least 5 years.

Analyst’s View:

Angel Broking is one of the front runners of the online broking space in India. They have been in the broking business for over 25 years now and have time and again shown remarkable adaptability by pivoting its business model and transforming from a traditional physical broking house to an AI/ML-led digital-only broker that has its eyes set on becoming a fintech platform. Angel continued its great run with a 92% YoY rise in revenues and 1.3 million new customer additions. The company continues to source almost 95% of its new additions from tier 2 & 3 cities and is focussing on the launch of the super app in the next few quarters. Angel is also looking to differentiate itself on service quality and customer journey and the ability to allow for small-ticket investment profiles which will be instrumental for expansion in Tier 2 and beyond cities. It remains to be seen whether Angel will be able to maintain its growth momentum amidst the highly competitive space with seemingly everyone in the financial sector from traditional banks like HDFC Bank & NBFCs like Bajaj Finance to fintech unicorns like Paytm & Zerodha looking to get a slice of the pie and go a similar way to become fintech giants. Nonetheless, given the sustained momentum Angel has in this crowded space and the history of successful pivots along with the vision of the new tech-oriented CEO, Angel Broking may prove to be a reliable bet in the ever-rising fintech space.

Q2FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company had another excellent quarter with 69.18% YoY growth in consolidated revenues and 78.67% YoY growth in consolidated profits.
2. It has a 9.3% share in NSE Active Client Base in Sept’21. Angel has a total client base of 6.5 million as of Sept ’21 across 98% of pin codes in India.
3. Q2 saw the top 5 digital brokers hold around 66% share of Incremental NSE Active Clients. Top 5 brokers now have a share of 54% In Cumulative NSE Active Clients Base.
4. Overall equity market share of Angel has risen to 21.2% in Q2FY22 vs 12.3% a year ago. F&O market share has risen to 21.3% in Q2FY22 from 12.1% a year ago.
5. Cash market share has gone down to 14% vs 18.3% a year ago while commodity market share has dropped down to 27.7% vs 28.4% a year ago.
6. Total gross customer additions in Q2 were at 1.28 million.
7. ~93% Of Gross Client Addition Contributed by Tier 3 & Tier 2 Cities in Q2FY22 with Angel’s share in Incremental Demat Accounts of 15.3% vs 15.8% a year ago.
8. Around 92% Of Gross Clients Added Under Flat Fee Plan.
9. The gross client base grew 23% QoQ. Average daily turnover grew 27% QoQ in Q2 while number of trades grew 16% QoQ.
10. Segment revenue breakup was 67% from Gross Broking, 17% from Interest, 6% from Depository, 2% from distribution, and 9% from other income.
11. Gross Broking split was 69% from F&O, 26% from Cash, 4% from Commodity & 1% from Currency.
12. Traditional broking plan now accounts for only 12% of sales.
13. Cost to net income was at 51.9% in H1FY22 vs 52.5% in H1FY21.
14. The company’s borrowings have risen to Rs 1206 Cr in Sept’21 from Rs 1171.5 Cr in Mar’21.
15. Angel has cash and cash equivalents of Rs 4570.4 Cr as of 30th September 2021.
16. It has a book value of Rs 158 per share.
17. Angel announced an interim dividend of Rs 5.7 per share.

Investor Conference Call Highlights:

1. The industry saw 15 million new Demat accounts opened in H1FY22, which is more than the number of demat accounts opened in the whole of FY21.
2. Even today, equity market penetration is at 5% of total population in India.
3. The company has added Mr. Jyotiswarup Raiturkar as CTO. Mr Raiturkar has worked with Walmart, Microsoft, Samsung, Goibibo, and Intuit.
4. The company has applied for AMC license.
5. Angel has added 2.5 million new customers in H1 with a 2^nd consecutive quarter with 1.2 million customers addition.
6. The management expects market share to improve across all segments due to full implementation of new margin requirements and its online customer acquisition strategies.
7. 74% of net broking revenue was contributed by direct clients.
8. 75% of broking revenue was from clients that were less than 2 years old.
9. OPM improved 152 bps YoY to 48.1% in Q2 while EPS grew 82% YoY.
10. The increase in distribution revenue in Q2 was mainly due to the high number of IPOs & NFOs in the quarter.
11. The AMC application was done in Sep 2021, and it is expected to take 6-8 quarters to launch the AMC business formally.
12. The management ahs refrained from commenting on ARPU saying that it is competitive information and states that Angel is concentrating on increasing its share in active demat user base.
13. The company is on track to launch the superapp by the end of FY22.
14. The management states that the dip in F&O was due to ongoing implementation of new margin norms and it should now come back to previous levels as the implementation is complete.
15. The management expects to maintain the current customer addition run rate in the rest of FY22 as well.
16. The management states that it is looking to simplify complex investment products like options with its new products like InstaTrade so that it becomes more accessible for everyday investors.
17. The management states that most of the the company’s costs are variable costs related to customer acquisition and in case of any revenue decline, costs should go down too.
18. The basis for rising penetration in Tier 2,3,4 cities is better understanding of the product through educational video on social media according to the management.
19. The management states that Angel will aim to become the market leader in the broking space in the next 2-3 years and build up the new business like fintech platform and AMC businesses on the side slowly for the next 2 years.
20. The 2 metrics that Angel will be concentrating on to become the market leader are revenues and active client base.
21. The customer acquisition costs have a payback period of less than 2 quarters according to the management.
22. Of the 3400-employee base, 650 are on the tech development side while 1800 are in customer care and call centre. The rest are in shared services team, operations, risk, revenue, etc. The company does not have RMs or trading advice callers.
23. The company is concentrating on DiY journeys so that it doesn’t need to add to employee strength significantly to handle a big increase in customers.
24. The management states that if there is clarity regarding regulations and governance from SEBI regarding cryptocurrencies, Angel will not have any issues with offering this asset class for investment on its platforms.

Analyst’s View:

Angel Broking is one of the front runners of the online broking space in India. They have been in the broking business for over 25 years now and have time and again showed remarkable adaptability by pivoting its business model and transforming from a traditional physical broking house to an AI/ML-led digital-only broker that has its eyes set on becoming a fintech platform. Angel continued its great run with a 69% YoY rise in revenues and a 2^nd consecutive quarter with 1.2 million new customer additions. The company continues to source over 93% of its new additions from tier 2 & 3 cities and is focussing on the launch of the super app by the end of FY22. The management remains focused on maintaining the current customer addition rate and to keep its superapp release on schedule. It has also applied for the AMC license in Sep 2021 and expects to launch the AMC business in the next 6-8 quarters. It remains to be seen whether Angel will be able to maintain its growth momentum amidst the highly competitive space with seemingly everyone in the financial sector from traditional banks like HDFC Bank & NBFCs like Bajaj Finance to fintech unicorns like Paytm & Zerodha looking to get a slice of the pie and go a similar way to become fintech giants. Nonetheless, given the sustained momentum Angel has in this crowded space and the history of successful pivots along with the vision of the new tech-oriented CEO, Angel Broking may prove to be a reliable bet in the ever-rising fintech space.

Q1FY22 Updates

Financial Results & Highlights

Detailed Results:

1. The company had another excellent quarter with 92% YoY growth in consolidated revenues and 152% YoY growth in consolidated profits.
2. It has an 8.8% share in NSE Active Client Base in June ’21. Angel has a total client base of 5.3 million as of June ’21 across 98% of pin codes in India.
3. The company has rebranded itself as AngelOne.
4. Q1 saw the top 5 digital brokers hold around 77% share of Incremental NSE Active Clients. Top 5 brokers now have a share of 52% In Cumulative NSE Active Clients Base.
5. Overall equity market share of Angel has risen to 22.7% in Q1FY22 vs 8.2% a year ago. F&O market share has risen to 22.9% in Q1FY22 from 7.8% a year ago.
6. Cash market share has gone down to 13.8% vs 17.3% a year ago while commodity market share has risen to 25.8% vs 24.6% a year ago.
7. Total gross customer additions in Q1 were at 1.2 million.
8. ~93% Of Gross Client Addition Contributed by Tier 3 & Tier 2 Cities in Q1FY22 with Angel’s share in Incremental Demat Accounts of 16.6% vs 14.7% a year ago.
9. Around 93% Of Gross Clients Added Under Flat Fee Plan.
10. The gross client base grew 28% QoQ. Average daily turnover grew 21% QoQ in Q1 while number of trades grew 14% QoQ.
11. Segment revenue breakup was 68% from Gross Broking, 15% from Interest, 6% from Depository, 1% from distribution, and 10% from other income.
12. Gross Broking split was 63% from F&O, 31% from Cash, 4% from Commodity & 1% from Currency.
13. Traditional broking plan now accounts for only 15% of sales.
14. Cost to net income was at 51.2% in Q1FY22 vs 57% in Q1FY21.
15. The company’s borrowings have risen to Rs 1215.6 Cr in June from Rs 1171.5 Cr in March.
16. Angel has cash and cash equivalents of Rs 3961.4 Cr as of 30th June 2021.
17. It has a book value of Rs 146.3 per share.
18. Angel announced an interim dividend of Rs 5.15 per share.

Investor Conference Call Highlights:

1. Q1FY22 was very good for the broking industry with 7 million new broking accounts opened in the quarter. This was 50% of net additions in FY21 for the entire industry.
2. Angel has rebranded itself as AngelOne to break the perception of being a traditional broking house and connecting with the young population and establish a new brand image which will also be covering its upcoming range of protection and wealth management products.
3. The company plans to launch its super app in the next few quarters.
4. The median age of new clients has dropped to 29 years.
5. In June 2021, Angel launched SmartStore which is a marketplace for FinTech based products and services, including rule-based investing solutions and investor education services.
6. The management states that finance costs have risen due to incremental borrowings for higher working capital requirements. The employee costs have risen 12% QoQ mainly on account of salary hikes.
7. The management states that compared to the traditional model of broking, the flat fee model enhances the lifetime value of a customer and is more resilient.
8. The interest income comprises 18% interest charged for MTF funding and interest from fixed deposits to exchanges for margin. The management states that overall interest income has not grown as much as the increase in MTF funding because the interest generated from the exchange fixed deposits has come down.
9. The company can expect good revenues coming from the distribution of third-party products after the launch of its super app according to the management.
10. The impact on ADTO from the peak margin rules has been mitigated by the growth in revenues.
11. Going forward the management doesn’t expect an impact of more than 2-3% from the implementation of peak margin rules.
12. Project Spark is the 1st leg of the super app which will replace AngelOne in a few quarters. In the WealthTech platform, the majority of investments will be driven by the ARQ engine in the passive space. The management is confident of the ARQ engine working for even small ticket portfolios like Rs 25000-35000 which should attract a lot of customers from tier 2 & 3 areas in India.
13. The SmartStore platform is intended to help people build and explore a wide range of trading applications. The platform offers many services for developers by default such as profiling of customers and data analytics. The company has around 1 lac users on this platform.
14. The management states that the primary value proposition for SmartStore is that it offers a wide variety of services and products for all kinds of niches given that more and more developers get on the platform and list their offerings on it.
15. The APs also offer the flat fee plan in addition to the traditional plan for customers.
16. The management states that around 13-14% of costs other than finance costs will be used for technology.
17. The management maintains that lowering fees to gain market share will not work anymore as customers are now looking for more engaging journeys which should be the differentiator going forward.
18. The management maintains that the lifetime value of a recently joined customer of less than 2 years is higher than older customers because these new customers are predominantly using the app and thus there is almost no attrition as compared to traditional customers who have to be contacted by the brokers periodically.
19. Almost 70% of new customers are new to the market according to the management.
20. The management stresses that the prime driver for growth for the investment and broking industry will be service quality and being able to serve small ticket sizes.
21. The active customer base for the industry is at 33% while for Angel, this number is at 37%.
22. The company is not focussing on attracting a particular type of active customer and it is concentrating on attracting all kinds of customers as much as possible according to the management.
23. The management states that Angel is constantly adding new talent and scaling up its data centers to be able to continue the momentum for 2-3 years.
24. The management maintains that the market opportunity is at least 10x of its current size.

Analyst’s View:

Angel Broking is one of the front runners of the online broking space in India. They have been in the broking business for over 25 years now and have time and again showed remarkable adaptability by pivoting its business model and transforming from a traditional physical broking house to an AI/ML-led digital-only broker that has its eyes set on becoming a fintech platform. Angel continued its great run with a 92% YoY rise in revenues and 1.2 million new customer additions. The company continues to source almost 94% of its new additions from tier 2 & 3 cities and is focussing on the launch of the super app in the next few quarters. Angel is also looking to differentiate itself on service quality and customer journey and the ability to allow for small-ticket investment profiles which will be instrumental for expansion in Tier 2 and beyond cities. It remains to be seen whether Angel will be able to maintain its growth momentum amidst the highly competitive space with seemingly everyone in the financial sector from traditional banks like HDFC Bank & NBFCs like Bajaj Finance to fintech unicorns like Paytm & Zerodha looking to get a slice of the pie and go a similar way to become fintech giants. Nonetheless, given the sustained momentum Angel has in this crowded space and the history of successful pivots along with the vision of the new tech-oriented CEO, Angel Broking may prove to be a reliable bet in the ever-rising fintech space.

Q4FY21 Updates

Financial Results & Highlights

Detailed Results

1. The company had an excellent quarter with 110% YoY growth in consolidated revenues and 209% YoY growth in consolidated profits.
2. It has an 8.3% share in NSE Active Client Base in Mar’21 from 5.3% a year ago. Angel has a total client base of 4.12 million as of Mar ’21 across 97.9% of pin codes in India.
3. Q4 & FY22 saw gross client addition of 87% QoQ & 322% YoY respectively.
4. In FY21, revenues rose 72% YoY while profits rose 243% YoY.
5. FY21 saw the top 5 digital brokers hold around 73% share of Incremental NSE Active Clients. Top 5 brokers now have a share of 47% In Cumulative NSE Active Clients Base.
6. Overall equity market share of Angel has risen to 20.8% in Q4FY21 vs 6.9% a year ago. F&O market share has risen to 20.9% in Q4FY21 from 6.7% a year ago.
7. Cash market share was at 16.3% vs 14% a year ago while commodity market share has risen to 25.5% vs 20.9% a year ago.
8. ~94% Of Gross Client Addition Contributed By Tier 3 & Tier 2 Cities In Q4 ’21 with Angel’s share in Incremental Demat Accounts of 17.6% vs 15% a year ago.
9. Around 90% Of Gross Clients Added Under Flat Fee Plan.
10. The gross client base grew 29% QoQ and 127% YoY. Average daily turnover grew 66% QoQ in Q4 and 380% YoY in FY21.
11. Angel announced a dividend of Rs 7.5 per share.
12. Segment revenue breakup was 68% from Gross Broking, 15% from Interest, 6% from Depository, 1% from distribution, and 9% from other income.
13. Gross Broking split was 60% from F&O, 33% from Cash, 6% from Commodity & 1% from Currency.
14. Traditional broking plan now accounts for only 17% of sales.
15. Cost to net income was at 52.1% in FY21 vs 70.6% in FY20.
16. Angel has cash and cash equivalents of Rs 1877.4 Cr as of 31st March 2021.
17. It has a book value of Rs 138 per share.

Investor Conference Call Highlights

1. The company appointed Mr. Narayan Gangadhar as the new CEO. Mr. Gangadhar has extensive experience and has been part of global experience leading technology businesses like Google, Microsoft, Amazon, and Uber.
2. Angel saw its highest ever overall ADTO of over Rs. 3.75 trillion in Q4 FY2021 which has grown close to 15x between Q1 FY2020 to Q4 FY2021.
3. The company has endeavored is to share at least 35% of its profits in the form of dividends every quarter.
4. Around 72% of broking revenue comes from direct clients.
5. The management has highlighted that Angel is also looking to become a platform company where it can offer lots of other financial services to its customers.
6. For the next 2-3 years, the focus will be to get maximum market share from the stockbroking business, to get maximum market share in the mutual fund business, and to get some inroads in the insurance business on the digital platform.
7. Angel is looking to make a multifunctional app where it will be selling mutual funds and insurance on the same app platform.
8. The management also sees huge scope in passive investment and ETF business and smart beta product through the digital app route.
9. It will be looking to introduce a mutual fund having backed by its Robo advisory passive strategy where it can reduce costs of distribution as well as the cost of managing funds.
10. The company is not spending on mass media and is instead targeting social media and search engines and the internet for acquiring customers with AI/ML-led acquisition plans. It is also specifically targeting Tier 2 & 3 areas that remain underpenetrated.
11. The scope for expansion in the underpenetrated tier 2 & 3 regions is present for all digital players due to the lack of physical branch accessibility here.
12. Angel boasts of an activation rate of 38% to 40%.
13. The company is earning an OPM of 44% from the digital model and it is aiming to bring this up to 50%. The company is also looking to maintain a breakeven time of 3-4 months for every new customer.
14. The company is aiming to become the largest player in the stockbroking space in the next 2 years.
15. The vision for becoming a preferred fintech company through the all-in-one app should take 6-7 years according to the management.
16. Angel has not had to burn cash like other online brokers as it has a well-established customer base already and didn’t need to spend too much on expanding its scale. Given its size in broking space, it can easily put up the acquisition cost for new segments from cash flows from the established segment.
17. In the AMC business, the company will be going the passive funds’ way with its ARQ engine and it will not be doing any human stock selections as its model has proved to give good performance over the past few years.
18. The new CEO states that a big part of his focus shall be to build large teams with the right skill set on machine learning, data science, and AI sides.
19. The tech investment should be around 13-14% of total OPEX excluding fees & commissions for Angel.
20. The increase in opex in Q4 was mainly due to higher customer acquisition as the acquisition costs are always front-loaded.
21. >90% of customers added in Q4 were young people with an average age of 30.
22. The main cost in setting up the AMC will be coming in year 3 which is the marketing cost.
23. The management is looking to launch the new super app in the next 2 quarters.
24. Easy access to stock markets through mobile apps, declining interest rates, and significant under-penetration of equity investment in India are expected to be the key factors driving growth for the industry.
25. On average a customer takes around 4-4.5 months to break even for Angel and provides at least 5 years in terms of regular revenues.
26. The company is not looking to acquire any existing AMCs as it is looking to make its disruptive model rather than pay a premium for an old model in the AMC business.

Analyst’s View

Angel Broking is one of the front runners of the online broking space in India. They have been in the broking business for over 25 years now and have time and again showed remarkable adaptability by pivoting its business model and transforming from a traditional physical broking house to an AI/ML-led digital-only broker that has its eyes set on becoming a fintech platform. FY21 was a phenomenal year for Angel with gross client addition of over 300% YoY and a rise in equity market share to over 20% from 6.9% a year ago. The company has made good inroads in sourcing customers through the internet through social media and search engines which has seen them acquire >90% of customers in Q4 from Tier 2& 3 regions with an average age of 30 years only. Angel also has big plans to launch its super app to offer a variety of financial services from mutual funds to insurance and transform itself into a fintech powerhouse in the next 6-7 years. It remains to be seen whether Angel will be able to maintain its growth momentum amidst the highly competitive space with seemingly everyone in the financial sector from traditional banks like HDFC Bank & NBFCs like Bajaj Finance to fintech unicorns like Paytm & Zerodha looking to get a slice of the pie and go a similar way to become fintech giants. Nonetheless, given the sustained momentum Angel has in this crowded space and the history of successful pivots along with the vision of the new tech-oriented CEO, Angel Broking may prove to be a reliable bet in the ever-rising fintech space.