Intiating Coverage : Angel One Ltd
03-04-2023

Angel One Ltd (AO) is a diversified financial services company and is primarily engaged in the business of stock, commodity and currency broking, institutional broking, providing margin trading facility, depository services and distribution of mutual funds, lending as a NBFC and corporate agents if insurance companies

Industry Overview

As of Jan 2023 only Cr demat account (accounting 5.1% of the Indian population) have been opened in India. This reflects an inflection point in Indian brokerage industry, where 13.7% in China and 32% in the US population have demat.

Net Household Financial Savings has grown at CAGR of 15.7% fromINR 8,321 Billion to 23,037 Billion. Financial assets as a percentage of savings have increased 36% in FY14 to 52% in FY21 of household savings. Increase in financial literacy, mobile penetration, growing awareness and opening up of Jan Dhan bank accounts; demand for financial products are expected to push demand further. Pandemic led growth in demat, awareness regarding equity as asset class, and young demographics will keep momentum sustaining.

Another noteworthy trend here is the rise of discount brokers like Angel One. Since past many quarters it has been observed that approximately 75% of incremental active clients were added by top five digital players of this industry. Discount brokerages market share is forecasted to reach 65% of demat accounts by FY25.

Business Model

Broking

Angel has transformed itself from being a traditional broker to adopting a completely digital model, offering a seamless online trading platform through its mobile app, website and call centre support. It has shifted to flat fee brokerage from percentage charged brokerage in this transformation. It currently has a market share of 12% in active clients on the NSE, which has increased from 4.8% in Q1 FY20; market share in Equity ADTO has surged from 3.7% to 21.2% in Q4FY22. It has emerged to be India’s third-largest broker with 6.5m total clients and 2.5m active clients on the NSE.

Angel earns revenue by charging fee on trades executed by clients in intraday, F&O, Currencies & Commodities segments.

Financial Services

Margin Trading Facility: AO provides margin trading facility to clients for leveraging their eligible collaterals by funding their requirements on the cash delivery segment of equities

Distribution: The Company undertakes distribution of third-party financial products such as mutual funds, and health and life insurance products, according to its clients’ requirements. Such distribution is undertaken through both, its offline channels and digital platforms, “Angel Broking” and “Angel BEE”.

Loans against shares: Through its Subsidiary, AFPL, which is registered as an NBFC, the company provides loans against shares to its retail clients.

Business Performance

Angel One has turnaround in its strategy since 2016, moving from physical to digital brokerage. In 2019 company adopted overall digital ecosystem from acquisition, on boarding, trade execution, and advisory. It also shifted to flat fee plan (94% clients addition under flat fee plan), from traditional percent based plan.

Check 10 year X-ray here

Management

Mr Dinesh D. Thakkar - Chairman & Managing Director

Mr Prabhakar Tiwari- Chief Growth Officer

Mr Ketan B Shah - Chief Strategy Officer

Competition

Angel faces competition from discount brokerages like Zerodha (19% market share), Upstox (9.9%), Groww (15.2%) as well various traditional brokerages who provide additional services like research to its clients.

Risks

Broking business is highly correlated to market returns and volatility, period of low returns or volatility can reduce participation.

Competition is high in this business; there is no product/service differentiation in discount brokers.

Lower growth and penetration of demat accounts addition & decrease in trading activity as well order executed.

Recent exit of Narayan Gangadhar who joined as the CEO of Angel in April 2021.