Angel Broking limited - (SUBSCRIBE) IPO Note 22 September 2020
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Angel Broking limited
IPO Note
(SUBSCRIBE)
Analyst:
Brijesh Bhatia
Rohit Rai
22 September 2020
IPO details
Key Data Pre Issue Post Issue^
# mn Shares % Holding # mn Shares % Holding
Issue Opens 22-Sep-20
Promoters 39.7 55.2% 29.9 36.6%
Issue Closes 24-Sep-20 Public 32.3 44.8% 32.3 39.4%
Equity Shares Offered (in mn.) Others 0.0 0.0% 0.0 0.0%
19.61
Offer for sale 0.0% 9.8 12.0%
QIB Up to 50% Fresh Issue 0.0% 9.8 12.0%
NIB Min 15% Total 72.0 100.0% 81.8 100.0%
Retail Min 35%
Object of the issue
To meet working capital requirements
Face Value (Rs) 10
General corporate purposes
Price Band (Rs) 305-306
Max. Issue Size (Rs mn) 6,000
Lot Size (Eq. Shares) 49 and multiple thereof
Valuation @ 305 per share @ 305 per share Recommendation
Market Cap ( mn) 25,030 25,030
Angel Broking Limited is one of the largest independent full-
Net Debt (Rs mn) 0 0
service retail broking house in India in terms of active clients on
Enterprise Value (Rs mn) 25,030 25,030 NSE as of June 30, 2020. Company's primary focus is to profitably
EV/ Sales
grow retail broking, margin funding and distribution businesses
3.4 3.4 through online and digital platforms. The issue is fairly priced
EV/ EBIDTA compared to its peers, thus we recommend a SUBSCRIBE
16.0 16.0
rating for long term perspective.
P/E
26.7 26.7
* Calculated on EPS of FY17
Source: Red Herring Prospectus, Dealmoney Research
2 22 September 2020
About the company:
Angel broking Limited (ABL) 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 is a technology-led financial services company
providing broking and advisory services, margin funding, loans against shares (through one of the
Subsidiaries, AFPL) and financial products distribution to the clients under the brand “Angel Broking”. The
broking and allied services are offered through (i) the online and digital platforms, and (ii) the network of
over 11,000 Authorised Persons (the “Authorised Persons”), as of June 30, 2020. It has had more than
4.39 million downloads of the Angel Broking mobile application and nearly 1 million downloads of the Angel
BEE mobile application as of June 30, 2020, which enable the clients to avail the services digitally. Digital
marketing has enabled the Company to garner 398 million digital impressions in June, 2020 on its various
online and digital platforms. The customer outreach, spans across approximately 96.87% or 18,649 pin
codes in India as of June 30, 2020. ABL manages ₹ 132,540 million in client assets and over 2.15 million
operational broking accounts as of June 30, 2020.
The primary focus is to profitably grow the retail broking, margin funding and distribution businesses
through the online and digital platforms, “Angel Broking Mobile App”, “trade.angelbroking.com”, “Angel
SpeedPro”, “Angel BEE”, which are powered by “ARQ”, a rule-based investment engine. The company
provide the broking services through various web, digital and .exe platforms, which are integrated with
each other enabling the clients to have a seamless trading and investment experience, positioning us to
benefit from the development of the Indian financial market, increased emphasis on digitalisation, and
growth in the returns from such financial investments. It has received several awards, certificates and
accolades for the services and products, including „Best performing Retail Member‟ award at Market
Achievers Awards organized by NSE for three consecutive years, being 2017, 2018 and 2019
3 22 September 2020It provides a wide range of financial services to its clients including and in relation to:
Broking and Advisory: It provides broking services across equity (cash-delivery, intra-day, futures and
options), commodity and currency segments, along with debt products. It facilitates participation of the clients
in initial public offerings undertaken by various companies. As a part of the broking and advisory services
offered by the company, it also facilitate opening of demat accounts for the clients. The Company is a
member of BSE, NSE, MSEI, MCX and NCDEX. To complement the broking and advisory services, It also
provide the following additional services to the clients:
(i) Research Services: As of June 30, 2020, It has a dedicated research team of 54 members who cater to
quantitative and qualitative research requirements relating to the stock market such as equity
fundamentals, technical, derivatives, commodities currencies and mutual funds.
(ii) Investment Advisory: It provides investment advisory services to the retail clients with customized
investment recommendations aided by the rule based investment engine “ARQ”, which it believe assists
the clients in achieving their investment goals across various investment avenues such as equities, debt,
currency, commodities, derivatives, mutual funds and insurance products.
(iii) Investor Education: The website, www.angelbroking.com, is also a knowledge center which aims to
empower investors, including clients, with an understanding in respect of trading and investments
products. As part of the investor awareness initiative, it regularly undertake sessions through various
digital mediums, to enhance the retail clients‟ knowledge regarding the products, research and market
trends
4 22 September 2020• Other Financial Services: In addition to the broking and advisory services, it also provides the following
financial services that may enable the clients to achieve their financial goals:
(i) Margin Trading Facility: It provides margin trading facility to the clients for leveraging their eligible
collaterals by funding their requirements on the cash delivery segment of equities. Such funding is
subject to exposure against margins that are mandated by the stock exchanges, with the securities
forming a part of the collateral for such funding.
(ii) Distribution: It undertakes distribution of third-party financial products such as mutual funds, and health
and life insurance products, according to our clients‟ requirements. Such distribution is undertaken
through both the offline channels and the digital platforms, “Angel Broking” and “Angel BEE”. It believes
that the distribution business helps the clients to achieve their financial and risk mitigation objectives by
providing them with personal wealth management services.
(iii) Loans against shares: Through the Subsidiary, AFPL, which is registered as an NBFC, it provides loans
against shares to the retail clients.
The consolidated total revenue from operations was ₹ 2,384.24 million, ₹ 7,246.24 million, ₹ 7,579.78
million, and ₹ 7,642.80 million for the period ended June 30, 2020 and in Financial Years 2020, 2019 and
2018 respectively. Further, the profit from continuing operations as restated was ₹ 482.59 million, ₹ 867.89
million, ₹ 834.02 million and ₹ 1,097.88 million for the period ended June 30, 2020 and in Financial Years
2020, 2019 and 2018, respectively. The return on net worth for equity shareholders (RoNW) for the period
ended June 30, 2020 was 7.40% (not annualised) and Financial Year 2020 was 13.92%.
5 22 September 2020Strengths
One of the largest retail broking houses with strong brand equity
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). The online and digital platforms, along with the vast network of
Authorised Persons enables it to reach a large population of retail clients spread across approximately
96.87% or 18,649 pin codes in India. This widespread reach has enabled the company to enhance the
client base by 36.81% CAGR from 1.06 million in FY18 to 2.15 million as on June 30, 2020. Over this
period, the company witnessed a consistent growth in our gross client addition of 0.22 million, 0.26 million,
0.56 million and 0.35 million in FY18, FY19, FY20 and Q1 FY21, respectively and representing a 59.54%
CAGR over the period from FY18 to FY20. In the three months period ending June 30, 2020, it has
witnessed an average monthly client addition of approximately 115,565 clients, over a monthly average of
46,676 clients in FY20 representing a growth of 147.59%. Over the last one year, it has more than doubled
the overall turnover market share in the retail broking space in India.
The “Angel Broking” brand, established over 22 years ago, has over the years built an online and digital
broking and financial services platform, with a pan-India presence. It provide broking, margin funding,
advisory and financial services through its brands “Angel Broking” and “Angel BEE”, powered by “ARQ”,
which are well-recognized brands in the retail broking industry in India and are capable of addressing the
financial investment and risk mitigation requirements of Indian retail clients. It believes that it has a strong
brand presence using a targeted strategy of offering services under different brands to cater to a diverse
group of clients. It believes that it is well placed to capitalise on the expected growth in the broking sector in
India due to the advanced digital presence, pricing and early mover advantage in providing broking,
financial and advisory services through both, the online and offline channels
6 22 September 2020Client acquisition through diversified digital platforms
It has strong capabilities to acquire customers through various diversified digital platforms. Based on the
average client additions in Q1 FY21, 85.21% of the clients have been acquired digitally, of which, 53.31%
are acquired through performance marketing, either by way of organic or paid leads, 20.72% through
referrals from the existing clients and approximately 11.18% through digital influencers. The remaining
14.79% of the clients, are acquired through the network of Authorised Persons. From Q2 FY 20 to Q1 FY21,
79.76% of the clients have been acquired digitally, of which, 50.76% are acquired through performance
marketing, either by way of organic or paid leads, 22.24% through referrals from the existing clients and
6.77% through digital influencers.
• Performance Marketing
• Referrals:
• Digital Referral Associates or Digital Influencers
• Authorised Person Network
Integrated, end to end, and advanced digital experience ensuring client satisfaction
It remains focused on innovation and implementation of technology across various services offered by the
company, which it believes has resulted in an increase in client satisfaction. The mobile based applications
across the broking and advisory businesses have been consistently appreciated and awarded. The backend
systems provide an integrated and seamless access across all product platforms
7 22 September 2020Over the last three years, the Company has transformed its business into a seamless digital experience for
its 2.15 million clients as on June 30, 2020. the marketing initiatives are now driven using artificial
intelligence. The client on-boarding journey is largely a straight through process, without any requirement for
physical documentation. Due to the continuous digital initiatives, it has increased the monthly average online
order execution of direct clients to more than 99% in Q1 FY 21. It has also entered into an agreement with a
third party for them to supply printable white labelled research reports and portfolio analysis for stock
selection by the clients, which will be an additional offering for them. Further, the client on boarding is
completely digital and a seamless process
Diversified product offering across segments at competitive price
The online platforms, “Angel Broking”, “trade.angelbroking.com”, “Angel SpeedPro” and “Angel BEE”,
powered by ARQ, allow to provide the clients with an ability to manage their wealth and investments in an
efficient and organized manner. The clients trade in equities in the cash-delivery, cash-intraday, futures and
options, indices – derivatives segment through various order types, including market orders, stop loss orders
and valid till cancelled orders. It also facilitate participation in initial public offerings. The Angel iTrade Prime
Plan was launched comprising, ₹ 0 for equity delivery and ₹ 20 per order for all other segments. Coupled
with this competitive pricing plan, it also offer services such as complementary in-house research and
advisory, margin trading facility, securities as collateral and no charges for any fund transfer (Source: CRISIL
Report). It believes that this complete offering is a unique proposition and makes them one of the most
competitive players across the industry
8 22 September 2020Robust business metrics building operating leverage
It has well executed strategy of being a digital first organisation enabled them to grow the business
exponentially, for example, it witnessed a growth of nearly 2.5 times in the average monthly gross client
acquisition run rate to 115,565 in Q1 FY21 from an average monthly gross client acquisition run rate of
46,676 in FY20. Further, the average monthly gross client additions in FY 18, FY 19, FY 20, and as of
March 31, 2020, April 30, 2020, May 31, 2020 and June 30, 2020 was 18,337 accounts, 21,784 accounts
46,676 accounts, 104,555 accounts, 95,169 accounts, 107,359 accounts and 144,167 accounts
respectively.
The augmentation of the digital processes, technological platforms, performance marketing, client
engagement strategy, robust client acquisition and an all-inclusive flat pricing model has enabled the
company to substantially grow the average daily turnover from ₹ 253,176 million in Q1 FY20 to ₹ 618,945
million in Q1 FY21, as well as placed at the forefront in the turnover based market share for the retail
broking industry in India. The broking, distribution and advisory services are backed by robust
infrastructure and has processed at peak usage, being, approximately 3.46 million trades in a day
Experienced management team with proven execution capabilities
It has a strong management team with experience in the Indian financial services and broking sectors. The
quality of our management team has been the driving force in achieving all-encompassing growth in the
business. All members of the senior management team have substantial experience.
9 22 September 2020One of the Promoters, Dinesh D. Thakkar has over 27 years of experience in the broking industry and is
the founder of the Angel Group. the other Promoters, Ashok D. Thakkar and Sunita A. Magnani have over
20 years and over 15 years of experience, respectively, in the Angel Group. the senior management team
comprises Dinesh D. Thakkar (Chairman and Managing Director); Vinay Agrawal (Director and Chief
Executive Officer); Vineet Agrawal (Chief Financial Officer); Nilesh Gokral (Chief Operating Officer); Rohit
Ambosta (Chief Information Officer); Sandeep Bhardwaj (Chief Sales Officer); Subhash Menon (Chief
People Officer); Ketan Shah (Chief Revenue Officer); and Prabhakar Tiwari (Chief Marketing Officer).
Further, the management team enables to conceptualise and develop new services, effectively market the
services, and develop and maintain relationships with various stakeholders and intermediaries including
the clients and Authorised Persons network
10 22 September 2020Strategy:
Strengthen the leadership position to become the largest retail broking business in India
It intends to strengthen the leadership position to become the largest retail broking firm in India, both by
broking revenue and active clients. In particular, it aims to enhance the market position in the growing retail
broking segment, by continuing to focus on acquiring and retaining clients, product innovation, leveraging
the web and digital broking platforms and brand to acquire clients through these platforms and our
extensive Authorised Person network, analyzing client behaviour and provide personalized
recommendations. Further, it intends to expand and offer all the financial services required by the retail
clients.
It aims to increase the client base, increase the number of trades and transactions, thereby increasing retail
broking revenues. It intends to widen the analysts‟ recommendations, create an integrated consumer
behaviour engagement model, which enables them to serve the clients better and increase the engagement
with them through implementation of technology, across various devices and means of communication. It
also intends to diversify and increase the retail client base by catering to various clients across different age
groups with digital applications such as “Angel BEE” which has been designed to specifically suit the needs
of the millennial generation. It also believe that it will be able to increase the retail client base by providing
an open source platform, integrate better third party applications and offer multilingual services on the
online platforms to ensure reach to a larger investor base and capitalise on the underserved client base with
simplicity in advice.
It also intends to strengthen the client support systems to ensure that it is able to provide anytime,
anywhere access through various modes of communication
11 22 September 2020Augment the investment in the mobile platform, artificial intelligence, machine learning capabilities
and newer Technologies
It believes that it is at the forefront of application of technology and digitalisation in the broking business in
India and are continuously striving to reach international standards of providing services to the clients.
Given that a majority of our retail clients interact with the company through the electronic broking platform, it
continuously invest in the development of technology to ensure that it provide the clients with a superior,
seamless and secure experience. It aims to enhance the client engagement through focused advancements
in mobile technology and delivering innovative products, improving user interface across devices and
ensure time optimisation for an increase in the performance and execution of trades. It also intends to
continue to ensure that it will implement the best practices in respect of cybersecurity and increase the
ability to operate with third parties to optimise the operations and provide the clients with a digital
experience which is efficient and cost-effective. The risk management framework is completely automated
and it remains committed to enhance the systems to meet the growing needs and requirements of
regulators, market participants and clients.
Establish a leadership position in the investment advisory space to support the business
The provides investment advisory services through the various applications and the website, which are
supplemented by “ARQ”, a rule based investment engine. It currently provide the clients with customized
solutions to assist them achieve their investment goals across various investment asset classes such as
equities, derivatives, currency and commodities, mutual funds, fixed deposits and bonds, health insurance
and life insurance products.
12 22 September 2020The “Angel BEE” mobile application as the digital interface for sourcing, client acquisition and digital
interaction with the clients further strengthens the focus on technology. “Angel BEE” is the digital platform
through which it provides retail wealth management and personalised investment recommendations to the
clients.
It intends to continue to maintain high growth and profitability by increasing the scope and intensity of
activities in the existing investment advisory business by providing such services to a wider range of clients
and ensuring that other platforms of the Company are capitalised in order to efficiently manage the wealth
of clients
Capitalisation of the growing investable wealth in India
According to the CRISIL Report, the financial market in India is expected to continue to grow in line with its
historical trajectory, due to strong demand and supply-side drivers, such as the expected growth in the
Indian economy, increasing urbanisation, increased consumerism due to higher per capita incomes, and
favourable changes. This indicates market growth potential for established financial service providers in
India such as Angel broking . Further, clients in India are also increasingly willing to pay a premium for
higher quality of infrastructure and service, such as technology, automation and other value-added services
and higher product safety. In the last five years, there has been an increase in the amount of wealth
invested in India in financial products as compared to traditional forms of investment. It intends to capitalise
and acquire larger market share on these opportunities in the Indian financial market, given the experience
in adopting technology and automation to service the clients. Further, it believes that the projected growth
and the changes in the Indian financial market resulting from increased wealth and trading will result in an
increase in the dependence of existing and new clients on financial services providers such as Angel
Broking
13 22 September 2020Summary Financials
Income Statement Balance Sheet
Rs. mn FY18 FY19 FY20 Rs mn FY18 FY19 FY20
Total Income 7,647.7 7,626.2 7,293.5 Liabilities
Share capital 720 720 720
Operating Expense 5,164.8 5,749.5 5,725.4
Share Warrants & Outstandings - - -
EBIDTA 2,482.9 1,876.7 1,568.0 Reserves and surplus 4,029 4,594 5,194
Depreciation 145.3 200.0 221.2 Minority Interest - - -
Other Income 196.2 264.9 305.7 Long-Term Borrowings 73 19 21
Finance Costs 946.9 697.4 504.1 Deferred tax liabilities(Net) (29) (76) (49)
PBT 1,586.9 1,244.3 1,148.5 Other Long Term Liabilities - - -
Long term provisions 1,302 1,756 1,673
Exceptional items - - -
Other financial liabilities - - -
Profit before tax 1,586.9 1,244.3 1,148.5 Trade payables 6,146 6,378 9,395
Provision for Tax 507.7 445.9 325.0 Other current liabilities 1,504 1,620 1,616
Profit for the year 1,079 798 823 Short term borrowings 11,150 8,699 4,888
Short Term Provisions 74 - -
Rs. mn FY18 FY19 FY20 Total Liabilities 24,969 23,711 23,459
EBIDTA Margin 35.0% 28.1% 20.6%
Assets
Net Margin 13.8% 10.1% 10.8%
Net Block 1,158 1,340 1,241
ROE 25.0% 15.9% 14.7%
Intangible assets under development - 6 21
ROCE 18.4% 12.9% 13.3% Investments - - -
Loans & Advances 1,571 2,416 4,328
Other Non Current Assets 32 64 51
Currents Investments 56 149 353
Inventories 1 0 0
Trade receivables 1,585 2,146 390
Cash and cash equivalents 9,274 9,860 14,136
Loans & Advances 11,062 7,612 2,837
Other current assets 230 118 102
Total Assets 24,969 23,711 23,459
Source: Red Herring Prospectus, Dealmoney research
14 22 September 2020Dealmoney Securities Private Limited
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