Published on 22/09/2020 10:28:15 AM | Source: Nirmal Bang Ltd

IPO Note - Angel Broking Ltd By Nirmal Bang

Posted in IPO Reports| #Nirmal Bang Ltd #IPO #Angel Broking Ltd

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Angel Broking is the fourth largest broking house in India in terms of active clients. It is a technology-led financial services company providing - broking and advisory services, margin funding, loans against shares and financial products distribution to its clients under the brand “Angel Broking”. Its broking and allied services are offered through (i) online and digital platforms, and (ii) network of over 11,000 Authorised Persons. Its customer outreach, spans across 97% or 18,649 pin codes in India. Angel manages Rs. 13,254 Cr in client assets and over 21.5 lac operational broking accounts as of June 2020.


Details and Objects of the Issue

The offer comprises of (i) sale of 0.98 Cr shares aggregating to Rs. 300 Cr by IFC, promoters and individuals; and (ii) fresh issue of 0.98 Cr shares aggregating to Rs. 300 Cr for meeting working capital requirements and general corporate purposes. The offer shall constitute 24.0% of the post-offer paid-up equity share capital of the company.

Investment Rationale

* Strong competitive positioning; focus to remain on discount broking.

* One of the fastest growing retail broking houses backed by strong brand equity developed over last 2 decades.

* Strong increase in market share likely to continue; Angel aims to become the largest retail broker in India.

* Experienced management team with proven execution capabilities


Valuation and Recommendation

Increase in market share by 2x in last five years, strong track record of introducing new technological products, proactive management and brand equity developed over last 2 decades; positions Angel well for transitioning into one of the top discount brokers in India with decent profitability in the longer term. Upon combining the financials of IIFL Securities and 5 Paisa, we observe that this entity shares identical characteristics to Angel with respect to number/market share of active clients, revenue and return on equity. However Angel’s valuations compared to the hypothetical entity of IIFL + 5 Paisa is higher based on FY20 earnings. Also we believe Q1FY21 has benefits of bunching up of (i) work from home due to COVID situation & (ii) broad based buoyancy in markets. The sustenance of these dual benefits into the future is uncertain and hence we believe it would be premature to annualize Q1FY21 earnings. We thus rate the issue as “NEUTRAL”.


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