Published on 22/09/2020 10:38:35 AM | Source: SPA Securities Ltd

IPO Note - Angel Broking Ltd By SPA Securities

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Angel Broking is one of the leading retail broking houses in India with a network of over 11,000 Authorised Persons and the customer outreach, spans across approximately 96.87% or 18,649 pin codes enabling it to enhance its client base by 36.81% CAGR from 1.06 million in FY18 to 2.15 million. It manages INR 132,540 million in client assets and over2.15 million operational broking accounts. The online and digital platforms, "Angel Broking MobileApp","","Angel SpeedPro", "Angel BEE", which are powered by "ARQ", a rule-based investmentengine, have helped the company reach out to its diversified customer base.


Investment Rationale

Strong Client Addition through all channels

Angel has witnessed a consistent growth in gross client addition of 0.22 million, 0.26million, 0.56 million and 0.35 million in FY18, FY19, FY20 and Q1 FY21, respectively and a 59.54% CAGR over the period from FY18 to FY20. In the three months period ending June 30, 2020, an average monthly client addition was at 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, overall market share in turnover in the retail broking space in India has more than doubled for the company.


Diversified Digital Prowess

The broking, margin funding, advisory and financial services are delivered through the brands "Angel Broking" and "Angel BEE", powered by "ARQ", which are well-recognized brands in the retail broking industry and are capable of addressing the financial investment and risk mitigation requirements of Indian retail clients. The company has created a strong brand presence using a targeted strategy of offering services under different brands to cater to a diverse group of clients.


Strong Research and advisory

Angel 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. Investment advisory services to retail clients with customized investment recommendations aided by the rule-based investment engine "ARQ", which assists clients in achieving their investment goals across various investment avenues such as equities, debt, currency, commodities, derivatives, mutual funds and insurance products.



The consolidated total revenue from operations was INR 2,384.24 million, INR 7,246.24 million, INR 7,579.78 million, and INR 7,642.80million for the period ended June 30, 2020 and in Financial Years 2020, 2019 and 2018 respectively. Profit from continuing operations as restated was INR 482.59 million, INR 867.89 million, INR 834.02 million and INR 1,097.88 million for the period ended June 30, 2020 and in Financial Years 2020, 2019 and 2018,respectively. RoNW for the period ended June 30, 2020 was 7.40% (not annualised) and Financial Year 2020 was 13.92%.


Outlook and Valuation

Angel has been able to retain and improve on its position with the digital and distribution edge, even in the era of advent of new age discount brokerages. The issue price discounts FY20 earnings by 25.4x while the for FY21 the discount rate is ~18x on diluted equity capital, the issue price implies a p/b multiple of 2.63 on diluted equity capital. Since client addition and volume uptick has been one of the most robust for Indian equity market retail trades there is a possibility of the same cooling off for some quarters and the ability of the company to wade through these tiles will be tested. We recommend a subscribe to the issue as a good long term investment in sync with the opportunities presented by the under penetration of investments in equities as an asset class and the strong brand equity created by the company over the last 2 decades with proven prowess in adoption of technology and strong advisory base.


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