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Angel One Ltd – Beneficiary of Pandemic

Updated: Jun 9, 2022

Company Name – Angel One Limited (Angel One)

Current Share Price – INR 1,831 (April 25, 2022)

Market Cap – INR 15,220 cr


1. What is interesting about the stock?

The world of stock brokerages has seen a complete transformation in the past decade. Gone are the days when you must have a dedicated human broker assigned to you to be able to conduct stock trading. It was a very opaque manner and along with high brokerage charges, it would also eat into any profit made by the investor or trader. Compared to that, now customers just need to log in to their trading account using a browser or mobile app and conduct trades with ZERO brokerage for stock delivery and a flat fee for intraday trades.

This discount brokerage model was popularised in the USA by Robin Hood and by Zerodha in India. Both these pioneers were focused on keeping lean operations with a focus on technology and accessibility while bringing costs for customers down as much as possible. The core premise for these disruptors has been to keep investing as simple and easy as possible for end-users using technology while keeping costs low to be able to better position themselves against legacy players with their legions of personal brokers. Using the scaling power of the internet, both giants are now the biggest brokerages in their respective countries.

Legacy brokers like HDFC Securities, ICICI Securities, Sharekhan and others have seen their market share shrink at the same time, and eventually, they also had to bow to the trend and concentrate on the online side of the business, along with slashing charges to be able to compete with discount brokerages.

But there was one small legacy brokerage in India that got on the technology transformation train early and is now among the top 3 in the industry in terms of active client base. That player is Angel Broking who has now been renamed Angel One.

Angel One is a traditional brokerage operating in both the traditional plan and the flat fee models. It pivoted much earlier than the rest of the traditional industry and scaled faster than them. This has seen the company add over 1.2 lakh customers under the traditional plan and 13.5 lakh customers under the flat fee model in Q4FY22 alone.

It is now the 3rd largest brokerage and the largest listed brokerage in India in terms of NSE Active clients at 3.7 million. Angel One also has a 10.3% share of the total demat accounts in India as of March 2022.

Source: Q4FY22 Investor PPT

The Company now acquires 100% of its direct clients digitally and sees 75%+ orders placed through its mobile app. It has also developed a wide variety of in-house built digital properties and is integrated with various 3rd party products like smallcase, quicko, sensibull and others.

Source: Q4FY22 Investor PPT

It also enjoys a good market share across all the major market segments like

  • 20.9% in overall equity market

  • 21.2% in F&O

  • 13.7% in cash market

  • 42.4% in commodity market

Since the start of the pandemic, the company has seen phenomenal growth in its user base of 6.3x since Q4FY20 with the vast majority of new users being acquired from Tier 2 and beyond cities.

Source: Q4FY22 Investor PPT

Within its revenues, the biggest chunk comes from gross broking which accounted for 69% of its revenues in Q4FY22 and F&O is the biggest earner in the broking revenues with 78% broking revenue share in Q4FY22.

The company is now planning to transform into a fintech platform with its own set of offerings geared towards investment for retail customers, along with a financial marketplace for all kinds of 3rd party financial products. The biggest signal for this steadfast focus on technology for the company comes from the appointment of Silicon Valley veteran Narayan Gangadhar as CEO in April 2021 and the rebranding of the company into Angel One to appeal to Gen Z and millennial investors.

But the way forward is not going to be easy for Angel One. Seemingly anyone and everyone in the financial services field from traditional banks like HDFC Bank and ICICI to NBFCs like Bajaj Finance, to financial services start-ups like Zerodha and emerging fintech companies like Navi are all gearing up to compete for the massive pie of the retail financial and investment services in India. There are also other VC backed startups Groww and Paytm who are burning cash to establish themselves in the Indian investment market.

The industry is also said to be highly cyclical with great performances during bull runs and stagnant behaviour after the bull runs end.

Will Angel One retain its edge and be able to defend against the large financial resources of its competitors? Will it be able to push away from the high dependence on market cycles by transforming into a fintech marketplace? Only time will tell.

Industry Overview

Source: Q4FY22 Investor PPT

Stock market investing is still a very underpenetrated market in India. Although the number of demat accounts in India has grown at a CAGR of 17.5% in the last 10 years, the majority of this growth has come in the last 3 years with the overall demat penetration rising from 3.1% in FY20 to 6.4% in FY22.

Source: Q4FY22 Investor PPT

But even at 6.4% demat penetration, the potential for this industry is vast when compared to China in FY22 which had this at 14% and USA which had this number at 32% back in 2018. The overall addressable market is also very big at 928 million working age population which is expected to stay stable and grow steadily to 1.11 billion by 2050.

Source: Q4FY22 Investor PPT

The overall fintech industry in India is currently valued at USD 31 billion and is expected to rise to USD 84 billion by 2025. India also has a very high fintech adoption rate of 87% vs the global average of 64%. The rising penetration of smartphones, UPI and the wide reach of cheap internet in India are considered to be the growth drivers that have made India a prime growth market for the fintech sector.

The major listed direct competitors of Angel One in India are:

  • ICICI Securities

  • Motilal Oswal

  • JM Financial

  • 5Paisa Capital

The company also has major unlisted rivals in market leader Zerodha & upcoming investment start-up Groww. It is also competing against all big commercial banks and major NBFCs like Bajaj Finance and Paytm, all of whom have their own broking business.

Key strengths

  • The Company has built its brand strength and long industry presence. Angel One has been present in the broking industry since 1996 and has developed a great brand for itself especially in tier 2 and beyond cities and towns in India which have accounted for over 90% of new client additions for the company since Q4FY20

  • The demat penetration in India is still at only 6.4%, highlighting good headroom for market expansion in Angel One’s flagship broking business. The Fintech sector in India is also expected to grow a lot which also shows a lot of growth potential for Angel One’s future business lines

  • The Company has been able to hold on to its large market share in the major market segments and has also maintained a great operating profile with RoE of 39% and a PAT margin of 28% in FY22

  • The Company’s focus on developing in the fintech space, and its experience in building apps and digital properties over the years should act as a big source of growth for the company in the fintech space. The appointment of Narayan Gangadhar, who has worked in various roles across tech giants like Microsoft, Google, Uber and Ola, as CEO should also provide the company with the necessary vision and leadership to develop into a universal fintech marketplace.

2. Key Historical Financials

Revenue CAGR in the past 3 years was 43% due to an industry wide rise after the COVID-19 outbreak. PAT CAGR in the same period was 99%, showcasing a rapid rise in operational efficiency for the Company in the last 3 years.

3. What is my view on Company valuation?

Angel One was listed in Oct 2020 at INR 275 and since then it has risen to over INR 1,800, currently showcasing a rise of 665% in 1.5 years. Nifty 50 has risen 42% and Nifty Financial Services Index has risen 39% in the same period.

This shows that the Company has vastly outperformed the general market and the financial services sector in India.

The company trades at a P/E of 24.4x vs 13.6x for ICICI Securities, 9.3x for Motilal Oswal, 8.5 times for JM Financial & 71.6x for 5Paisa Capital.

The wide difference in valuation between Angel One and ICICI Securities, Motilal Oswal & JM Financial has arisen from the superior market position of Angel One and its proven track record in digital capabilities. 5Paisa is also a big discount broker, which is trading at a large valuation vs Angel One mainly due to its position as one of the top pure play discount brokerages in India and its depressed earnings.

Based on the great potential for demat penetration in India, the other opportunities in the non-core businesses like the fintech space, and the increased focus on the technology side, I expect Angel One to have a steady growth momentum going forward.

At the current valuation, the stock appears to be expensive by industry standards. But given its potential and the massive scope for the fintech space in India, it is a good stock for long term investors to evaluate.

4. What are the risks to the investment analysis?

Risks to the analysis are:

  • High level of competition in this space. Almost every financial services company including big banks, NBFCs, startups and others are competing in the broking space. Almost all of these players have large pools of capital both through their flagship businesses or through VC financing, unlike Angel One which has used primarily used its internal accruals for growth.

  • Low barriers to entry make maintaining market share entirely dependent on brand strength in the long term, which is difficult in the face of the high competition in the industry.

  • Under the new flat-fee model prevalent in the industry, almost all of the broking revenues come from active traders and thus brokerages need to keep adding to their active client base to sustain revenue growth. But the addition of active traders is directly dependent on the state of markets with bull runs seeing humongous customer additions which eventually dry up when the bull run ends and can the company can even see a drop in customer count in bear runs. Thus the broking industry tends to be cyclical in tandem with the general financial market up and down cycles.


About the Author

I have over 6 years of experience in the Investment sector and have been an active prop trader in European Bond Futures in the past. Currently I am working as head of Research at Smart Sync Services where we are working on simplifying and expanding financial and investment knowledge to make the investment world as accessible for everyday investors as much as possible.

I graduated from the Master of Finance Program from Cambridge University in 2016 after completing my Bachelor of Engineering program from Jadavpur University, Kolkata in 2011.

I am an insignificant public investor & have avid interest in following emerging trends both in technology and other fast evolving sectors. I am also a lifelong learner and relish the chance to learn something new all the time.


I have no stock, option or similar derivative position in any of the companies mentioned since last 30 days, and shall not initiate any such positions within the next 5 days. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from SocInvest). I have no business relationship with any company whose stock is mentioned in this article.

I am not a SEBI registered advisor. This article is purely for educational purpose and not to be construed as an investment advice. Please consult your financial advisor before acting on it.

I have used publicly available information while writing this article.


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