5paisa Capital Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from 5paisa Capital Limited (5PAISA) Q3 FY23 Earnings Concall

Management Update:

• [00:05:06] 5PAISA said that with the acquisition of IIFL Securities it will acquire about 1.5 million customers and will boost the company’s overall client base by around 40%.

Q&A Highlights:

• [00:07:14] Rishikesh Oza of RoboCapital asked about the reason for avg. daily turnover (ADTO) doubling YonY, while revenue remaining flat YonY. Prakarsh Gagdani CEO replied that it’s because ADTO doesn’t necessarily mean entirely transforming into number of orders. 5PAISA charges on a per order basis.

• [00:09:19] Rishikesh Oza from RoboCapital enquired about the total employee count of the company and market cost for 3Q23. Prakarsh Gagdani CEO answered that 5PAISA is in the range of about 700-725 employees. And marketing cost was INR12.2 crore in 2Q23, while in 3Q23 it was INR11.6 crores.

• [00:09:56] Manish Ostwal with Nirmal Bang asked about cost of acquisition of customers declining sharply from 1Q23 to 3Q23 and if the current level is sustainable. Prakarsh Gagdani CEO answered that in 2Q23 it was INR574 and in 3Q23 it’s at INR525. 5PAISA expects the cost to hover between INR500-600.

• [00:13:24] Manish Ostwal of Nirmal Bang also asked about the customer acquisition run rate of 162,000 and where this trend is stabilizing. Prakarsh Gagdani CEO replied that since 5PAISA is not acquiring as much as the industry and is focused on quality, the run rate will remain in the range of 1.5-2.5 lakh account on a quarterly basis.

• [00:15:58]  Kajal G from ICICI asked about 5PAISA’s plan in tackling sharp decline in active clients, which is also an industry trend. Prakarsh Gagdani CEO clarified that active clients is not the right number to look at. The right number to look at is the income, turnover and profitability growth.

• [00:27:54] Alok Kumar of UTI asked about the market share of 5PAISA in the derivative market. Prakarsh Gagdani CEO answered that currently the company is in the range of about 3.2% vs. 3.1-3.14% in 2Q23.

• [00:28:11] Alok Kumar with UTI asked if there is a possibility of increasing the broking rates in the coming quarters. Prakarsh Gagdani CEO answered that with the kind of regulatory changes, it’s pushing cost of operations higher every quarter. So currently, with the changes, the broking rates will go up.

• [00:30:12] Alok Kumar with UTI also asked about the growth trajectory in terms of customer acquisition for the coming quarters. Prakarsh Gagdani CEO replied that 5PAISA is expecting the acquisition number in the same range of 7.5, 8 lakh customers to 1 million per year and it will continue to do that.

• [00:39:07] Sumit Jankar of Motilal Oswal asked about the current cash market share and the proportion of cash and derivatives in terms of revenue. Prakarsh Gagdani CEO said that the cash market share is in the range of about 2.7-2.8% and derivate is around 3.2%. On revenue breakup, 65-70% of revenue comes from derivative and balance from cash.

• [00:54:35] Dev Shah from Haitong Securities asked about time it takes for a newly acquired customer to be an active client. Prakarsh Gagdani CEO answered that broadly it takes not more than 30-45 days for a customer to get active.