5paisa Capital Limited (NSE: 5PAISA) Q3 2025 Earnings Call dated Jan. 20, 2025
Corporate Participants:
Gaurav Seth — Chief Executive Officer and Managing Director
Gourav Munjal — Whole-Time Director and Chief Financial Officer
Analysts:
Nemin Doshi — Analyst
Uday Pai — Analyst
Presentation:
Operator
Good afternoon, ladies and gentlemen. I’m Pelsia, moderator for the Conference Call. Welcome to 5paisa Capital Limited Q3 FY ’25 Earnings Conference Call. We have with us today Mr. Gaurav Seth, MD and CEO; and Mr. Gourav Munjal, Whole-Time Director and CFO; and Mr. Ameya Agnihotri, Whole-Time Director and CTO from 5paisa Capital Limited. [Operator Instructions] Please note that this conference is being recorded.
I would now like to hand over the floor to Mr. Gaurav Seth. Thank you, and over to you, sir.
Gaurav Seth — Chief Executive Officer and Managing Director
Thank you. Thank you, everyone. Thanks for joining. Good to have all of you with us and wishing you a very Happy New Year.
So I’ll get straight to it and focus on our last quarter results. So Q3 FY ’25 has been a challenging quarter for the entire stockbooking industry. On one side, regulatory changes have impacted client participation in exchange turnover and business income, while on the other hand, the index corrected by about 10% during the quarter and has affected new client participation. Overall, the industry acquired 99 lakh new customers in Q3 FY ’25 compared to INR1.31 crore in the previous quarter, which was a significant drop of 24%.
Regulators continue to focus on protecting investor interest and enhancing transparency among investors. One of the notable changes that SEBI has done as part of its FNO norms is the true-to-label regulation aimed at improving transparency around charges for investors and that has impacted our allied income. Additionally, SEBI introduced Phase-1 reforms for the FNO market starting December 1, 2024, sort of the first month of the last quarter and these reforms include measures such as limiting the number of weekly expiry days for option contracts, increasing lot sizes and acquiring higher margins on acquiry rates. These changes affected exchange turnover volumes subsequently impacting our broking income as well. While these changes may have a temporary effect, we believe they ultimately empower investors and support the long-term sustainable growth of the market and our business as well.
On the acquisition front, last quarter, which was Q3 FY ’25, we acquired 1.11 lakh new customers, bringing our total customer-base to 47.4 lakh. Compared to last quarter acquisition, the slowdown in new customer acquisition reflects broader industry trends. Our ADTO average daily turnover declined to 3.03 trillion, 20% Q-o-Q drop, primarily due to regulatory changes as explained before. Our client funding book grew to INR265 crores, which is an 8% quarter-on-quarter increase and mutual fund AUM reached INR1,386 crores, which was a 73% year-on-year growth.
Our financial performance, broking revenue dropped 8% quarter-on-quarter to INR43.9 crore, primarily due to new regulations related to SEBI ethanol. Allied income decreased by 39% quarter-on-quarter to INR16 crore impacted by the true-to-label regulation. And our total revenue stood at about INR85.3 crores, reflecting a 15% year-on-year decline.
On the expense front, our expenses have been in-line with what we budgeted and other expenses decreased by 14%, driven by reduced client acquisition costs and also ongoing cost optimization efforts. With this, our Q3 FY ’25 profit-after-tax grew 8% year-on-year to INR16.2 crores with-profit after tax margin of 19% for the nine months ended FY ’25 profit grew by 20% year-on-year, now on the — on the product side, we made significant progress and some of the things that we’ve done as part of in the last quarter and around months preceding that we revamped our web platform with React chairs for enhanced performance, scalability and cutting-edge trading experience complemented by an all-in-one dashboard for multi-asset management.
Our revamped flutter-based mobile app is now 100% live for all users on Android as well as the iOS platforms. It delivers faster feature-risk experiences including FNO 360 for advanced derivatives trading and upgraded MTF journey as well, which is for higher-ticket transactions. New trading tools like VTT OCO position grouping and integrated option chain positions empower users with greater control and efficiency, as well as flutter driven onboarding and streamlined online re-KYC processes ensure faster and secure activations. Boosting user engagement, satisfaction and retention. Together, these innovations solidify our position as a leader in seamless tech-driven trading solutions. Additionally, we have made significant efforts in optimizing platforms for lower latencies, increased throughput and reducing expenses.
And finally, I think in conclusion, I would — I would say that we remain committed to enhancing our product and deliver superior customer experience. We’re confident that these efforts will drive revenue and profitability and growth for us in the coming quarters.
So that’s a brief from me. Gourav, you want to add something?
Gourav Munjal — Whole-Time Director and Chief Financial Officer
I guess, we can start the question.
Gaurav Seth — Chief Executive Officer and Managing Director
Yeah. Okay. Over to you.
Questions and Answers:
Operator
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Nemin Doshi from Geojit. Please go-ahead.
Gaurav Seth
Hello?
Nemin Doshi
[Technical Issues] Hello?
Operator
Sir, you are audible now. Please go-ahead, sir.
Nemin Doshi
I have two questions from my side. Firstly, with respect to the payback period of our CAC, how do we see this being affected in light of the change — of this regulatory changes?
And secondly, is there any change in strategy from a customer acquisition perspective, given we see a sharp decline in SNO volumes industry-wide?
Gaurav Seth
Okay. Thanks. Good questions. I think on your first question, if I if I read it rightly or heard it correct. You’re talking about the payback period for client acquisition, right?
Nemin Doshi
Yes.
Gaurav Seth
So currently, I think a ballpark of about six months, we see that going to eight months with some of these new changes. And so I think with the caveat that obviously these changes are still too early to — these are our initial estimates, too early to determine.
And I think your second question was about, is there a change in our client acquisition strategy in light of the new norm?
Nemin Doshi
Yes.
Gaurav Seth
Right?
Nemin Doshi
Yeah.
Gaurav Seth
So I see, principally speaking, we want to be more thoughtful about our client acquisition strategy. And I don’t think we are we are changing anything drastically as far as the kind of kind of customers or clients that we want to acquire. We want to acquire people or customers who can benefit from our products in the long-term and also being good customers for us, right? If you look at the lifetime value and also the cost of acquisition. So those — those basic principles of acquisitions still remain the same. Obviously, we would — we would in — as depending upon how these norms play-out, determine which are the fine-tuned the cohorts we want to go after, et-cetera?
Nemin Doshi
Got it, got it. And sir, lastly, if you can just throw some light on the cross-sell that we — from a customer acquisition cost perspective, how — is there a cross-sell opportunity and how are we able to cross-sell the mutual fund products or different products across our value chain of the customers? So any sort of color on that would be helpful. Thank you.
Gaurav Seth
Yeah, certainly, I mean we have — and I think we — we appreciate and actually understand the importance of cross-sell. So whether we are cross-selling, let’s say, a broking customer, mutual fund or mutual fund customer broking solutions. I mean journey can start either way. But I want to kind of again caveat it by saying that our — we think that there is ample opportunity in this market in the investing and trading space. So we’re looking at cross-sell between these investing and trading products only, which is our current sort of bouquet of offering. And that is something that we would continue to focus on and track religiously.
Nemin Doshi
Okay. Okay, got it. Thanks and all the best for the next quarters.
Gaurav Seth
Thank you.
Operator
Thank you. [Operator Instructions] The question comes from the caller ID 02268497499. Please go-ahead with your question.
Uday Pai
Hello, am I audible?
Operator
Yes, sir, you’re audible, sir. I request you to introduce yourself and ask a question.
Uday Pai
Hi, my name is Uday. I am working with Investec Capital. I had one question on the pricing. Are you envisaging any change in your pricing policy due to these regulations or to mitigate the impact of this recognition?
Gaurav Seth
So right now, we are not changing anything. We are closely monitoring that how the volumes will go up or down in near-future and we will review the competitor and industry actions towards the same. And after all this, accordingly, we’ll take action. But till now, we haven’t changed any prices.
Uday Pai
Okay, sure. Thank you. That’s it from my side.
Operator
Thank you. [Operator Instructions] Sir, there are no questions, sir. [Operator Instructions] A follow-up question from Nimin Doshi from Geojit. Please go-ahead.
Nemin Doshi
Yeah. Hi, sir. Thanks for the follow-up again. Sir, firstly, from a MTF perspective, we have seen our book growing a fast over last few quarters. So how should we think about this book in near-future, especially in light of the changes that there could be a rate fall or rate fall in coming quarters?
Gaurav Seth
So it’s — I think we — I mean as a general one don’t want to speculate I mean as a business we adjust whether it is pricing or product or strategy based on-market conditions, right, and that’s something that we would look to do very hard for us to say at this point in time, you know where the rates are headed if you’re saying that why you know why did the book grow to a certain amount, I mean we obviously an MTF would be a focus, but I would not — I don’t think so we would be able to speculate or determine at this point in time that what impact interest rates will have on our MTF book in the future. It’s too early to say.
Gourav Munjal
Also on a, so overall impact of this industry will not be that much because anyway, it is more driven by the market correction and market improvements. So any reduction in half percentage or the 1 percentage will not impact these kind of customers because anyway they are paying between in the range of 17% to 18%. So it’s more of towards — it’s more — will, I mean impact via the market improvement.
Nemin Doshi
Okay, okay. So we won’t be indulging in aggressive pricing strategies to attract and grow our FTF book.
Gourav Munjal
We are clear, right, we have in the last quarter reduced 2.045% per day, which comes around 16.42%. We had already reduced by 2% to 3% in last quarter. Till now, we are not thinking about to reduce it more because it makes sense for us to get a spread of 4% to 5% at least, especially when the market is open for 240 days out of INR365 so — and yes, we know that there are players who is competitive in this space and they may are burning from their own pocket. But till now we are we are not in a position to reduce it further and are it is 16.40% as of now.
Nemin Doshi
Okay. Okay, got it. And lastly, sir, how do we see this broking environment, especially for are panning out over the near-term, especially in light of this regulatory changes, do we see any further changes in cost structures or do we just have to wait-and-watch until the situation settles around?
Gaurav Seth
So I think excellent question. Again, this is a more regulatory-driven environment, right? And I think we are being — being in the industry used to dealing with regulation and complying. I think as I said that we think this is a net positive for the industry. Even if you look a couple of years back to the peak margin environment, right, when that drilling came in about 2021, market had a temporary effect and then the new base was set and then there was growth from there. So hopefully, these changes also pan-out there. I would not like to speculate. But I think overall, it’s good long-term for the customer and for the market.
And how our business will pan-out and what decisions we’ll take, I mean, we would have levers like it — obviously, we would — there are some decisions that we would take and there are decision given on what competition is doing in the market is doing, right, in terms of pricing levers and so on and so forth and product composition. And those are things that we would evaluate if need be in the next, let’s say, couple of months or quarters. That’s how we are looking at it.
Nemin Doshi
Perfect, perfect. So that would be a fair assumption that we have levers to play-out and maintain our profitability.
Gaurav Seth
I mean, yes, we do have. We can think about all the cost optimization in many areas. But again, we need to take a bet between the profitability and the growth. We need to maintain a balance between our acquisition, our infrastructure and IT spend, product development as well as to get a market-share. Share with the — of course, with the profitability, we need to deep-dive and come back with a good strategy. But yes, we do have levers overall.
Nemin Doshi
Perfect. Thanks a lot. That’s it from my side. Thanks.
Operator
Thank you. [Operator Instructions] Sir, we don’t have any questions. Now I hand over the floor to the management for closing comments.
Gaurav Seth
So thank you for joining us on the call today. I hope we’ve been able to answer all your queries. If you have any further query or need any assistance, please feel free-to get-in touch with us. You can mail us at. Thank you again.
Operator
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Conference call service. You may disconnect your lines now. Thank you and have a good day.