Angel One ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Angel One ltd (ANGELONE) Q4 FY23 Earnings Concall

Management Update:

• [00:04:32] ANGELONE said it ended the year with a client base of 13.8 million, making the company one of India’s largest retail stock broker.

Q&A Highlights:

• [00:18:39] Swarnabha Mukherjee of B&K Securities enquired if there has been any reclassification between interest income and other income. Vineet Agrawal Group CFO answered that the company has consolidated the income reflected in two parts of the financial statement into interest income for ease of understanding.

• [00:19:28] Swarnabha Mukherjee of B&K Securities queried about other expenses increasing and employee expenses coming down slightly. Vineet Agrawal Group CFO replied that employee expenses came down mainly due to some reversals in the provision of variable pays made through the year. Other expense was driven by client acquisition cost.

• [00:21:02] Swarnabha Mukherjee of B&K Securities asked about the reason for reversal of grant and if any reversals can be expected in upcoming quarters.  Vineet Agrawal Group CFO replied that in future there will not be any impact.

• [00:28:40] Sahej Mittal with HDFC securities asked about the fixed and variable component in the staffing cost. Vineet Agrawal Group CFO answered that the increments, variable pay and ESOP costs are variable in nature which is 30-35%.

• [00:30:00] Aditya Chheda at InCred enquired about the cash and cash equivalents and investments breakdown into company’s cash and cash for margin requirements. Vineet Agrawal Group CFO clarified that of the 55 million of cash and cash equivalents, about 40 million is clients funds and the rest net worth of the company used for margins.

• [00:45:36] Nidhesh Jain enquired if the acquisition cost per customer has gone up now vs. the past. Dinesh Thakkar MD answered that it cannot be disclosed. But moving to deeper Tier 3 and beyond markets, ANGELONE doesn’t focus on increase or decrease in cost of acquisition. The focus currently is on increasing market share.

• [00:49:16] Nidhesh Jain asked what are the rollout plans for other financial services products that will be revenue generating, following the success of the Super-App’s mutual fund SIP. Saurabh Agarwal said ANGELONE launched MFs in the beginning of the year and experienced significant growth. They are focusing on unsecured consumer lending for retail customers and expanding into insurance to generate more revenue.

• [00:50:48] Ajox Frederick at Sundaram Mutual asked about the reason behind the substantial jump in orders per NSE active client in the F&O space from 40 to 50 in 4Q23. Saurabh Agarwal answered that overall, it is not right to compare the total client base of NSE with the orders that are placed on their platform. The client base is driven by investors, while orders are driven by a combination of investor and other categories of products.

• [00:52:39] Ajox Frederick at Sundaram Mutual queried that given improving persistency and visibility, why ANGELONE is sticking with a 45-50% EBITDA margin instead of taking advantage of potentially more profitable products. Dinesh Thakkar MD said ANGELONE is not conservative, but will be conscious about spending and maintaining an operating margin of 45-50%, while still investing in new technologies and acquiring customers for its cohorts.

• [00:54:49] Ajox Frederick at Sundaram Mutual asked about the ESOP costs going forward. Dinesh Thakkar MD said the company has allotted PSUs for achieving stretch targets this year, in addition to the normal ESOP and RSU allotment of INR25 crores.

• [00:58:13] Anand Bhavnani of White Oak asked about the market share targets in terms of ADTO business for FY24. Dinesh Thakkar MD replied ANGELONE would be spending to gain more market share. Already, it’s done in every concerned quarter. Therefore, the focus would be increasing market share.

• [01:00:05] Deepak Sonawane of Haitong Securities asked if there any agencies the company pays commission or fees for getting clients active. Vineet Agrawal CFO replied that the fees and commission expenses only cover the revenue sharing with sub-brokers and authorized persons.

• [01:04:22] Aejas Lakhani from Unifi Capital asked how the company expect the behavior of customers who have not seen market cycles to be different from those in the pre-digital era. Dinesh Thakkar MD said empirical data covers events like the dotcom and global financial crises, and when looking at customer behavior over five years and beyond, it shows a consistent customer base that does not drop significantly. Digital platforms have improved customer service and retention.