Angel Broking Company Analysis

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In the last Fiscal Year (FY21), the number of demat accounts opened in India was a staggering 10.7 million. To give perspective, the numbers were 4.7 million (FY20) and around 4 million (FY19 and FY18).

People had a lot of time to spend during the lockdown and most of them were looking for additional sources of income and thus, investing in the market matched both of these reasons.

Founded in 1996, Angel Broking Limited is one of the oldest stockbroking houses in the country. It went for an Initial Public Offering (IPO) in the year 2020 amidst the rising interest of investing in stock market amongst the people of India.

Even though the IPO opened at around a 10% discount (₹275 against the issue price of ₹306), it increased by almost 150% over the past 1 month to reach ₹808 (as of Friday, 4th June).

About The Company

Angel Broking is one of the largest independent full-service retail broking houses which provides a platform as well as research data for the online retail investors.

As of June 2020, they have a strong market presence with a market share of 6.3% and around 2 million brokerage accounts. From Q1 FY20 to Q1 FY21, the daily turnover has increased from ₹25.31 crore to ₹61.89 crores.

With a single trading account, people have access to trading in Equity, Derivatives, Commodities and Currency Markets along with the provision for also investing in IPOs, Mutual Funds and Insurance schemes.

The trading account can be accessed through the desktop application, web browser as well as the Mobile Application of Angel Broking.

Apart from this, Angel also provides a plethora of other services as well such as Investment advisory (Fundamental and Technical Research), IPO updates, Margin Account, Investment in Gold and the Debt market (Corporate bonds, NCDs, etc).

Figure 1: Homepage of Angel Broking (Angel Broking)

Let us look at some of these services:

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i. Angel Broking Trade – Browser based trading platform where you can track your portfolio of mutual funds, equities, IPO and many other assets. Besides, it provides updated market information which can be used by investors to make sound decisions

ii. Angel Speed Pro/Angel Broking App – These are the desktop based application and the mobile app respectively. Like the web browser, it offers real time updates, integrated news reports, an ease of trading, personalized advisory and many others.

iii. Angel Broking ARQ Prime – This is a rule-based investment engine which minimizes the risks and claims to have a track record(108%) of beating BSE 100 (62%) during the last year. It provides real life notifications through SMS by scanning through all types of stocks – Momentum Stocks, Growth Stocks, Value Stocks, etc.

Figure 2: How ARQ Works (ARQ)

4. Fundamental/Technical/Content Research – One can find top picks of the day, company reports of more than 150+ companies and IPO analysis to help the people choose value stocks. Further, a section also provides daily reports which consists the technical analysis of the market (by charts and various indicators).

5. Smart Money – This is a platform created by Angel Broking with the objective of it acting as a guide to the financial markets. Through a series of engaging lessons in different formats such as podcasts, quizzes and infographics, it avoids the jargons and simplifies the stock markets for the users. There are certified modules on topics such as Fundamental Analysis, Portfolio Management, Technical Analysis, Currency and Commodities and many others.

Figure 3: Smart Money (Smart Money)

6. Smart Buzz – It is place where you can find all the news relating to the market at once – for FREE. One can keep a track on the stocks they wish to, know about the performance reports of all the companies and get short and crisp information. It is also available in multiple languages.

Figure 4: Smart Buzz (Smart Buzz)

Financials

There is a lot which we can infer from this above data:

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1. There has been an overall increase in the sales/revenue of the company which in turn reflects in the increase in the Net Profit as well. The 3 year CAGR (Compound Annual Growth Rate) has also increased over the years by a lot and if we look at the 2020 numbers, they might be even higher.

2. i) Looking at the cash flows, we can say that Angel Broking turned positive in operating cash flows since 2 years. This is a sign of a company who has matured and is not in its initial phase. It now has more liquidity which it can use in new ventures or expanding its operations which is a plus point.
ii) The Cash flows from financing activities have become negative over the past few years which shows that the company might have started paying off its debt which is also evident by the decreasing Debt/Equity ratio.
iii) The Net Cash flow has also increased throughout the years which is a consequence of increasing profit as well as reducing the dividends to be paid. This shows the approach of the company to retain more of its cash for further expansion and to improve the services better.

3. Looking at some of the financial ratios, they all are indeed positive. The Return on Equity (RoE) as well as the Return on Assets (RoA) have grown up over the years. The Debt/Equity ratio has decreased which is a good sign for the company as well.

Although the annual report hasn’t been officially out for FY21 for Angel Broking, we can calculate some rough figures from the Quarterly results:

Sales ~ 1249 cr (an increase of 75% YoY)
Net Profit ~ 289 cr (an increase of 236% YoY)

Such figures were expected due to the introduction of new people to the stock market in the lockdown.

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There are a lot of players in this domain and it is very competitive. Companies have to offer very attractive prices and offers to lure more and more people.

However, with more and more financial inclusion especially in rural areas, there is still a lot of scope in this area.

The main competitors of Angel Broking are plenty – Zerodha, Groww, and Upstox which are not listed, and ICICI Securities, MCX India, HDFC Securities, and Motilal Oswal which are publicly listed.

A lot of the above companies mainly focus on the trading/brokerage side and put less focus on the advisory part.

Angel Broking has some edge over this and can put a tough competition to the others in this domain.

With the financials also, it looks good and has a P/E ratio of around 22 as opposed to the Industry P/E ratio of 47.

With many people entering the stock market, there is a big target audience out there.

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