Angel One Limited – Equity Research Report

1. Q3 FY2025 Results & Recent Highlights

Revenue & Earnings Impact:

• Q3 witnessed a regulatory-induced revenue hit – management estimates an 18% combined impact (13–14% from true-to-label pricing changes plus an additional 3–4% from adjustments in expiry groupings).
• Reported consolidated profit after tax from continuing operations declined by approximately 33.5% sequentially (with a 16.8% drop when adjusted for ancillary income).

Key Operational Metrics:

• Total Client Base increased to 29.5 million (up 7.4% QoQ).
• NSE Active Client Base reached 7.8 million (up 5.5% QoQ).
• Order volumes declined by 13.8% QoQ, reflecting softer trading activity amid regulatory changes.
• Despite short-term headwinds, customer acquisition remains robust with quarterly growth rates around 40–45%.

Financial Performance:

• Q3 gross revenues were slightly lower due to reduced ancillary income and market-driven softer volumes.
• Broking revenue, which contributes about 65% of total income, was down by roughly 12.5% sequentially. • Adjustments in charges (for example, on non-cash collateral) helped partly offset the regulatory impact.

---

2. Future Growth Plans & Strategic Expansions

Digital & Product Innovation:

• Continued rollout of the Super App platform aimed at creating a holistic financial ecosystem—integrating equity broking, mutual fund distribution, insurance, credit products, and wealth management. • Recent launches include the beta insurance journey, the mutual fund platform (with regulatory approvals secured), and the introduction of the ‘Ionic Wealth’ brand to capture the growing wealth management opportunity.

Expanding Revenue Streams:

• Diversification into asset management and credit distribution (with cumulative personal loans disbursed around ₹600 crores so far) reinforces its long-term play. • The company is strengthening its distribution network, especially in Tier 2 and Tier 3 markets, where 88% of new clients originate.

Technology & Analytics Investment:

• Significant CAPEX is being directed toward enhancing its tech stack, personalization algorithms, and data analytics capabilities. • This investment is expected to lower client acquisition costs over time while increasing lifetime value (LTV).

---

3. Financial Projections & Long-Term Returns

Short-to-Medium Term (Next 5 Years):

• Normalization of client behavior and regulatory impacts are expected to reverse the temporary revenue headwinds. • With robust digital adoption and deeper product integration, revenue growth could stabilize in the mid-to-high double digits. • Margin improvements are anticipated as the company leverages economies of scale across its digital model.

Long-Term Outlook (10–20 Years):

• As India’s capital markets mature, Angel One’s expansion into comprehensive financial services positions it well for substantial growth. • With current valuation metrics—trading at a P/E of 15.6, ROE at 43.3%, and ROCE at 38.7%—the company appears attractively priced relative to its earnings power. • Long-term projections assume continued market penetration, higher AUM from the wealth management segment, and potential reinvestment returns that could deliver attractive total shareholder returns over 15 to 20 years.

Valuation & Credit Ratings:

• The stock’s valuation appears fair on a P/E basis, especially given its strong profitability ratios and market position. • No significant changes in credit agency ratings were disclosed during the conference call, implying stable credit metrics in the near term.

---

4. Key Metrics Snapshot

Market Cap: ₹20,929 Cr.

Current Price: ₹2,318

P/E Ratio: 15.6

Book Value: ₹585

Dividend Yield: 1.49%

ROCE / ROE: 38.7% / 43.3%

Debt / Reserves: ₹3,135 Cr. / ₹5,188 Cr.

Sales & Profit Growth (3-Year): ~49.1% and ~55.5% respectively

Promoter Holding: 35.6%

---

5. Investment Thesis & Risks

Investment Case:

• Resilient Business Model: Angel One’s diversified revenue streams—from equity broking to emerging wealth and asset management—offer long-term upside potential. • Digital Edge & Client Growth: Aggressive digital initiatives and a growing client base (particularly in underpenetrated markets) provide a strong competitive moat. • Attractive Valuation: With high profitability ratios and moderate valuation multiples, the stock is positioned well relative to its growth prospects.

Key Risks:

• Regulatory Headwinds: Ongoing regulatory changes may continue to exert short-term pressure on revenues. • Market Volatility: Fluctuations in trading volumes and investor sentiment can impact broking income. • Execution Risks: Successful integration of new business segments (wealth and asset management) remains critical to achieving long-term projections.

---

6. Conclusion & Disclaimer

Angel One Limited is navigating a short-term revenue impact due to regulatory changes but remains fundamentally strong with a robust client base, diversified product offerings, and significant investments in technology and analytics. Its expansion into wealth management and credit distribution is expected to drive long-term growth, potentially offering attractive returns over the next 5, 10, 15, and 20 years. Valuation metrics such as a P/E of 15.6 and high ROE/ROCE underscore its earnings efficiency and market position.

Disclaimer: This report is provided for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consider their risk tolerance before making any investment decisions.

---