The brokerage Industry and Angel Broking IPO

Published on Thursday, September 17, 2020 by Angel Broking Limited

The stockbroking industry - an overview

In recent years, the stockbroking industry in India as a whole has grown by leaps and bounds. The reason for this growth can be attributed to an exponentially increasing investor base. Thanks to the inflow of tech-savvy millennials, brokerage houses are being forced to adopt digital and technologically-driven processes and develop products to cater to these investors.

Of late, the entry of discount brokerages and their unique business model with fixed brokerage charges and razor-thin margins have disrupted the entire market - so much so that even full-service brokerages have made the transition from charging fees based on a specified percentage on the total transaction value to imposing a flat brokerage fee on every buy or sell transaction.

For instance, Angel Broking, one of the country's oldest and leading stockbrokers, introduced the Angel iTrade Prime Plan in the year 2019. Under this model, investors would be charged Rs 0 as the brokerage for equity delivery trades and Rs 20 for every buy or sell transaction on all other segments such as intraday, derivatives, commodities, and currencies. Such a shift to a simple pricing plan has directly contributed towards an increase in the company's active user base. Angel Broking is currently India's fourth-largest retail broking house in terms of the number of active clients in NSE and commands a market share of around 6.3% as of June 2020.

New pricing plans that act as a win-win for brokers and clients

Such a major change in the pricing plan would have no doubt made a dent in the revenue-generating capacity of such brokerage houses. However, contrary to popular opinion, the Rs 0 brokerage fee charged by such brokerage houses on equity delivery would not cause any noteworthy drop in their revenue. The slide in revenue has been more than adequately compensated for by the increased user base and participation. The daily average turnovers and the number of trades being executed have gone up significantly. This has led to an increase in the revenue being generated by brokerage houses and has lifted their profits. 

This is also because,among the total annual trading volume on the exchanges, the cash segment (equities) accounts for only around 3 percent. Around 88 to 92 percent of the total trading volume comes from derivatives such as futures and options, where the brokerages charge Rs 20 per trade.

Increased digital participation to rope in more investors

With an increase in the penetration of smartphones and the internet, more retail investors are gearing up to hit the stock market's shores shortly, which would lead to a further increase in investor participation. This would undoubtedly drive the revenue and profitability of brokerage houses even further. 

Considering these facts, it is quite clear that the securities and stockbroking industry is performing well. In addition to that, the industry as a whole is a profitable one, with a high future potential for further growth.

Leveraging this positive scenario, Angel Broking, one of the country's oldest and leading stockbrokers, is planning to introduce an Initial Public Offering (IPO). The company has already filed a Draft Red Herring Prospectus (DRHP) with the SEBI in this regard. Here are some of the details of the Angel Broking IPO as per the DRHP filed by the company.

Angel Broking IPO Details

Reasons to invest in the upcoming Angel Broking IPO

Here's a preview of some of the reasons why you, as an investor, should invest in the upcoming Angel Broking IPO.

• Over 2 decades of experience in the stockbroking industry
• Fourth largest retail brokerage house in India in terms of active clients in the NSE
• Second largest retail brokerage house in India in terms of the number of incremental active clients in the NSE in Q1 FY21
• Extensive network for customer outreach covering around 96.87% of the country
• Impressive CAGR of 59.54% in terms of gross client additions during the period starting from FY18 to FY20
• Diversified range of services and products on offer including ancillary financial services such as stock research, investment advisory, investor education, margin trading facility, loans against shares, and distribution of third-party financial products
• Average monthly client addition of around 115,565 clients in Q1 FY21 alone
• Growth in the average daily turnover by around 144.47% to Rs 618,945 million in Q1 FY21
• Strong customer acquisition process with an increased focus on digital means
• High future growth potential

Sources

• Economictimes
• TheHinduBusinessLine
• FinancialExpress