Angel Broking IPO - Angel or Devil for Dalal Street!
India’s brokerage industry caught everybody’s attention when reports came that approximately 38 million new Demat and trading accounts were opened during the lockdown period as “work from home” became the new culture of India’s corporate sector.
Angel Broking is India’s one of the leading providers of brokerage and advisory services and its IPO has created much hype after the successful launch of Happiest Minds IPO and Route Mobile’s IPO this week.
In this article, we shall examine whether investors should subscribe to Angel Broking IPO or not. But before we begin I would like to request you to subscribe to our website WODS Official so that you can get instant notifications of all latest updates in the stock market
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So, let’s begin!!!
WHAT WE HAVE COVERED IN THIS EXTENSIVE ARTICLE
- Angel Broking IPO: Overview
- Angel Broking IPO Date
- Angel Broking IPO Issue Size
- Angel Broking IPO Price Band
- Angel Broking - Company Analysis
- Angel Broking - Financial Analysis
- Angel Broking - SWOT Analysis
- Angel Broking - Competition Analysis
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Angel Broking IPO: Overview
The under-penetration of equity market investments and lower than average financial literacy ratio are the key advantages that Indian broking and advisory industry has always enjoyed. However, the ongoing pandemic has changed that penetration process completely, as visible by a surge in a number of Demat accounts opened since work-from-home (WFH) culture took off from March.
Many traditional brokerages including Motilal Oswal, Sharekhan, ICICI Securities, etc. have floated discount broking models and invested heavily in digital technology to take advantage of the ongoing trend. Angel Broking’s forthcoming IPO is a follow-on of this industry-wide digitisation.
Angel Broking filed for the draft prospectus of its IPO in the first half of 2018.
Let’s see whether Angel Broking’s fundamentals are strong enough to offer value for its shareholders or not.
Angel Broking IPO Date
Angel Broking will open its maiden initial public issue for subscription on 22nd September 2020. The offer for sale will close on 24th September 2020. The shares will be listed on both BSE and NSE.
Angel Broking IPO Issue Size
Angel Broking will raise Rs. 600 crore from its initial public offering.
Fresh issue - Rs. 300 crore
Offer for sale - Rs. 300 crore - Promoters Ashok D Thakkar and Sunita A Magnani will sell shares worth Rs. 18.33 crore and Rs 4.5 crore. Investor IFC will sell shares worth Rs. 157.16 in the offer for sale.
Angel Broking IPO Lot Size
Minimum lot size 49 equity shares and in multiples of 49 equity shares thereafter.
Angel Broking IPO Price Band
The book runners and merchant bankers have fixed the price Angel Broking IPO apply price band in the range of Rs. 305 to 306 equity per share.
The Angel Broking IPO will be the eight IPO this year after SBI Cards and Payment Services. The previous IPO’s to hit the Dalal Street were Rossari Biotech, Mindspace Business Parks REIT, Happiest Minds Technologies, Route Mobile, CAMS and Chemcon Speciality Chemicals.
The last big IPO from the broking space was that of ICICI Securities which didn’t receive much attention from investors.
Angel Broking IPO Allotment Status.
Investors who would subscribe for Angel Broking IPO can check their subscription status on www.linkintime.co.in the online portal of Link Intime India Private Limited, the registrar of the IPO.
Angel Broking IPO Bookrunners and Underwriters
ICICI Securities Ltd, Edelweiss Financial Services Ltd and SBI Capital Markets Ltd.
Angel Broking Listed Competitors
ICICI Securities Ltd., Geojit Financial Services, IIFL Securities, Motilal Oswal Financial Services and JM Financial.
Angel Broking Main Competitors
Sharekhan, ICICI Securities, Geojit Financial Services, IIFL Securities, Motilal Oswal Financial Services and JM Financial, Zerodha and RKSV Securities.
Also read - Zomato Valuation - Should investors taste Zomato’s mega IPO.
Angel Broking - Company Analysis
About Company
Angel Broking is a SEBI registered provider of online trading, broking and advisory services. It is one of the largest full-service retail broking house in India in terms of active clients on NSE as of June 30, 2020.
Angel Broking Limited (formerly known as Angel Broking Private Limited) is a registered member of the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Metropolitan Stock Exchange of India (MSEI), NCDEX & MCX.
Services
It is a technology-led financial services company.
Angel Broking provides broking and advisory services, margin funding, loans against shares (through one of its Subsidiary, Angel Fincap Private Limited), and financial products distribution to its clients under the brand "Angel Broking".
Its broking services are offered through (i) online and digital platforms and (ii) Extensive network of more than 11,000 Authorised Agents, as of June 30, 2020.
As of June 30, 2020, Angel Broking managed Rs. 1,32,540 million in client assets and over 2.15 million active broking accounts.
Company Management and Directors
Dinesh D. Thakkar - Chairman & Managing Director
Vinay Agrawal - Director and Chief Executive Officer
Uday Sankar Roy - Independent Director
Kamalji Sahay - Independent Director
Anisha Motwani - Independent Director
Management Analysis and Commentary on Angel Broking IPO DRHP
Angel Broking Chairman and Managing Director Dinesh Thakkar said that the IPO took a while as the company was waiting for regulatory clearance and later shifted its business model from offline and physical locations into a more technology-oriented digital one.
“We have changed from physical (model) to the digital model in FY20. We wanted that model to shape up. The market will appreciate it better if it understands the result of the digital model” - Chairman and Managing Director Dinesh Thakkar, Angel Broking
Thakkar stated that the brokerage house on an average acquired 46,000 new clients per month and in the first quarter of FY21, it acquired 3,50,000 new customers.
The COVID-19-induced lockdown prompted many first-time investors to try their fortune into the stock markets for earning some quick bucks.
Angel Broking - Financial Analysis and Valuation
Angel Broking posted a 3.6% decline in its annual revenues. Revenue declined to Rs. 710.5 crore in FY 2020 compared to the previous year.
On a Q-O-Q basis, its revenue for Q1 FY2021 stood at Rs. 236.1 crore.
Net Profit for the period increased by approximately 13% to Rs. 86.6 crore. Profit for Q1 FY 2021 stood at Rs. 38.32 crore
In FY 2020, the company reported an EBITDA of Rs. 154 crores with an EBITDA margin of 22%, due to growth in Average Daily Turnover Ratio (ADTO) led by flat brokerage rates and a decline in operating expenses from digitization.
Segment-wise Revenue
The company earned 69.54% of its total revenue from brokerage business while revenue from lending activities, depository operations, brokerage fees, portfolio management services and other activities contributed to 30.46% of its revenue.
Angel Broking share price is available at 29 times their FY20 EPS on a post-dilution basis and 16 times annualised June quarter earnings. Also, Angel share price is relatively overvalued compared to its peers.
P/E stands at Rs. 25.4 which is overvalued when compared to the industry average. The Angel Broking share price target should have been below 250 in order to provide a good entry point.
KEY STRENGTHS - ANGEL BROKING
- Angel Broking is the fourth-largest brokerage house in India after Zerodha, ICICI Securities and RKSV Securities India on the basis of active clients.
- The number of operational accounts increased from 10.6 lakh in Mar 2018 to 21.5 lakhs in June 2020 growing at an annual rate of 10% per annum. This led to an increase in its market share from 4% to 13%.
- Angel has spent a substantial amount of money on digitization and technology. It acquires 85% of its clients digitally through online advertisements and digital campaigning.
- The company’s digital innovation allows it to operate efficiently by minimizing total operating expenses. Its 2500 employees manages over 21 lakh customers
- Angel added more than 1,15000 clients in FY 2020, which implies that it added nearly 45000 clients per month in FY 2020
KEY CHALLENGES - ANGEL BROKING
Tough Competition from Zerodha, Upstox and Discount Brokers
The entry of new discount broking players such as Zerodha and Upstox changed the entire landscape of the brokerage industry by introducing competitive pricing models which crimped already narrow margins of full-service brokerage firms.
Disappointing Industry Trend
Historical data analysis shows that most stocks of broking firms or those that offer broking services have not performed well and has failed to deliver consistent returns on the stock markets in the last few years.
Shares of Edelweiss Financial Services have lost 76 per cent of its value over the last 3 years and 36 per cent in the last one year.
Emkay Global’s share price dropped 81 per cent in the last three years and 2 per cent in the last one year.
Shares of Motilal Oswal Financial Services have plunged 48 per cent over the last three years, and have delivered 14.8 per cent return in last one year.
ICICI Securities, which was listed in April 2018, had a disappointing stock market debut, as it listed in debut price which was 10% lower than its issue price.
ICICI Securities had to cut the IPO size to around Rs 3,520 crore from an earlier target of Rs 4,017 crore due to low subscription.
However, the stock has picked up speed in the last one year and has delivered 106 per cent returns over last one year. But it still trades below issue price.
CONCLUSION - ALL IPO’s ARE NOT WELL
WODS would not recommend its subscribers to jump for Angel Broking’s IPO. Historically, it can be seen that Dalal Street doesn’t cheer for stock broking IPO’s as the listing of its more fundamentally strong peers have miserably failed.
Also, Angel Broking IPO comes at a time when investors have already spent huge money on three IPO’s which has shown strong listing performance. WODS believes that although Angel broking IPO will sail off but is not an attractive company fundamentally.
The initial response to Angel Broking’s IPO price band has been fair, with unlisted shares showing a Rs 55-75 premium in the grey market – the unofficial market for trading in unlisted shares.
Brokerages felt the price band was around Rs 25-30 higher than what the grey market was expecting.
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