As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Hitul Gutka from Angel One Limited. Thank you, and over to you, Mr. Gutka.
Thank you. Good morning, and welcome, everyone. Thank you for joining us today to discuss Angel One's Q3 FY24 financial and business performance. The recording of today's earnings call and transcript will be uploaded on our website under the Investor Relations section. The financial results, investor presentation, and press release are also available on the website. For today's call, Angel One is represented by Dinesh Thakkar, CMD; Vineet Agrawal, CFO. We also have the senior leadership team of Angel One, along with SGA, our IR consultants. The leadership team will give us a brief overview of the operational and the financial performance of the quarter gone by, followed by a Q&A session. Please note that there may be certain forward-looking statements during the call, which must be viewed in aggregate with the risks that the company faces.
With this brief introduction, I now invite Mr. Dinesh Thakkar for his opening remarks. Thank you.
Thank you, Hitul, and good morning, and wish you all a very successful 2024. Let me begin by giving you all a perspective of how we think about growth, as we strongly believe in the tremendous opportunity at our disposal. Over the last 27+ years, our team has dedicated their efforts to offer clients the most suitable product in a seamless and efficient manner by harnessing power of data and technology. Over time, our organization has also ensured that it constantly evolves with the needs of its client and strives to stay relevant. That has been the core proposition of Angel One. Our goal has been to not just provide services, but also to cultivate a culture of investment. The digital assets we have developed are continuously evolving, enriched with innovative features to ensure an unparalleled investing experience.
It is through such exceptional experience that clients choose to remain engaged with a platform like ours over the long term. We firmly believe in the importance of encouraging long-term investing habits, even if it means that some services are not immediately remunerative. Witnessing the change in today's retail investors, we have consciously and actively building their portfolio through SIP and direct equity investments is incredibly rewarding. It is heartening to see that long-term retail investments through both these channels of direct investment, direct equity and mutual fund, stands about one-third in NSE's free float market capitalization as of September 2023, even as many of them continue with their trading activity in different segments. This gradual shift towards long-term wealth creation is an exciting prospect, defining the longevity of retail investors in India's capital markets.
More individuals are recognizing the potential in these products, driven by the opportunity for sustained growth. It is gratifying to see our efforts contributing to this transformation in India's investing landscape. I'm happy to share that Angel One continues its robust performance in Q3 , FY 2024 as well. Angel One is among the few players to consistently expand its market share across various parameters while operating the business with very strong unit economies. This has been an especially historical quarter for us, as we acquired more than 1 million clients in a month and 2.5 million clients in a quarter for the first time, accounting for nearly a quarter of industry's net client addition. This consistency in acquisition and expanding market share is premised on our superior tech and product development, topped by continuous enhancement focused on priming our customers' experience.
Let me take you through some of the company's key development, after which Vineet will walk you through our financial performance. Broking and Super App. Our clients' needs are central to us. During the quarter, we channelized our effort to make the Super App more productive than them, thus double-clicking on their needs. Since majority of the clients are young and fresh in their investing journey, it is imperative that we focus on process improvements. Right from easing their onboarding experience to offering them unique features, we simplify their investment journey on the app. We integrated the Google Mobile number picker in KYC journey, thus leveraging existing information from clients' Google-linked accounts. This not only eases the data input step for our clients, but also improves the accuracy in capturing their contact details.
We launched a self-serve journey for our clients with the aim to empower them to modify and update their KYC documents through the DIY route... thus reducing the dependency on manual assistance. Moreover, we encourage and help this young client to invest and build their lifetime wealth. We developed and released the stock discovery feature on our Super App. These screeners host a collection of stocks like blue chips, sectoral themes, top gainers, et cetera, thereby improving engagement and encouraging clients to build long-term portfolios. Simultaneously, addressing the need of our experienced clients, we introduced some advanced features like open interest analytics. We also optimized the web trading application with the rollout of TradeOne, an all-in-one solution offering seamless trading experience, which allows our clients to quickly access multiple data points and thus make more focused decisions.
We also upgraded our charts with the introduction of some new free-to-use features for our clients. All this reflects on our commitment to continuously improve our product stack for both the new-to-market and experienced clients. A culmination of this enhancement has led to further improvement in our overall NPS. Another indicator highlighting superiority of our product is that Angel One has consistently ranked among top 10 finance apps on Play Store and App Store, and is in the top five on iPad. We will continue our emphasis on improving experience for all our clients. Over the next few months, we plan to roll out enhancement on our chart, like tick-by-tick data, which will provide clients with the most recent market activity. We also plan to develop an all-encompassing equity portfolio view, aggregating their holdings across different platforms into one unified holding report. MF and lending update.
Our mutual fund offering on Super App has done exceptionally well since its launch. We created simple and user-friendly experience, results of which are clearly visible from the uptake of SIP through our platform. Focusing on easy-to-use journey, we installed pipes, allowing our client to set up SIP mandate through UPI as well. We have also put effort in optimizing the homepage, thus making it easier for users to discover funds. These tweaks led to a significant improvement in conversion. Not just that, we have also made enhancements to the NXT platform, ensuring our channel partners have better visibility and capabilities. Our latest addition, the SIP Health Score, is also well received. Through this, we encourage our client to stay disciplined in their long-term investing journey. Features like this have culminated into better client retention on the app, with around 90% of SIP clients continuing to engage.
I am thrilled with the progress we have made in simplifying the journey of our clients and supporting their investment habits. This has led to an incredible 17-fold year-over-year increase in SIP registration to over 955,000 during the quarter ended December 2023. Our sustained position as India's second-largest player on, for incremental registered SIP is a testament to effectiveness of our Super App strategy and the value it brings to our clients. Our aim is to partner with our client at every important phase of their life. While providing equity and mutual fund is a pivotal part of this commitment, we are broadening the horizon. We are extending our touch points by venturing into distributing credit and fixed income product. During Q3 FY 2024, we dedicated efforts to crafting journey to distribute credit products.
These are currently undergoing beta testing, and we are gearing up to launch this offering in the current quarter. Initially, we will take a measured approach, stepping in cautiously to grasp the nuances of the ecosystem better before we scale up the servicing offering. Our strategy for expanding this service vertical relies on the wealth of data from our extensive client base. We will use this data to develop, develop an informed approach, ensuring that as we expand, our services align with precisely our clients' needs and expectations. This data-driven strategy is key to our gradual yet meaningful expansion. Data science. A testament to success of our data-driven strategy is the sustained growth of our existing business. We are harnessing a vast pool of data and leveraging it to create predictive models using complex algorithms. These models analyze client behavior, thus empowering us to improve our engagement through personalized experience.
Insights from the in-depth analysis play a pivotal role in our decision-making process. Data equips us to swiftly adapt to market shifts, ensuring our strategy remain agile and responsive. Incrementally, our data-driven machine learning algorithms allow us to strengthen our security protocols and protect sensitive information, thus effectively mitigating risks associated with fraud. Content strategy. During the quarter, we sharpened our focus on our content strategy, which forms a bedrock to engage and educate people about various financial products and establishes industry thought leadership. A key tenet here is to leverage social media, communities, and users to promote awareness. Going forward, we'll be rolling out multiple content initiatives aimed towards our target audience for brand recognition, engagement, recall, acquisition, and eventually, activation. We will design well-targeted, authentic, linguistically and culturally accessible content that sparks conversation around wealth, investment, and finance amongst our future clients. Assisted business unit.
Coming to our plans for growing the assisted business, we have very high aspiration here, and strongly believe that we can and will disrupt the existing format of the business. Here, I wish to update that the tenure of NSE AP order served to us on 14 July 2023 has run its course, and we have now commenced onboarding new authorized persons. We will transform the ecosystem and improve a better engagement journey on our NSE platform. Over the next couple of quarters, we will dedicate our efforts to building a strong foundation, and will focus on assembling a specialized team for this vertical. We will have a targeted approach to expand our network of channel partners as we forge newer partnerships and penetrate further in underrepresented geographies.
Here, too, we will leverage our technology prowess as we build intelligence in our system premised on data. Group CISO onboarding. I'm happy to introduce Anuprita Daga as our Group Chief Information and Security Officer. She is distinguished thought leader, with over 25 years of expertise in spearheading security transformation, architecture, defining and driving security strategy, data privacy, risk qualification, and compliance with various global regulatory guidelines. She served as a CISO and data privacy officer at Yes Bank prior to joining Angel One. Anuprita would... will enhance information security, cybersecurity, data privacy framework at Angel One AMC. During the quarter, we progressed building the leadership team for our asset management business. I am happy to share the onboarding of Hemen Bhatia as the CEO of the business.
Hemen brings along with him a wealth of experience, cultivated over 17-year asset management industry, with his last engagement being as head of ETF at Nippon Life India Asset Management. Through his numerous engagements in industry and regulatory committees, Hemen has played a pivotal role in fostering growth of passive fund industry in India. He will lead the strategic direction and growth initiatives for our asset management business. We also onboarded Mehul Dama as the Chief Investment Officer for the business. Mehul comes with an equally strong repertoire, with over 19 years of experience across financial services, of which more than 14 years were in asset management with companies like Nippon Life India Asset Management, Goldman Sachs Asset Management, and Benchmark AMC. Operational performance. I'm delighted to share that we delivered yet another historic performance during Q3 , FY 2024.
For the first time, we acquired over 1 million clients in a month, thus leading to 2.5 million gross acquisition during the quarter. With such a strong acquisition run rate, we now account for nearly quarter of the industry's acquisition. With this, our period-ending client base expanded to over 19 million, accounting for about 14% of India's Demat accounts. Robust client activity led to 8.7% sequential growth in our average daily turnover to 5.8 million, again, our lifetime best. The ADTO generated on our platform continued to be on an uptrend, growing by 21.4% quarter-on-quarter to nearly INR 36 trillion, as we continued to gain market share in overall retail equity turnover by 62 basis points, quarter-on-quarter to 26.8%. At Angel One, our steadfast commitment has always been to foster profitable growth.
While we remain dedicated to the core ethos, we recognize that it is equally imperative to make strategic investment to strengthen the business and stay ahead of the curve. The investments made in Q3, FY 24, demonstrates our proactive approach, whether it is building a team for newer businesses like asset management, expanding our client base, or upgrading our tech and product to continuously prime client experience. We acknowledge that these strategic moves impact our margin in the short term. However, this investment will significantly contribute to our long-term profitable metrics. In nine months of FY 2024, we acquired over 5.9 million clients and reported nearly 937 million orders executed on our platform, both of which are higher than what we did in the entire of the last year.
I hope these insights have given you a flavor of our tech-driven business model and our growth strategy to become a more integrated financial service player. Vineet will now take you through our financial performance, after which we'll be happy to answer your questions.
Thank you, Dinesh bhai. Good morning, and happy 2024 to everyone.... As highlighted by Dinesh bhai, Q3 FY 2024 has been a very strong operational quarter for us, as we achieved our historic best performance yet again, with average daily orders growing by 8.7% sequentially to 5.8 million, taking our aggregate order count higher by 3.5% sequentially to 350 million in Q3, FY 2024. Despite three lower number of trading days in the quarter, Angel One clocked its highest ever quarterly gross total revenue at INR 10.6 billion, aided by a 17% sequential growth in interest income. Gross broking revenue declined marginally by 2.6% quarter on quarter, to INR 7.1 billion, in spite of higher order count.
The composition of orders underwent a shift in Q3 of FY 2024, with cash segment orders growing by nearly 20% to 74 million. In the middle of Q2 of FY 2024, we instituted a change in our tariff structure for the intraday cash segment, where we now charge our clients 0.03% of the value of the order, or INR 20 per order, whichever is lower, as compared to our earlier structure of 0.25% or INR 20 per order, whichever was lower. This change is the dominant reason for the decline in gross broking income for the quarter. Gross broking revenues account for 67% of our total gross revenues.
Within this, FNO continues to drive our gross broking revenue, contributing 84% in Q3 FY2024, while the share of cash and commodity segments remains stable at 11% and 5% respectively. Since majority of our clients are part of our direct business unit, their share in our net broking revenues stood at approximately 76%, whilst the balance 24% was contributed by clients acquired through our assisted business unit. We are witnessing steady buildup of our long-term relationship with our clients. This is evident from the rising share of those clients who have been with us for more than two years. These cohorts accounted for 48% of the net broking revenue in Q3 FY 2024, a significant increase from about 25% in Q3 FY 2022.
Through several efforts, advancements, and incremental product offerings across the super app platform, we are further strengthening the lifetime value proposition of these young clients. During the quarter, we witnessed significant improvement in the cash delivery segment. Higher activity in this segment is an important lever for our clients' funding book, which witnessed a robust growth of 32.1% sequentially, to average at INR 118.6 billion for the quarter. This led to a corresponding growth in the interest we earned from this book. The interest earned on client funding, along with the interest earned on deposits with exchanges, led to a 17.2% sequential growth in our total interest income to INR 2.1 billion, thus accounting for about 20% of the total gross revenues during the quarter.
The ancillary transaction income linked to the turnover, clients do on our platform stood at approximately INR 0.8 billion, accounting for nearly 8% of Q3 FY 2024 total gross revenues. Finance cost was higher by nearly 35% quarter-on-quarter, to INR 356 million in Q3 FY 2024, on account of higher average borrowings for the period, in line with higher client funding book and higher margin requirements with the growth in business.
Of the INR 400 million estimated increase in net finance cost, due to the impact of higher borrowings for substituting the underlying collateral for bank guarantees with borrowed funds towards margins with the Clearing Corporation, pursuant to the SEBI circular, discontinuing any client funds as collateral for bank guarantees, we have incurred about INR 160 million for the period between July to December 2023, and estimate to incur another INR 150 million in the ensuing quarter. This is due to the fact that most of the BGs with collateral as client funds matured by the end of September 2023, and the requirement for incremental borrowings went up after this.
Employee benefit expenses, including cost of granting ESOPs, was at INR 1.4 billion for the quarter, sequentially higher by 6.5%, due to the addition of headcount, primarily in the asset management business, data and analytics, technology, operations functions, and related hiring spends. Other OpEx for the quarter clocked over INR 3.2 billion, being 21.7% higher sequentially, as we achieved our highest ever gross client acquisitions, leading to an increase in related one-time client acquisition and onboarding costs. Operating expenses were also higher on account of higher spends on tech infrastructure, Demat charges in line with growth in business, and a quarterly incremental spend of INR 25 million on CSR.
Flat revenue, coupled with aggressive client acquisition initiatives, led to a decline in our consolidated operating margin to 44% for the quarter, versus 51.3% in Q2 of FY 2024. This margin, however, remains in line with our guided range. This upfront one-time investment in acquiring more clients today, will help us grow the business, grow the business yield going forward, thus reaping the benefits of better operating leverage.... 16.7% increase in depreciation and amortization costs at INR 131 billion in Q3, was on account of commissioning of some of our network infrastructure and other costs of our data centers and disaster recovery sites.
Our consolidated profit after tax from continuing operations was lower by 14.5% quarter-on-quarter, from INR 3 billion to in Q2 of FY 2024 to over INR 2.6 billion in Q3, FY 2024. For Q3, FY 2024, the board has approved distribution of about 40% of post-tax profits as third interim dividend to the shareholders, aggregating to INR 1.07 billion and translating to INR 12.7 per equity share. On nine months, FY 2024 total gross revenues and profit after tax stood at nearly INR 29.2 and 7.9 billion, respectively, representing a growth of 33.4% and 26.1% over the corresponding period last year. Period end, cash and cash equivalents increased to INR 90.6 billion on the back of increase in clients' margins.
Period end, client funding grew to nearly INR 19.7 compared to 11.5 billion as of March 2023. Consolidated net worth of the company grew to INR 27.9 billion. As we continue to operate the business within our desired margin profile, our nine-month FY 2024 annualized return on average equity remains a healthy 42.3%. With this, I conclude the presentation and open the floor for further discussion. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions, may please press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, kindly limit your questions to one or two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. We'll take the first question from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.
Yeah, thank you, sirs, for the opportunity. I have a few questions, but I'll quickly ask a couple of questions. On the, you know, the revenue side, so if you could explain what made you to change the tariff structure in the intraday part, is it competition or is it something else? And why ancillary revenue is down 10%, despite, you know, overall volumes have gone up. And also, if you can discuss a little bit in detail on the expenses side, particularly the customer acquisition cost. So what proportion of that will be part of our, you know, overall other expenses line item, and, you know, whether per customer acquisition costs have increased or is at a similar level to earlier?
And how we expect the payback from these customers, is the payback period remains six months, or any kind of change in the metrics that you are seeing? These are my two, three questions. I have other questions. If time permits, I'll ask them after you guys go.
Yeah, excellent questions. See, on the tariff part, as repeatedly we have told that we are actually market makers, right? We are, we are able to expand markets. So we have to go into kind of a different geographies, different profile of customers, and check what are the offerings which will attract them to onboard in this industry. So time and again, we have been kind of like coming out with lots of, kind of like, tariff structures and all that where we are able to attract new set of customers. But what guides us, what we look at is that, what is the cost of acquisition and what kind of a lifetime value we can derive from this set of customers?
So that is the prime reason that we all the time being first, kind of like, move in this market to acquire new profile of customers. We have to try out different ways to onboard this customer. But what we have seen, once a customer is onboarded, almost lifetime value is justifies cost of acquisition to the tune where we want to maintain our OPM of 50% and above. So we look at that. Second, on ancillary revenue and all that, Vineet to cover it later. Let me just complete on, your, the cost of acquisition and LTV side, although I have covered. So our cost of acquisition has not increased, first of all. As I said, that we go for different, different profiles, and every profile we try to map what is an LTV we achieve.
If you look at all the profiles that we are acquiring customer from open market, our cost to LTV has remained steady, and we still maintain that breakeven of six months. Vineet, if you can just answer on ancillary, revenue and expense side.
Sir, just a follow-up on, on your, response on this first question. Sir, so, you have highlighted on the, lifetime value of the customers and the feedback period. So in terms of, you know, on the margin overall, you have you have mentioned generally that a 45%-50% OPM is your target range, but you have normally delivered better than that.... Now, should we consider that this particular quarter to be a relatively one-off quarter or, where the margins came to the lower end of the range? Or, should we think that now we are going ahead to be more aggressive, and that is why maybe over the next two, three quarters also, our margins would start, coming out at the lower end of the range? If you could give some color on that.
Yeah. Yeah, sure. As I said, our overall metrics, this cost of acquisition to LTV has not changed. But what happens, like, this quarter was full of seasons and all that. So when we take LTV of a customer, it's five years and beyond. So there will be a few quarters where clients are not active, because as you know, Diwali, Christmas, New Year, and all that, activity are bit lower. And plus, this quarter, if you see, we had three less working days. So overall, we don't see any impact on margin. But what will happen? If you get an opportunity to acquire more customer, it's an up-fronting cost. So it will impact, it will show a lower margin for that quarter. But if you extrapolate business model, that whole OPM has not changed. So there'll be few quarters where you get more opportunity to acquire more customer.
You will see that quarter, you may see OPM is less because of up-fronting costs on acquiring customer, onboarding customer, expanding our technology capabilities and all that. So this quarter was more about investing in new set of customers. If you look at our customer base, has grown almost by 16.5%, quarter-on-quarter. That's a huge jump. There is a cost of acquiring a customer, and the revenue is going to come in next five to six years. If I look at the metrics of cost of acquisition and LTV, it is almost, like, similar to what it was previous quarter. So overall, I don't see that this impact on margin, what we are seeing in this quarter, is anything permanent. It is something that we got an opportunity to acquire more customers.
We acquired, we invested on expanding our kind of like technology capabilities and all that. So there is a cost of cloud, there is a cost of onboarding a customer. So overall, I can tell you that our cost of acquisition and LTV hasn't changed, so there is no impact on long-term guidance that we say that we would like to remain in that zone of 45-50. But if you look at our cost acquisition to lifetime value, what slide we show, it appears to be around in the range of 75%-80%. Slowly, you will see that, okay, this will play out once kind of like India reaches a level where there is not a huge kind of an opportunity to grow, but we are more trying to get more wallet share of a customer.
That is where a true reflection of OPM will be visible. But currently, as we are growing, as we see more opportunity to acquire customer, we may see impact in a quarter or two. And then again, if at all opportunity stabilizes, we'll see we're going back to the same OPM. Plus, we are investing in new businesses, so that new businesses will have impact in terms of we have to take upfront costs in the new businesses. But if I talk about broking, we have been maintaining this kind of like cost to LTV, but new business addition that we are doing, incremental investment that we are to do, is not going to impact margin in a big way.
Understood, sir. Very helpful.
Swarnabh, on your question about ancillary income. So, as we mentioned earlier, that there were three less number of trading days in this quarter, and that is linked to the number of trading days. So primary impact of the decline is because of the lesser number of trading days.
Okay, sir, but overall turnover, despite lesser number of trading days, would have increased, right? So this would be kind of the fees that you pay to exchanges linked to the turnover. So that's what I-
Yeah. As we also explained, the order mix has also undergone a bit of a change, where cash delivery orders were higher as compared to the other segments. So it's a mix of number of trading days as well as the change in the order mix.
Sure. Understood, sir. I'll come back in the queue. Thank you so much for the response.
Thank you. We'll take the next question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi. First of all, wish you, everyone, a very happy New Year. And I have a few questions. Firstly, on the pricing, price action, again, you know, is it fair to understand that you want the mix of your brokerage business to slightly increase towards the cash segment? And because you also alluded to the fact that this price cutting, realization cutting would help you grow your margin trade funding book as well. And so is there, is there a change in thought process where you want to kind of increase the share of cash segment volumes? That would be my first question.
Second is, you know, on the cost front, again, while you alluded to there is no change in the cost, would there be any other additional costs that would have gone up sequentially apart from client acquisition costs? Because that reflects in the increase in the overall admin costs. And lastly, on whether, you know, with the RBI regulation changes, what would be your approach on the lending, on the loan distribution business, and whether there is some thought on, you know, how, could you give some insight into as to how would you approach this? What could be the ticket sizes that you would be looking at? Or some information so that we can understand this.
Just one small clarification: Does the SIP, ETF SIP, come into your client acquisition in any form? That would be, that would be my question. Thanks.
Okay. Let us go one by one. One, on this mix up, see, we always said that we want to be having a market share in all the segments. So you are right in terms of when it comes to market share in cash segment, margin trading, everywhere we are looking up to be present in a leadership position. So wherever we find a pocket, like there are clients who want to start their journey by cash segment, we are equally, kind of, like, eager to acquire them and try to nurture them on our platform. As I said, what we have realized, when we take a customer for cash segment, a lifetime value of this customer is almost quite decent in terms of unit-wide economy.
So it surpasses, like, maybe past the consensus, like, best OPM of 50% and around. So yes, when we are looking at the new geographies, we know lots of customers, they don't want to start activity which is very intense, high. They want to start building portfolio, they want to buy cash segment, they want to make a portfolio. So we are very keen to get a market share over there. And that doesn't impact our cost or attrition to LTV metrics. Second, when we come to expenses, yes, this quarter, one cost was because of higher customer acquisition that we did. And plus, we did lots of investment in building technology capabilities. So there were two components which was upfront and which was needed, looking at the higher base that we are serving now.
On this, RBI regulator, regulation and, on SIP, yes, we don't acquire customer, it is just cross-sell. Saurabh would be the right person to answer both these questions. Saurabh?
Good morning, Mr. Jain. I think your question on RBI. Let's take a step back and understand what RBI has done and why. That, I think, the core issue is leverage in the unsecured business across a few cohorts was building up and customers were getting overburdened. Hence, what RBI has done is it has increased the risk weight. By doing that, what happened is cost of funds and hence ROI for a few cohorts will go up. Primarily, we believe that for lending business to go a long way in India, it has to be responsible lending. You can't be overburdening the customer with a lot of leverage. So that is our view on what RBI has done. How does it impact us, right? So one is this is the foundation year for us to build the lending business.
So, as of now, we are in the beta testing stage. Secondly, in terms of our plans in lending, we were never looking to get into small ticket lending, which is where the entire stress has built up. So, direct impact on the business in the year going forward, also looks to be very, very limited. In terms of the ticket size that we are looking to target, it will be north of INR 100,000 on an average. So I think, largely, we don't see any impact on us. In fact, we are quite positive that RBI has come out with this regulation now, when we are in the initial phase of building our business. Having said that, since the industry is very large, there is a lot of demand.
We are sure that the overall industry is poised to grow multifold over the next few years, and we will be a key beneficiary of that growth.
Okay. And just on the SIP thing, I know whether when a customer is acquired and he invests in a SIP or invests in an ETF, which ideally for us will be zero revenues, would that still be counted in the gross client addition? How, how, how does that go?
No, since we only do a cross-sell on the MF SIP part, the client addition happens only when someone completes the KYC for opening a Demat account, right? So someone doing a SIP or not doing a SIP, that does not get counted in your gross client addition.
Okay, okay. Got that. Thank you so much.
Thank you.
Thank you. The next question is from the line of Chintan Sheth from Girik Capital. Please go ahead.
Hi, thank you for the opportunity. Am I audible?
Yeah.
Yes.
Yeah. Thank you. Thank you. So, on the affiliation, affiliated channel partner side, if you can, you know, provide some more color, what's your strategy around, you know, adding new set of adding new channel partners, and whether that affiliated channel can be also leveraged to expand your both the lending side of the business, as well as your AMC side of the business in terms of distribution of the products? Whether there will be an overlap to that? That will be the one. And second, on the margin front, again, sorry to hop on that part. This upfronting, of course, if you can, if you can elaborate on the...
In terms of, you know, if I look at the cost was slightly offset. If the increased cost is understandable, but at the same time, the cut in the tariffs also impacted the margins to slight more than the increased cost. So the understanding would be that this is the last leg of tariff cut which we can see, or there is still you need to optimize it if the market remains in favor of you know in terms of adding more number of clients? That would be the two questions.
... Yeah. On assisted channel, I will ask Nishant to give his view. Let me cover up-fronting cost, which is very important to understand in this kind of business. So what happens when we are acquiring a customer, as I said, that we have to do an up-fronting cost. Like, we don't apportion this cost across the life cycle of the client. So when we are taking a big chunk of cost on a customer when we acquire, we are able to realize only, like, come to a break-even only after six to seven months. So there is a period where actually it takes time for us to break even on this cost, but when we take the cost, it is reported immediately in that quarter.
Right.
So second comes when we are growing our customer base, we need to take care of their growing requirement in terms of technology capabilities, in terms of organizing our products and all that. So lots of current technology cost goes up-front. So when client is acquired, we try to see that our capacities are created for this client, so that they don't face any glitches, any problem that they are creating in the future. So that way, when we are building any platform, there are lots of costs which immediately comes as an up-front cost if we are increasing our base of customers. Okay? Second comes tariff impact. As I said, it is not tariff impact, it is about how do we grow the market?
In India, if you see, like, 65 crore, we are saying, having a PAN account, but they are not taking interest in equity. Where we know that every person needs certain kind of thing, like saving investment, and equity has given an excellent return in terms of CAGR of 13%-14% for 20-30 years. So we need to... Players like us have to really expand this market. So we need to go into an area, understand what tariff would attract them, what certain content will attract them. So there is lots of costs we have to take to attract these new geographies, new profiles. So when we are working on a new tariff plan, what we look at is, is this customer profitable in the future? What would be his trajectory or her trajectory?
If that comes as a trajectory, would be an OPM of 50% around. So we try to modify, change, work on a campaign, work on a marketing around that. So on an aggregate level, you may feel that tariff, we have reduced the tariff. We are reacting to how to acquire and how to get new geographies, new profile in the market. That is how we have grown for all these years. So we will continue our strategy to understand what this customer needs in terms of understanding the content, in terms of journey on our platform, in terms of tariff, which will make this person on board on our platform. So that's the reason, tariff when we tweak on tariff, we look at lifetime value.
If we are convinced that the lifetime value does not change, we'll try to tweak it. That makes attractive for the customer, and that helps us to gain market share. So this is what on-
What is this benchmark, LTV you keep talking about? What is the benchmark, you know, you keep, the range you keep, in terms of is it linked to the, the income of that individual, percentage of that in, income of that individual? Or how should one look at, the LTV for you? What is LTV for you?
Yeah. So we look at every cohort and all that, but what we disclose is the total cohort that we have acquired in FY 2022. So if you look at that cohort, behavior is almost same, like-
Mm-hmm.
When we take a cost, almost LTV appears to be around in the region of 8x. So what we are saying, at that time also, we told that break even on this customer that we acquired is around six months, that trend continues. So when we talk about CAC to LTV, we look at cohort-wise, profile-wise.
Right.
When we disclose to you, it is more of like mix of all cohorts.
Right.
But what we look at, even like customer... So today, we don't go out and acquire customer for SIP, because until now, we are not convinced in terms of CAC to LTV, but we have enough customer base to sell them SIP, sell them mutual fund. So for other cohorts, wherever it becomes profitable, we go out in the market and acquire those customer at a new pricing or work on some content strategy or create some journeys, some referral programs. So for us, for all these cohorts, it is important that we are able to maintain a margin of around 50%. So few cohorts will be doing above that, few cohorts will be doing below that.
Yeah.
But we don't totally go into a cohort where we are not sure that we can make it profitable.
Mm-hmm. Mm-hmm. No, so fair enough. So on the assisted channel?
On assisted channel, Nishant, if you can just...
Sure, sure. Thanks for your question, Chintan. See, growth in assisted business has to be seen in two ways. One, deepening our relationships with our existing clients, which is where, Dinesh had alluded to how we are planning to transform our NXT platform, primarily through which our SBs engage with their end clients.
Mm-hmm.
But adding a layer of cohortization, personalization, and therefore being able to roll out relevant products to relevant users. So that's the first piece of this growth path. The second is with regards to engaging with newer channel partners, the likes of mutual fund distributors, POSPs and DSAs, to be able to unlock growth potential within mutual funds, within lending or within insurance. And the game of this multi-channel play, primarily to expand our footprint and also to deepen our relationship with the existing customer base.
Okay. So, that will be a separate channel than the broking affiliation? Partners, that will be separate, right? For the insurance distribution.
No, our consideration is that both these channels would be at play. Even our existing sub-brokers would be selling mutual funds and insurance products. At the same time, we would have, kind of, new channels getting unlocked as we proceed.
Sure, sure. Okay. Any road near-term tactics in terms of what we are looking at expanding the base of affiliated channel? Or are we also looking at, you know, tweaking our commissioning to the channel partner so that the business they get attracted to enroll with us and expand the engagement with their counterpart, you know, clients at the end? So are we trying to further incentivize them more initially and then grow that business? What will be the strategy there?
The idea is to build business, on back of a solid foundation, which is where leveraging technology plays a key role, and also engaging with quality channel partners to be able to provide a great experience from a customer point of view. These are the two focus points. Commercials and kind of, discounting in any form and fashion is not the primary strategy.
Right. Okay. Got it. I'll, I'll get back into it. Thank you for the answers. Yeah.
Thank you. A reminder to all the participants, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Participants are requested to kindly press star and one to ask questions. We'll take the next question from the line of Abhijeet Sakhare from Kotak Securities. Please go ahead.
Yeah, hi, everyone. Good morning. I had just couple of clarifications. So on slide 11, where you have the vintage-wise revenue break up, can you also share what is the vintage-wise break up of active clients as of now, around five million clients that you have?
Amit or Vineet, would like to take this question?
No, right now, we don't disclose that information, so I don't have that with me right now.
Okay, sure. No problem. And, the disclosures on slide 10 on the cohort of FY 2022, so if you could just give some sense on how the FY 2023 cohort has behaved so far. Are the trends similar to FY 2022 or any deviations?
Yeah, I would ask you to wait for some, maybe a quarter or so. We'll come up with a updated, you know, data point on this. So we've shared it for FY 2022. Once we have the complete data for FY 2023, we'll share it with you.
Okay. All right.
Yeah, Amit, if you want to add this, because why we took 2022, not 2023? Because they haven't completed this three. We are talking about lifetime value, Abhijeet. So it is important that we have data of three years and four years. So these are the closest cohort year, which comes where we can at least show some kind of a, like, trend of a customer. But as I said-
Right.
Breakeven of that time customer and today's customer remains same, six months. Amit, you want to add anything on this?
Right.
So this is, because we went digital around FY 2022, and we want to actually cover the journey of the digital customers, how they have behaved. And, FY 2023 is effectively when they complete, three years, and therefore it was relevant, FY 2022 is the customers who complete three years, and therefore, it's for the time being, it is relevant to look at the three-year LTV, for that set of cohort customers which has completed three years. As we get to the next financial year, we will again update the slide, as Vineet just suggested.
Okay, all right. Thank you so much.
Thank you. The next question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead.
Yeah, thank you for the opportunity. So there was some tariff change in the cash segment. So if we have to compare only for the you know derivative segment, our brokerage income from the derivative segment would have increased quarter-on-quarter, or it was flat, or we lost some volume or market share there and we saw some impact in the brokerage income in our derivatives segment as well?
Hey, Dikshit, this market, you have to see in context of, like, it is the dynamic. So, like, revenue from customer every quarter is not consistent. They react based on, market situation, some events, some news. So this quarter, usually, Q3 is always a kind of, like, very, solid quarter because of, festivals and all that. So comparing one quarter to other quarter in this way may not be a, proper comparison. What we look at the trajectory of a customer who become active-
Yeah.
-and, they remain active for a few quarters.
Yeah. The reason for asking this was because at the exchange level, the number of, you know, the, the number of options trade, contracts traded quarter on quarter was significantly high. So that-
Okay, that way.
Yeah.
Okay. Bhavin, can you take this?
Yes, sir. Dixit, see, basically, this quarter, what we saw is a lot of weekly expiry got spread over the week. Monday, the expiry changed, obviously, Fin Nifty and the Midc ap Nifty got a lot of participation. What has happened is, though we see the number of contracts were traded higher, we have actually seen that the contract per order has increased for a customer.
Okay.
Because premium has reduced when the customer trades, and if it's an expiry date, the premium has actually gone down, so they are able to trade higher number of contracts for the same amount of premium that they want to trade for.
Okay, okay.
This is the reason that we have been seeing, that though the contract numbers have increased at the exchange, but the same has not got translated into orders across exchanges. But, Mr. Dixit, you know, also just to add to this point, that when we look at the overall growth of the market, we usually look at the overall market share. So in case of F&O market share, you know, if we compare it to Q2 to Q3, in Q2, we were at 26.2% market share, and our market share has gone up to 26.9%, which is reflective of the fact how we have grown along and faster than the market itself. That's the way we gauge the overall growth of the segment itself.
So, accounting for these two aspects, so we are looking at a flat thing, but overall market share has gone up, which is also showing how Q3 for the overall industry has been also little subdued in nature.
In this market share, we are referring to the retail market share, because there must be, a lot of pro account volumes also in this. So we see net of that, right?
So, retail market share was in Q2 used to be 26.2% in equity segment. Now we are at a retail market share of 26.9%, so which has sequentially gone up in Q3, as we mentioned.
Okay. One more question, sir. Maybe I missed it in the, in your opening statement. Maybe if you can let us know by when we plan to start our AMC business?
Yeah, sure. Hemen, if you can take this question.
Sure. So, Mr. Dixit, currently, we are in the process of seeking the AMC, the MF license from SEBI, and are doing the needful in terms of setting up the necessary infrastructure, processes, policies. So again, as I said, it's a process. So, we endeavor to get the MF license as soon as possible, once all these formalities are complete, and we'll have to wait for the regulators then to revert for any queries or any questions which they have on the existing setup which we have.
Okay. Okay. Thank you, sir.
Will be very difficult to give a timeline now, but our endeavor is to be on ground as soon as possible.
Okay, great. Thank you. Thank you.
Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead.
Yes, I just wanted to understand, you mentioned about the increased headcount for the asset management, et cetera. So you know, what is... And then it's mentioned in your presentation, page 12, but, you know, it's been put in other expenses, the increased employees. I just wanted to understand how many, how, what is the amount of expense on the employee side and, you know, why it results on that, in the other expenses?
Vineet, you can take this.
Yeah. So, as we mentioned in the operating profit bridge, that the employee cost has increased by about INR 56 million for the CTC cost and about INR 30 million for the ESOP cost. So, we've added about 107 employees overall in the across the group, including the new business, data analytics, technology, product. So, with this, the cost has gone up to by almost INR 90 million, including the ESOP cost.
No, so the other expenses don't include any employee expenses, is that right?
No, the other expenses do not include. All the HR-related costs are part of the employee expenses and ESOP cost.
Okay, the slide shows that. Secondly, was on the tech team, how much, what would be our spend on tech as a per- if you can give any, you know, as a percentage of revenue or as a percentage of PBT?
No, we don't disclose that, any percentage.
Mm-hmm. And the number of people in the tech team, last, was 500. I, I don't recall. What is it now versus last year?
Across technology, product, and digital footprint, we have more than 600 people.
Right. Right. The AMC side, is the hiring over, or we need more hiring to be done for the people side then?
No, my understanding is most of the crucial hiring is over. Maybe a couple of associates may be required.
Right. Mm-hmm. Just lastly on this, you mentioned about this, the cash side, you know, the... I think I got some comments like, you know, you're interested in the market share and all. Is there any increase expected for the, you know, share of cash business and the... I mean, are we targeting anything like that or?
So we have high aspiration in terms of, increasing our market share wherever it is possible. So it'll be difficult to put a number, but, we would like to see that everywhere, like, not just, one segment. All the segments, wherever we become active, we focus on certain market share, and we'd like to see incrementally every quarter, every six months, we get better market share than where we are.
Right. Thank you so much, sir. That's all.
Thank you. The next question is from the line of Nidhesh from Investec. Please go ahead.
Well, thanks for the opportunity. Is there an update on wealth management business that we have been talking about last quarter? And any update on the business model in that, which customer segment we will target, and what will the model of reaching out those customers?
I announced last quarter that we are keen to start wealth management business. But as I said, that would be functional only in first quarter of next financial year. Currently, we are in the process of strategizing and working out the right kind of an approach, where we can use our technology, and where, where we can serve our customers who have this kind of, like, need for this kind of product. It's a bit early to comment right now, because we are in the process of really putting our heads down and working on the right strategy. Maybe by end of next quarter, we'll be able to come out with some clear direction on wealth management piece.
Sure. Secondly, if I look at the derivatives revenue, that has declined 6% QMQ, versus, I think 1% decline in derivatives number of orders. So revenue per order and derivative segment has declined by almost 5%. Any particular reason? Have you changed any pricing there? What has driven that?
No, nothing like that. It may be, like, a number of contracts per order would have increased. Bhavin, do you take this? Or, Devendra.
Yeah. So, again, to mention, I think when you're looking at quarter-over-quarter, Mr. Nishant, there is a factor of three less trading days in this particular quarter. So there is already an impact of 3%-4%, which has impacted by lesser number of trading days. Now, coming to point number two, that now overall F&O market increase, I think Bhavin has mentioned that how, number of contracts per order has gone up, which has resulted into, you know, the number of contract increase not reflecting into order side, because we are pricing model itself. And the third important point remains that when we look at the F&O market, right, we look at our market share, right?
Which has gone up from 26.2% to 26.9%, from Q2 to Q3. Which means that we have gained market share in the retail market share. Obviously, we only participate in retail market share today. So in retail market share, we have increased our share. And at an overall level, if you look at Q3 itself, because of the holiday season, there is obviously a subdued performance. Overall market, you know, behaving in a little subdued way as well. So, that is the-
My question was actually on revenue per order. If you look at F&O revenue divided by number of orders for us, that was around 23 point something last quarter. It has now declined to 22.2, I think, in this quarter. So is there any pricing change in F&O or mix of flat fee has gone up? So what has led to that 5% decline in revenue per order in the F&O segment for us?
So at an overall level, Mr. Nishant, when you look at the overall order size, the flat fee contribution to our overall pie used to be around 85% in the last quarter, which has now increased to almost 89%. Now, that must be reflecting back in terms of the overall revenue per order, because I think the flat fee clients are growing much faster pace in comparison to old customers, which were at a percentage base with us. So that is maybe one of the factors also contributing in terms of the overall reflection of, you know, revenue per order when you look at that you're looking at.
Sure, sure. Also, my last question is on the OpEx. So if I look at admin and other expenses, which have gone up by INR 57 crore this quarter, if you can get us some break-up that what were the main components of this increase? Like, what percentage of this has been contributed from customer acquisition? What is from other components? That would be helpful.
Whatever, we can give detail, Vineet, if you can just assist.
Yeah. So there are three or four main components that have contributed to this growth. One is, of course, the, you know, 3.5 lakh more clients that we acquired during the quarter as compared to the previous quarter. The onboarding cost of those clients, which is again, a one-time upfront cost that we incur. The Demat charges have grown in line with the growth in the cash delivery volume and the income in the depository operations. The tech infra cost, the OpEx part of the tech infra cost. And, there's been an INR 25 million additional contribution to CSR as compared to the previous quarter.
Okay, sure. Thank you, sir. That's it from my side.
Thank you. We'll take the next question from the line of Ashutosh Garud from Ambit Global . Please go ahead.
Hello.
sir, please-
Am I audible?
Yes.
Yeah, yeah, audible.
Please.
Yeah. So just wanted to understand on this tariff effect on the cash segment and the upfronting cost. I mean, what I heard you mentioning about, that you will continue this thing as far as long as you see a scope of acquiring clients. Given the low penetration and given how we are placed from a secular trend perspective, the segments which we operate, this looks like a fairly long-term approach as far as you getting you targeting these kind of customer acquisition and the tariff change. So would it be fair to assume that through FY 2025 as well, we'll see this kind of a margin percentage going ahead on the operating front?
Yeah, Ashutosh, like, as I rightly put, that this seems to be very secular trend, and we don't know where this trend will lead in terms of penetration. How much of population would be ready to really jump and start investing in equity? If that trend continues, we are talking about currently, like, if you look at active customer base, there's hardly 3%-3.5% of population is investing in equity... and similar numbers are for mutual fund. So point is that if that trend continues, it is really kind of like very profitable for us, because it is just one time in a lifetime you get an opportunity to acquire a customer when they are onboarded, then to acquire a customer from competition is always difficult.
So this trend we have seen everywhere in U.K., U.S., where this can come, like, 10,000, when people started attracted towards equity, players who became big, they became really a kind of solid player who were able to work out a good profitable business. It is difficult to say in terms of, upfront cost, up to what level it will continue. But what I am seeing that this seems to be like a trend, which is going to last, up to at least we see a penetration of at least 15%-20% of population coming on our platform and using our industry products. On tariff costs, as I said, that we have to be dynamic because India is very diverse.
There are different, different needs of people, so we have to look at that, what are the requirements and at what price they will be attracted on our platform. As I said, that we are guided by our CAC to LTV, CC and margin of 50% and around. We try to go into a newer pocket and acquire newer customers. That is how Angel has grown since 2020. So all the time, when you acquire a new set of customer, it appears that our ARPU is decreasing. But when you look at our overall margins, it has remained intact. That means few quarters when we become confirmed. Aggressively acquiring customer, there is an upfront cost on technology, on onboarding, on acquiring a customer.
But if you look at unit economics, it is still very effective to continue to see which are the pockets where we can acquire more customer and continue with this trend. We'll be very delighted to see this trend continues for next five to seven years. That means we are looking at a deep penetration of this equity market where we become a leader. So in digital market, what is important is that what different market share we have and how many people are really using our services. In both the metrics, in terms of acquiring a customer, we are market leader. In terms of creating revenue from each customer that we're acquiring, including, like, selling them mutual fund, SIP and all that, we have been getting a good market share.
Overall, this suggests that this business model is strong enough and our platform is very popular among all category of customers. There are a few platforms which are popular with trader category, but in our case, we have seen diversity of customers that we are able to acquire and serve, and create revenue from them is quite immense. That way, I feel if this trend continues, because of diversity, we have a better business model which will sustain for a longer period of time.
One more point, and one more point to it, Ashutosh. One more point to note, though, as we are looking at, you know, grabbing market potential, this is also reflecting in our cash market share. Post the tariff change has happened, you know, our market share used-- in cash market used to be stagnant. In retail, market share used to stagnant around 13.8%. In the first time, you know, after eight quarters, we have seen a strong increase in market share as well, where in Q3, we're looking at a market share of almost 15.1% in cash market as well. So it is in, in, in line with the aspiration of increasing the potential of India and grabbing larger market share, which is reflecting, you know, with, with the strategy going live as well, all from that point of view.
Thanks. Thanks for the elaborate answer. So, just to add, I mean, on the and once you're starting on the AMC front, I would want to believe the LTV which you assume now should go up as we go ahead, because you are adding new verticals from business aspect.
Yeah, Ashutosh, as I repeatedly told that through the time we are successful in the OPM, what we do is we try to spend more on acquiring customers. If we think that, okay, by adding two more products, our LTV has increased, so we'll try to acquire more customers, spend more on acquiring new set of customers. So what is the guiding force for us is that CAC to LTV. And see, if you stop, like, growing, our margin may increase. But what is important for us is that if there's a budget to acquire a new set of customers, explore new profile of customers, we'll go ahead and do it.
Thank you, sir. Thanks a lot for the answer.
Thank you. The next question is from the line of Sanketh Gora from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. Sir, when I see your customer acquisition, it's very visible that the bulk of the customer addition is happening in tier three markets. So your statement, what you made, that LTV to CAC or payback period in six months, is it even true for tier three clients? Or your tier one clients are cross-subsidizing tier three clients and therefore you say it is six months? And because it's not converting into revenues, because you added similar number in Q2, but it's not translating into revenue in Q3. Just wanted to understand that it's cross-subsidization, and we are hoping that it will play out in subsequent years rather than on immediate six months basis so for tier three clients.
Yeah, yeah. First of all, to give the answer would be the kind of like... it require lots of components to be identified and, to be really, we don't disclose all that for every cohort. Even you say tier, tier, tier one, urban and all that, mean tier three also we have, [KRIS, KRNO], 20 below 25, 25, age below 25, above. So what we look at is that bulk of customers that we acquire in that kind of like cohort, what kind of like CAC to LTV is there? As I said, that we are looking at OPM of 50% and above. So different, different tiers will be having that different, different kind of ratio. We don't disclose those kinds of data.
But what I'm trying to say is that even tier two, tier three, and beyond, CAC to LTV is very profitable, and it meets our specification of maintaining, maintaining an OPM of 45%-60%. If you look at our customer base that we are acquiring, most of the customer, 80%-85%, are coming from tier three and beyond.
Yeah.
So if there was an impact of tier three and beyond, it would have been visible by this time. So in three years, if you see, our trend is that we are acquiring maximum customer from tier three and beyond. So clearly, it is visible that those segment of customer are profitable, are contributing to our margins, and that initiative that we took initially, so people were a bit skeptical in terms of our approach of tier three and beyond. But what happened? Because we were first to get a great market share. When I'm saying many organizers were able to acquire the customer from tier three, but we were the ones who were able to make them active, create a good engagement, cancel out programs. And today, we can see that what fruits we have canceled, like, delivered in terms of revenue to...
Revenue from each cohort of customer. So to answer your question, tier three and beyond is also very profitable pocket. So we are very aggressively trying to acquire, trying to work out proper customer marketing for those, area. And we feel that we being market leader in that, it is very easier for us to acquire. We have created journeys for this customer on our app. So when they are onboarded on our app, in terms of content, in terms of messages that we give, pricing also that we have worked out, is very attractive for them. And for us, what is important, if you're able to activate them, if you're able to make this customer active, that is most important, and we have been successful in that.
Got it. But I just wanted to understand, is it as an intuitive assumption, is it safe to assume that payback period is a little longer in tier three compared to... Maybe in long term it will play out, LTV to CAC, but on immediate payback period point of view, tier three clients will take a little longer compared to tier one inductions?
Currently, data does not suggest that. As I said, that depends on what kind of profile we are acquiring.
Got it. Got it. And...
The data is not suggesting that, tier three, cancel like three units higher than urban and all that.
Got it. Got it. And I just wanted to understand in with tier three, which is the channel? Is it the same authorized person which are driving the growth in client acquisition or is it more direct or reference? I just wanted to understand the color, how you are managing to acquire more customers in these geographies.
Sure. So Prabhakar is actually go to officially answer this, but let me tell you that we have two channels. One is associate channel, where customers are acquired through this kind of like, authorized person. But on digital side, Prabhakar will be a better person to answer you this. Prabhakar?
Yeah, hi. Thank you for the question. I mean, if you look at it, we have a strategy which is based on three pillars. You know, first is the channel specific, as , Dinesh Bhai pointed out, that we focus on specific channel and their cost to revenue ratios. So be it organic channel, be it referral channel, be it paid channel or be it a financial influencer, influencer channel.
Yeah.
So we ensure that at a channel level, those profitability are maintained, and we do a pan-India campaign, leveraging various cohorts.
Mm-hmm.
Second approach we take is a signal-based approach. Now, this signal-based approach is unique to us, and this is what, you know, Dinesh Bhai said, we have mastered, you know, since 2020, thanks to very close collaboration between the acquisition revenue team, that, you know, we know which signal to pass on, to acquire customers, which are good revenue yield for us. And we also know, like, you know, what kind of investment we want to do behind those cohort of customers.
Mm-hmm.
The third is, you know, what we call a catchment area. We know for sure that, you know, there are certain places, you know, which are very heavy on trader kind of the cohort, and we ensure that we pay additional cost for additional revenue for those cohorts.
Right.
Why we have been able to successful on it? Because somewhere both our performance marketing, brand, content, you know, work very closely with each other, and we try to go with a full funnel approach. You know, whether it is tier two, tier three, tier four. So both our brand media choices and also in terms of performance marketing, paid channel choices, are in sync with each other.
Got it. But is it safe to assume that out of the total client acquisition, on a marginal basis, the authorized person contribution is coming down and it's more happening in the digital way of acquiring the customer?
Dinesh Bhai, can you take it? Yeah.
Can you just repeat your question?
No, I was just asking-
I think that, okay, that... Yeah. Yeah, please.
My question was that on incremental basis, whether the client acquisition is more happening outside the authorized person, more compared to the authorized person. We just wanted to understand or AP still drives the leading client acquisition for us.
No, see, like, when we are talking about broad basing this market, definitely digital marketing and all that would be a main engine of growth.
Mm-hmm.
Because associate channel looks at quality of customers, okay? So they will acquire only customer where they see a quality. But when we are acquiring digitally, definitely, this will expand and grow faster on digital side. If you look at our market share also on digital side, on flat, brokerage, and all that, is increasing in our overall revenue pack. So to answer your, this question, flatly would be in terms of when we are acquiring new pockets, new geography, this B2C direct, marketing would be having a higher market share and will be growing at a higher rate. And when it comes to associate business, maybe in terms of acquisition, they will be a bit lower than the digital side, but in terms of quality of revenue over there, it's far better, because they are very selective.
... Got it. Perfect, perfect, sir. And...
Just to add to what Dinesh Bhai said, the ratio remains almost same. Of the 100 clients that we acquire in any month or quarter, fourth of those clients come from the assisted business and, two, three-fourths come from the direct channel. So that ratio remains more or less same.
Okay, perfect, sir. And last one from my side. Sir, this authorized person-led strategy on MF distribution, I just wanted to understand when it is going to go live, and when we can see that number trickling down to our revenue? And second, we had a freeze on new addition of authorized persons, so I believe six months are over. So have we started adding more authorized person or still we are beating our existing authorized person to grow this channel?
Nishant, you can take this question.
As far as the embargo is concerned, it has been lifted, and we are pretty much open to acquiring more APs in areas where we don't have adequate representation. In areas where we have decent coverage of our APs, we would continue to grow on back of those channel partners. As I also mentioned in one of the earlier responses, that we are also going to be acquiring newer channel partners like mutual fund distributors-
Yes.
POSPs and DSAs in phase two.
Perfect. Sir, on this MF, distributions through authorized person, which was the strategy, when we can expect that numbers to trickle down in our top line and bottom line?
This is a futuristic statement. I'm not sure if I can make it here. But-
Sir, as your asset management is expected to go live in first quarter of FY 2025, then this MF distribution, which we are largely going to soup up.
One second. Sanjay, just to answer you, our MF listing through AP is already live. Now we are talking about scaling it up.
Okay. Okay.
Nishant, they are going to scale up all the division, all that kind of distribution channel, apart from Authorized Person.
Sir, the reason I'm asking this question is that, our distribution income is still INR 10-11 crore, which, which has not changed meaningfully, in the last two to three quarters. So, so, so when we can see this number to go up, given, given we are already live with, MF distribution?
Sanjay, what happens is that, okay, to really, like, start any new division full-fledged, it requires a, like, foundation period.
Mm-hmm.
So currently, I would say for assisted business beyond selling stock broking products and cash market products, and scale it up, requires some kind of a, like, investment in kind of a working out the right strategy and right plan. So I would say you'll see some traction coming from this vertical, maybe first quarter of FY 2025.
Perfect, sir. That answers my question. That's it from my side. Thank you very much.
Thank you.
Thank you.
The next question is from the line of Mayank Bukrediwala from Citadel. Please go ahead.
Hi, sir. Thanks for taking my question. I hope I'm audible.
Yeah.
Yes.
You've already spoken about this, issue, which is, you know, our futures, our FNO ADTO growth has been much higher than the ordering growth. And this has been true for many, many quarters now, but it seems to have accelerated a lot in this particular quarter. I mean, if I just simply look at it, over a two-year period, our FNO orders have increased by almost 2.2, while the FNO ADTO has increased by almost 5.5. So this is a very large gap created over two years. And I'm not sure if this is entirely explained by a decline in, you know, premiums and all of that. So just want to understand what else is driving this.
And this entire splitting of expiries, where we've got an index expiring every day, has not really resulted in a material increase in FNO ordering for us. Do you anticipate that will happen from here onwards?
See, one thing on ADTO and orders, I'll ask Devendra or Bhavin to answer that. On that split of expiry and all that, I can tell you one thing. See, customer has comes with a certain budget, certain wallet. So he can stretch his wallet only to certain amount of contracts and orders. So choice would be, he gets more choice, but that does not mean he's going to trade more. So that is where, like, when a customer get choice, his benefit would be more customers are attracted towards market, thinking there's lots of choice. But individual putting in more money, I don't think that is happening in retail side at least. So what you will see because of this kind of more product available, more people are attracted, and they are getting attracted and onboarding on our industry.
So that is a good thing, that they get variety and they're attracted towards variety. That is what I feel. If you look at expiry, there is no product. When Sensex and Bank Nifty and all that came up with a different, different expiry day, because of wider choices, we are seeing customer base again started growing. So if you look at, growth in this last, December, it was maximum. What is happening is that this market or this industry has to give lots of variety and look at more customers getting onboarded, rather than getting more wallet share from the same customer. On ADTO to order, Devendra, you would like to answer? I think I'm not audible. Bhavin or Devendra can answer this. ADTO to order, what,
I hear you audible.
Yeah. Question was that, okay, why this ADTO has increased 5.5x ?
I mean.
Is it related to strike price and premium?
Your response on the order growth not picking up materially makes sense, which is why it's surprising as to why is the ADTO growth picking up then. Is a lot more, I don't know, is some activities. Does some institutional activity also pass through us or something which is driving this?
No, we don't have institutional, because we just do retail. Bhavin?
Yeah, yeah, sir. First of all, for clarification, that ADTO is based on the notional, notional calculation. So it is, it is not just premium into quantity, but it is strike plus premium into quantity, and that's how, the market share is derived on ADTO. So because the Nifty values have gone up and the Bank Nifty values have gone up, there is a change in ADTO, due to that. And also there would be some factor on, number of contract per orders. So both of this would have made, the ADTO look higher, but, practically, that's the reason, sir.
So that's the general reason, I think, like, ADTO is strike price, but I think with this daily expiry, premium has gone down. So what we are seeing, we may see ADTO has gone up, but what if you look at, premium, come from, like, customer has to pay premium-
Yeah.
So they have to buy any contract.
No, no, that's right. But the difference is huge because, you know, your FNO ADTO growth is about 20% QoQ, while your FNO order is flat QoQ. Now, this 20% cannot be entirely explained by the difference in the premium coming down, is what I think. That, you know, that premium has certainly come down.
We look at our market share has not gone down, and it is not that some other component in detail. What we are talking is about retail ADTO and retail, order per client. So that is the only way we can explain. Beyond that, I think there is no explanation, because in this segment, institution is not included. So what we are seeing is that we track, our market share, and that in the market share, we are seeing we are... Our market share is increasing. So there is no reason for us to believe that somebody else is taking away the market share or business from us.
Yeah. Sir, I'll just take 30 seconds more to reemphasize on this. What has happened is, see, the Niftys have, Nifty values have gone up in this quarter, right? And when we talk about an ADTO, the notional value would depend on the strike price, right? Strike price has gone up. But the premium value, because of the weekly expiries, has gone down. So you might see a rise in ADTO, but it would not translate into the actual premium turnover of the customers. One factor is that. Second factor is very clearly that the number of contracts per order has gone up. So customer is able to trade higher number of contracts with the same premium value that they normally trade with. And that is the two main reasons why you'll see the difference.
Got it. Got it. Thank you so much.
Thank you. Ladies and gentlemen, due to the paucity of time, that was the last question for today. I would now like to hand the conference over to Mr. Dinesh Thakkar for closing comments. Over to you, sir.
Thank you for joining us on the call today. I hope we have been able to answer all your queries. Should you require any assistance, please feel free to get in touch with Hitul Gutka, Head of Investor Relations, or SGA, our IR advisors. Good day.
Thank you, members of the management. Ladies and gentlemen, on behalf of Angel One Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.