Good morning, ladies and gentlemen, and welcome to Angel One Limited's Q2 FY2023 Earnings Conference Call. 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. 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. I now hand the conference over to Mr. Hitul Gutka. Thank you, and over to you, sir.
Good morning and welcome, everyone. Thank you for joining us today to discuss Angel One's Q2 FY2023 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 is represented by its leadership team. We have with us today Dinesh Thakkar, Chairman and Managing Director , Narayan Gangadhar, CEO, Vineet Agrawal, CFO, Dinesh Radhakrishnan, Chief Product and Technology Officer, Jyotiswarup Raiturkar, Chief Technology Officer, Ankit Rastogi, Chief Product Officer, Prabhakar Tiwari, Chief Growth Officer, Ketan Shah, Chief Strategy Officer, Dr. Pravin Bhatte, Chief Legal and Compliance Officer, Subhash Menon, Chief Human Resources Officer, Bhavin Parekh, Head of Operations, Risk and Surveillance, Devender Kumar, Head of Online Revenue, and 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. As a reminder, I would like to inform you that the company does not provide any operational and financial guidance. 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 Narayan Gangadhar for his opening remarks.
Thank you, Hitul, and good morning, everyone. Q2 FY 2023 has been a strong quarter for India's capital markets, with indices returning 8% and 16% for Nifty and Nifty Midcap respectively, supported by healthy volumes in cash, F&O and commodity segments. This is contrary to negative returns of 4%-21% delivered by some of the developed and developing markets. Global investment climate has been dampened by rising interest rates, rising inflation, geopolitical tensions, the risk of recession, et cetera. During this period, India too raised interest rates to rope- in inflation, which has been higher than the comfort zone of RBI. This may moderate growth prospects of the country. However, the silver lining is that India added another 6 million-plus Demat accounts during the quarter, thus expanding its Demat base to approximately 103 million as of September 2022.
We strongly believe we have a strong long runway ahead of us. This stems from the fact that India's demographic dividend is largely underrepresented by the current investor base. With nearly 435 million unique PAN cardholders as of March 2019, there is enough growth opportunity available. When the headline Demat count is about 103 million, in terms of unique accounts, this may be significantly lower as many investors have multiple Demat accounts, thus indicating a robust growth opportunity for the industry as we progress towards achieving penetration levels akin to other developing or developed markets. Diversification of assets is another growth driver for us and this coupled with rising wallet share across financial products.
The country is already witnessing a fall in the share of physical assets as the current generation better understands the virtues of investing in financial assets. With an average age of just over 28, India has the youngest population across the world. As this cohort grows in their working careers, they will prime to become future wealth holders with a larger deployment in financial assets. We at Angel are clearly building products and are fine-tuning our acumen to service this category of population, especially from tier two, three and beyond cities of India. Since most of these clients will be first-timers, there's a greater responsibility on regulators. Over the last year or so, the regulators have played a phenomenal role in creating a conducive environment for investors and reducing their risk of investing in the capital markets.
We sincerely appreciate their efforts to increase retail participation in equity and the overall financial markets. Such insulated environment encourages more investors to participate in India's growth story, and players like us are using technology to empower these investors to better leverage this opportunity. Our digitally enhanced products enable us to steer ahead of our peers. This is evident from our robust operating performance we have been reporting month-on-month amidst volatility in the market. Our endeavor to bring capital markets to large parts of the society is playing out well as we continue to onboard over 1 million clients per quarter for six consecutive quarters now, with more than 93% coming from tier two, three, and beyond cities. We garnered about 19% share in incremental Demat accounts opened in India during Q2 FY 2023, thus representing almost one out of every five clients onboarding.
Rising share in incremental accounts led to a steady expansion in the overall Demat market share to 11.3% as of September 2022, from 7.5% six quarters back. This demonstrates the superiority of our digital marketing strategies. The robustness of our business model is depicted from the rising turnover market share, which now stands at over 21%. Our clients transacted average of more than INR 12 trillion daily through 230 million cumulative orders in Q2 of FY 2023, which makes this our best quarter ever. September 2022 was our best month in terms of average daily orders and turnover. Our emphasis on deploying advanced analytical capabilities based on data science, machine learning, and AI across acquisition, onboarding, engagement, communication, et cetera, has aided us to consistently grow despite tough market conditions.
Last few quarters have been challenging for the industry due to market volatility. In this background, new to market investors have taken some time to start their investing journey, and this is reflected from the approximately 300 basis points quarter-on-quarter contraction in active client ratio for the industry to 36.4%. At Angel too, we have seen our active ratio decline by approximately 250 basis points quarter-on-quarter. However, what is heartening and a testimony to our client acquisition strategy is that despite this decline in active ratios, we clocked our highest ever ADTO and the number of orders in Q2 FY 2023.
To further extend and benefit from the maturing ecosystem, we rolled out the first phase of our super app on iOS, which is Apple and the web platform to a limited set of clients, which was progressively offered to the entire iOS population. We have become one of the first listed fintech companies at our scale in the country to successfully demonstrate such a large migration to a new app without operating two parallel versions of the app. With the new application, we have a far better capability to iterate quickly, and we have demonstrated an industry-high SLA, service level agreement, of 99.995%. Over the last two months, we constituted a customer council to proactively assess clients' experience and receive feedback from our clients. We are now better positioned than ever to close the loop faster and course-correct wherever required.
There are still some upgrades planned, which will be integrated and rolled out during this current quarter. With the changes incorporated on iOS, we experienced constant decline in client complaints, and we experienced a corresponding increase in Net Promoter Score, NPS, for our journeys by over 40%. This was an important learning for us as we replicated the critical responses onto our Android version as well, and we are now ready to initiate the Android rollout during the quarter. During the quarter, we focused on scaling up our organic traffic and revamped our website with this purpose in mind. The optimized site led to 11% increase in page load speed on mobile. We also got rid of technical debt built over years of extended workflows and layers of cache, which calcified our portfolio feature and made it sluggish.
Hence, it was imperative for us to rewrite the entire code, which now makes the feature nearly seven times more efficient. Customer-requested updates are now faster and easier due to fewer touch points. We deployed fully managed cloud solutions for improved traceability, reliability, and monitoring of our services, which further improved our troubleshooting process. We have also scaled up efficiency on charts, as well as integrated the upgraded version of TradingView library and resolved issues that led to slowness, et cetera. We continue to regularize the core trading services, thus building improvements for better reliability, monitoring, and alerting, and automated deployment of services. A new data center was commissioned as a replacement to our vintage data center. This one has better hardware and networking capabilities. We recently concluded mock testing and validation of the same.
I'm very happy to share that the board of directors have approved distribution of 35% of the quarter's consolidated post-tax profits as the second interim dividend to shareholders. With this, I now request Vineet Agrawal, our CFO, to brief you on the financial performance of our company. Thank you very much. Over to you, Vineet.
Thank you, Narayan. Good morning, everyone. It is heartening to see that despite the tumultuous phase in capital markets globally, India continued its resilient performance, and we reported healthy operating and financial performance quarter-on-quarter. Q2 of FY 2023 continued this trend as we report our best quarterly performance across all key parameters. Our gross revenues grew by 9% sequentially to our historic best of INR 7.5 billion. Gross broking income continues to remain the mainstay revenue driver, at INR 5.2 billion, contributing 70% to our gross revenues. Interest income, which includes interest on our client funding book and interest earned from deposits with exchanges, remains stable at INR 1.2 billion, contributing about 17% to our gross revenues.
Higher volumes on our platform led to approximately 20% sequential increase in our ancillary transaction income to INR 651 million, accounting for about 9% of our gross revenues. Depository income contributed 4% to our gross revenues at INR 270 million. Income from distribution of third-party products declined sequentially due to muted IPO environment and accounted for 1% of our gross revenues. For quarter two FY 2023, gross broking revenues further split as follows. Share of F&O segment increased to 82%, while contribution of cash segment came down marginally to 13%. Share of commodity and currency segments remained flat at 4% and 1% respectively. The average revenue per client, which is calculated on the entire client base at the end of the quarter, stood at INR 430 for the quarter.
This trended lower primarily due to a higher share of the new-to-market clients, which were 88% of our gross acquisitions for the quarter. Based on our experience, these clients initially are low revenue accretive, but stabilize and prime with time. Despite this, we have been able to maintain our growth and profitability metrics. On a cohort basis, we have seen revenue per client mature as they progress into year two and onwards of their wealth creation journey. In contrast to our pre-digital model, where year two revenue per client were significantly lower than year one, the same is now more stable. Since we acquired clients at a robust pace over the last two years, their share in the net broking revenue continued to dominate at 69% in quarter two FY 2023.
Here, I wish to draw your attention to the fact that now some of the older clients are moving to the next aging bucket of two to five years. As a result, we are witnessing an increase in our net broking revenue from this cohort, thus indicating longevity of clients and their corresponding activity levels. Our net broking revenue under the flat-fee plan continued to witness very strong momentum, contributing to a significant 85% of our overall net broking revenue. Share of total net income from our flat-fee clients to the consolidated total net income grew 1.5 times to 85% in quarter two FY 2023 from 58% in quarter two of FY 2021. Since quarter two FY 2023 has full quarter impact of the grants issued in quarter one, ESOP cost appears higher on a sequential basis.
This will normalize going forward as the older grants complete their tenure and corresponding cost will not be reflected. Upfront margin penalty was earlier passed on to the clients. However, based on clarifications received from the regulator, we have now reversed the same and provided the entire amount of INR 166 million pertaining to the period from October 2021 to September 2022 in current quarter. This amount forms part of our other expenses. As discussed in the previous earnings call, we witnessed some softening of cost towards acquiring clients in quarter two of FY 2023. This is likely to normalize further as we progress into future quarters. Our payback metrics continue to remain efficient, with break-even being achieved within two quarters. Our quarter two FY 2023 operating margin came at 52.4%.
Accordingly, we achieved our lifetime best quarterly profit of over INR 2.1 billion. Our consolidated earnings per share stood at INR 25.6 per equity share on quarterly basis. On the balance sheet side, cash and cash equivalent increased to nearly INR 53 billion. Our other financial assets increased to INR 19.4 billion. This increase is largely due to the cash collateral parked with the clearing corporations as a run-up to the quarterly running account settlement in early October 2022. The period-ending client funding book was at INR 16.7 billion. Our borrowings increased to INR 30 billion at the end of the quarter. A large part of this incremental borrowing is temporary in nature, which has already been repaid as we speak.
The borrowings were utilized to partly fund our client funding book, place margins with the exchanges to fulfill the incremental margin and allocation requirements, partly to temporarily fund the running account settlement obligations. Our continued investments in development of the Super App and augmentation of our IT infra, that is data center and DR site, led to an increase in our fixed assets by INR 540 million to INR 2.2 billion as of September 2022. Our net worth increased to over INR 18.9 billion as of September 2022, with our book value per share at INR 226.5. Our annualized average return on equity stood at 45.5%. With this, I conclude the presentation and open the floor for further discussion. Thank you.
Sir, should we open for the Q&A session?
Yes, please.
Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi. Hi team. Congratulations on great set of numbers. Just a few questions from my side. Firstly, Narayan, could you talk about customer acquisition and the way you are thinking about spending on customer acquisition or what channels that you'll use in this new environment that we are coming in. Firstly could you talk on that front as to how do you see either shaping up going ahead? Secondly, would like a deeper explanation on the increase in the from Vineet. If you can, you know, give some more clarity as to what happened.
Vineet, it will be great if you could extend that point and help us understand as to really how the things shaped up, when you know, the payout on the first Friday of the previous week happened. That would be great if you could explain that. Yeah, so that would be the questions that I have right now.
Great. Thank you, Prayesh. You've asked three different questions. Let's go one by one. Yeah?
Mm-hmm.
See, our acquisition strategy, right? Our acquisition strategy has not really changed in the past from the past few quarters. We believe that this is a market that is currently in expansion phase. We believe there is a lot of new entrants coming into the market, and we want to tap them when they are young, and we want to curate them. Very specifically, by young, I mean people who are under the age of 25, who are in their first jobs and who are just getting started with their journeys. This cohort is going to continue to mature over time.
As you see in our financial results already, because the cohorts have matured, our revenue streams and our businesses have stayed pretty robust because as these client groups continue to get better understanding of the markets, better understand the financial ecosystem, better understand the products involved, they tend to trade more, and also they tend to look at the whole, they then look at wealth management in a whole holistic portfolio, you know. Our game plan for acquisition has really not changed. We are focused on acquiring these customers. Yeah. Secondly, as far as how we continue to curate these customers, you know, our strategy has always been, we believe that there is going to be a need for introducing a portfolio of products.
Which is why we are investing very heavily in our Super App. As the Super App gets launched, we are gonna be introducing multiple journeys in the future, so that this same cohorts that we acquire today can continue to nurture and expand their own investment horizons over a longer period of time. Now, you asked another question about borrowing, which I'm gonna defer to Vineet. He can give you, some more data there. Let me just answer one of them, one of your final questions, which is around payout. You know, payout, as you guys know, it's been a major event for the, you know, it was a much anticipated event for the whole industry.
I'm extremely happy to report that we have performed exceptionally well on this front, and we have had pretty much zero to no business loss at all. In fact, if anything, our business numbers have improved post this payout event. Because we used this opportunity to reinforce our technology strength and actually come up with better experiences to allow clients to replenish their platform, to replenish the platform with capital and things like that. I will leave this now to Vineet, who can touch on the borrowing costs and others.
Naren, before Vineet gets in, could you give certain examples as to really what have transpired on that Friday, and so whether you were able to get the money from the clients on the same day or whether you got their money by over the weekend? Because this leads to a loss in float income, right? To, for you guys to a certain extent. Could you give some examples as to what really transpired in this, in those two days?
Sure. See, the payouts happened on 5th, 7th, right? Sorry, on the 7th, as you guys already know, right?
Yes.
We basically swung into action pretty much that same weekend. We hardened our processes. We hardened our product, you know, we hardened our product experiences around the pay-in factor. Because of this hardening and the investment that we made up front, we saw that we had recovered almost 80% of the capital within the first week of full business days. As a result of that, right on the very first day, that is the very first day after the payout, we actually didn't see any loss in our order volume. You know? Of course, we don't share those numbers, but we didn't see pretty much any loss. On the contrary, within two days the order volumes were up. Right?
This essentially is testament to not only our technology progress in handling this transition smoothly, because I'm sure you're aware that there were many other, you know, institutions that struggled with actually this process of payout pain, with downtimes and things like that. Fortunately, we were well prepared. We had approached this very scientifically and accordingly much ahead of time, and we ran a lot of aggressive campaigning also from a product strategy perspective, which really helped us communicate to the client in terms of methods in which we can, in which they can have zero loss to their productivity as we continue to trade. This is really how the whole thing materialized. Now, over to Vineet, who can address the question on borrowings. Yeah, Vineet, over to you.
Yeah. Thank you. So I've already explained in the speech that the incremental borrowings that we see at the period end balance sheet were largely temporary in nature, and these were primarily to use the proceeds to fund the incremental client funding book. The margins that we place with the exchanges towards segregation as well as allocation requirements. Of course, some was used towards the fulfillment of the client payout in the first week of October.
What was the other financial asset jump?
This money that we borrowed, and the FDs that matured over a period of time, we just parked them as cash with the clearing corporations in anticipation of the payout.
Okay.
Most of the FDs were maturing towards the end of the quarter or early in October.
Okay. I take this offline. Yeah. Thanks.
Sure.
Thank you. Before we take the next question, ladies and gentlemen, in order to ensure that the management will be able to answer, address questions from the participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Uday Pai from Investec. Please go ahead.
The line has gone silent. We can't hear anything. Hello?
Mr. Pai, I have unmuted your line. Kindly proceed with your question.
Hello, am I audible?
Yes, please proceed.
Yeah. I wanted to know the impact of the regulation of margin requirement at a client level and not at a company level. What would be the impact of this on the business?
Yeah. See, as far as the, you know, as far as the regulation change is concerned, I'm assuming you're still talking about the payout, correct?
No, no. Margin requirement at a client level.
You're talking about the margin side. Yeah.
Yeah.
Essentially at a client level there is no perceived impact per se, largely because it's a better workflow and a better orientation of client funds to help and protect their ability to trade in 2020. From that perspective, the upfront margin which now we have to pass it back to the client, right? It's anyway something that the regulatory changes which have happened have already been factored. We have already built those features in our products, you know, and our back office systems.
Ultimately all this has actually done is it has introduced a much greater level of transparency around how the costs are managed, both from the regulator, from a broking standpoint, and also it helps the client manage their costs very well. If anything, I think this is a great catalyst to help more people come to the market. With this I will just hand this over to Bhavin, who can maybe add a few more. He's our Head of Operations, so he can add some more perspective here from that side.
Thank you, Narayan. Good morning, everyone. See, pertaining to the segregation and allocation circular that you are referring to, this came into existence in this quarter itself, and we are well ahead of that particular thing. See, anyways, whatever customer assets that we get as funds or securities is parked at the exchange. Anyways, pledge of securities went live almost a year back. So that was actually allocated to that particular customer who is pledging the security. The fund allocation went in this quarter and there is no impact in the business as such because we used to follow the same for a year also.
Just to add what Bhavin said, hi, this is Vineet. So we've been able to place enough and more bank guarantees with the clearing corporations to take care of the, you know, the incremental working capital requirement for margin segregation. In fact, we've not seen any decline in the business. In fact, this can actually be an opportunity for us to actually grow our business with some tweaks. Thank you.
Yeah. Just to add to that, just to close this out, I think we are going to see more push from the regulators, which is actually great for the rest of the industry because what they are trying to minimize is the amount of client funds which is either unutilized or not clearly utilized at their end or with the broker. I believe this is actually a great move on behalf of the, you know, for the rest of the industry. As Vineet said, this will open doors for better innovation on the product side itself.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Pritesh Shah from Congruence Advisers. Please go ahead.
Hello. Sir, my first question would be, our quarterly average revenue per client has been mostly INR 430 and it has been declining since last six quarters also. Can you just quantify on that part? It would be great for me.
I don't understand the question. What do you want me to quantify? It's
Sir, like let'sm
Hello.
From Q2 2021, if we check the quarter, we were earning average revenue of INR 714, and now we are earning average revenue of INR 430.
Okay.
What is actually the declining, like, what's your view on this actually?
Yeah. See, I think this is happening because our industry is maturing. There are more and more people coming to the market. You know, if you look at our business, let's say five years back, this business was. The participants were only few and far between. Most people would not even enter into equity markets about five years ago. It was still considered a niche product. Today, what has happened is the commodity appeal of equity investing has significantly broadened. As Dinesh Thakkar always says, you know, he's our founder, right? So he always makes this point that this is poised to expand over the coming decade. Now, as this expansion happens, as new entrants come to the market, I think it's very natural to see two things go down.
One is obviously the average revenue because you know the ticket size and everything will go down and adjust itself to the average mean of the people we acquire. Second is so will our operating costs. Ultimately we are now starting to offer this product at almost planet scale. Because of this, what's gonna happen is, as a business as a whole, I do think that at some point this trend will materialize, it will normalize at some point, but that point is not today. It will normalize maybe in a few years when things have just started to plateau out a little bit. You know? Like, as in the customer acquisition has started to plateau out a little bit.
At the same time, if you look at the way we are approaching the business, we want to run the business at a healthy operating margin between 45%-50%. That's our stated objective. To that end, we look at our goal is to expand this market and continue to penetrate under-penetrated segments and drive broader retail participation. Long story, you know, if I were to give you a full 360 view on it, yes, I think this trend is here to stay. At the same time, I think with greater volumes coming in, I think the robustness of the business will only continue to get better and better and better with time.
Okay, sir. Thank you so much. My second question would be on employee stock options. Can you just quantify how much expense would be there for FY 2024 and FY 2025?
Vineet , can you take that please?
You were asking how much expenses would be there for FY 2024?
Yes, half of FY 2026. You can quantify for FY 2023, FY 2024, if you can.
With the current grants that have been already done with, the estimated cost for FY 2024 would be about for the incremental grants 47 crores. For FY 2023, it should be in the range of about INR 25-INR 30 crores.
INR 25, 30 crores. Okay. That's it. Thank you so much. Thank you for your time. Thank you, sir.
Thank you. The next question is from the line of Aditya Dixit from Morgan Stanley India Company Private Limited. Please go ahead.
Hi. Many congratulations first of all on an amazing set of numbers. I actually just have one question. As you continue to acquire new customers in tier 2, tier 3 cities, from a top-of-the-funnel perspective, what are you really seeing in terms of behavior? Is that acquisition really happening from a digital sort of channel purely? Is it a mix of two through your sub-broker networks? Or is it predominantly, you know, physical initially and then moving them onto digital?
Thank you, Aditya. Great question. The entire acquisition is digital. There's nothing physical at all, you know? In what we are seeing in tier two, tier three, is the penetration from a digital standpoint is extremely robust. What we are also seeing is that as these clients onboard, their engagement with the product is also very significant. Because in these underdeveloped markets, right? Under-penetrated markets, what we are seeing is that there's a lot of appetite to understand the product, to understand what are the options available, to understand what kind of financial tools are available at their disposal. This is a very ripe customer base for us to harvest, you know?
From our perspective, obviously in terms of terminal value, we really don't see much difference between tier two, tier three or tier one, and that's testament to our strong economic growth the country itself is seeing across, you know. This is a cornerstone of our strategy because we want to continue building our presence and our brand in tier two and tier three and eventually even tier four, five and six markets. We are already strong there, but we need to make it even more stronger, you know.
Thank you so much for that. Can I also ask one more question?
Yeah, yeah. Go ahead.
As you again think about your customer split, irrespective of which tier, do you see more customers coming in from the salaried segments or more coming in from the self-employed segments?
I think a very interesting question. I don't think we have any greater insights than you know, than what's available in the market. I won't be able to tell you what's the actual split in terms of salaried versus non-salaried. We generally look at only a macro-level view from the KYC. Yes, there is some KYC data, but I'm not sure if it is truly representative. If I were to gauge just based on what we are seeing in the KYC, I would say majority of them would be employed, you know. There would be a small percent, maybe 5%, 10%, whatever, who are in the self-employed bucket. This is what we see so far.
Understood. Thank you so much for this. Congratulations again.
Thank you. The next question is from the line of Deepak from Haitong Securities. Please go ahead.
Hello, am I audible?
Yes, Deepak, you're audible.
Yeah. Thank you, sir, for the opportunity. I had two questions, mainly related to our cost of acquisition. Can you give us a breakup of, I mean, your advertisement and business promotion expense that has been sitting in other expenses. Can we have that split number for your marketing cost for the quarter?
See, Deepak, we don't share those numbers. Lastly, as you, I'm sure you appreciate that there's a lot of, that's very sensitive data. Clearly, it's a competitive moat that we don't want to give out. That we don't wanna share. Right? Now, that said, just to give you a broader sense of our cost of acquisition, the core metric that we are after at the top line is we wanna make sure that we run the business always between 45% and 50% OPM. No matter what the operating costs, no matter what the overall situation, our goal will be always to grow the top line and maintain this operating margin going forward.
As far as the financial envelope of computation is concerned, this is the macro level number. Similarly, our turnaround, you know, when we say we're trying to recoup, right? It's still breakeven. It's still at around two quarters, and we have not really changed that or moved that significantly. Within these parameters, our company operates the whole business. What I can tell you is this metric is true across most of the channels that we pursue for acquisition. Okay? That's how we look at our entire business plan and our entire holistic acquisition strategy.
Okay. Fair, sir. My second question is towards the end, sir. How do we account for our marketing costs? I mean, do we defer it over the year? I mean, book it on a quarterly basis or is it on a monthly basis?
The entire customer acquisition cost is expensed out in the month in which the customer is acquired.
Okay. Thank you so much, sir.
Thank you.
Thank you. The next question is from the line of Prachi Korekar from B Capital Partners. Please go ahead.
Hi. Good afternoon, sir. My question is first, you know, related to this chart that was put up.
I'm sorry to interrupt. Miss Prachi, you're not audible. I would request you to use your handset.
Hi. Is this better?
It's better. There's static, but still continue.
My first question is regarding this chart you have on slide 10 of your presentation. Here you're saying that, you know, the share of top five digital brokers in incremental NSE clients this quarter has drastically reduced. It's been in the 70s, and this quarter it's almost come down to 40%. What is the reason for that, this drastic drop that has happened?
Yeah. See, there's a couple of things, right? First is what has happened overall is that the current market conditions are still recovering. It's not fully recovered just yet, right? Already the country has seen its 4th interest rate hike, you know, within this year alone. The repo rate today at the RBI level is 5.9%. Anytime there is a 40-50 basis points hike in the central bank interest rates, naturally there is going to be a muted participation in the market because cost of capital becomes more and more expensive and things like that.
For this reason, there is also another factor at play here, is that every central bank, if you look at what the central bank of the U.K. Is going through, if you look at what the central bank of China, this, for example, are going through, right? Almost in every case, there is a macro theme which is being developed. Because of this, what has happened is overall participation is a little bit subdued than it normally was, you know. I think apart from this, what we don't see any other extraneous conditions that can explain why the situation is what it is, you know.
My question was directed more towards the, you know, share of digital brokers going down so drastically and that of traditional brokers going up. I mean, if you see the data has been, you know, Q2 of 2021, and this is the first time you've seen this trend in almost two years that is.
Yeah. As I was explaining, right? A couple of things, because for many of the other digital brokers that are continuing to play in the market, right? Their acquisition strategies and their strength are directly correlated to the strength of the overall investment climate. Many of these digital brokers, they are also VC-backed. You know, unlike us, we are publicly traded, and we operate with full fiscal transparency and such. In many cases, the numbers have gone down because the VCs have started putting less money into the ecosystem. Yes. This trend is also a combination of what's playing out in the venture world, which you are seeing today in the top five digital brokers.
As you can see, out of the top five, almost everybody is, you know, no there's no bank-based broker in there. It's basically all new age brokers, right? Out of those, you know, three of them are VC funded. As the venture climate has dried out, which is what I was explaining earlier, because of rising interest rates and such, this is not the climate perceived as ripe for further investment, at least from the top five. From our perspective, our game plan and our acquisition play and our strategy hasn't changed. If anything, we continue to increase our investment and our participation to drive this number overall.
Got it. Also, my second question is, you know, if you could just help me bridge the gap. When I look at your average daily turnover, that has been increasing steadily. On the other hand-
Yes.
Your ARPU has been falling on a quarterly basis.
Yes.
Just those two numbers. How should we think about it? You know, increasing average daily turnover and the reducing ARPU.
See, increasing ADT is very clear that our existing customers are participating and they are participating heavily in the markets, you know. They're participating heavily in the sense of they're participating at a expected rate of clicks, which we normally always see in the previous quarters, right? That part is going well. Now, at the same time, the ARPU, as we explained, the ARPU decline is attributed to the fact that as this business becomes a more commodity business, you are gonna start seeing the net ARPU obviously go and normalize to a certain level, right?
As we see that, what we are seeing though is the overall unit economics of the business are still very strong, which is what I was explaining earlier, is that with the falling ARPU, with the growing customer base, with more cohorts getting matured, our terminal value for the business is only gonna continue to get stronger and stronger. In many ways, this business is becoming more like a commodity stock, you know, and this is where we are in the very early days of that. If you look at the trajectory over the next five years, you are essentially seeing the makings of a rapid fire commodity business which is going to grow very substantially and it's in a serious acceleration phase at this point in the industry's journey.
If I can just add, the average revenue per client as we disclose is on the entire base at the end of the quarter. While we are adding clients, month-on-month, the calculation is done for the entire base at the end of the quarter. That way if you see that, the ARPU will show a slightly lower trend because those clients who are coming in, let's say in the last few days or couple of weeks may not be immediately trading. That's one. On the turnover side, the turnover is increasing because the number of orders and the activity levels have increased for those who are trading.
Correct. That's what I was trying to get at. If the activity level is increasing, shouldn't that translate to higher ARPU? That's all I was trying to, you know, get.
Actually the number of orders have increased. If you see the orders, quarter-on-quarter have grown considerably. That shows that the activity levels have increased.
Okay, got it. Does that also mean concentration is increasing, so the top trading clients are trading more? Is that a fair comment to make?
That's whatever is the industry trend that's continuing. I mean, it's not like we have a significantly lower number of clients trading a larger volume. It's whatever is the industry trend that continues for us as well.
To just add to that, right, what we are also seeing is that our, as I said, our client base. Client base is customers who are residual in the system, who have been there for a long time, and their engagement is obviously continuing to get stronger and stronger, which is what explains this is how the numbers can be rationalized and explained, right? Because you are acquiring new guys, you know, let's say 80% or 90% of your customers are new. They are obviously not contributing significant portion of the revenue. But the folks that we have acquired in the past, who we have curated and they continue to remain in the system and their participation, their engagement actually goes up, which is why you are seeing their order volumes at 230 million orders, right?
That explains the macro trend. This is what I was explaining earlier that I expect the ARPU to normalize. It's gonna normalize at some point, and that some point I don't think anybody in the industry can predict when it is, right? Because we are still in rapid fire growth mode, you know.
In fact, one more important thing is to decouple the way we look at the turnover and then compare it with the ARPU because ARPU is now largely driven by flat fee plan, which is driven by the number of orders placed on our platform, executed on our platform. It's very important to see how the number of orders is growing. The turnover in some ways could be misleading because if there is an FNO trade happening then the turnover constitutes the contract value. It's always good to check the number of orders to get a better sense.
Got it.
Yeah.
Thank you so much. Those are my questions. Thanks, Adi.
Thanks.
Bye.
Thank you. The next question is from the line of Gautam Jain from GCJ Financial Advisors LLP. Please go ahead.
Yeah. Good morning, sir.
Good morning.
Yeah. I was just looking at your balance sheet. Couldn't understand it properly. You said some time back what is lying in other assets, that INR 1,939 crore? Vineet, can you take this?
Hello.
Yeah. The other says 1939. What is that?
INR 1939 crores.
Yeah.
That a large part of it, most, almost all of it is the cash that we place with the exchanges in form of margins.
Okay. You report cash and cash equivalent. That is cash within your bank, right?
That would be cash in our bank and the fixed deposit. Equivalent means the you know cash in some other form which is fixed deposits. If you see cash equivalent bank balance put together, which is INR 53 billion, that would be in the form of fixed deposits and cash and other financial assets, INR 1,939 crores. Almost the entire amount is the liquid cash that we place with the clearing corporations because there was a payout event happening in the first week of October.
We increased some cash level. That's right to understand because the borrowing has gone up.
Sorry, come again, please.
We increased cash level at our end just to make sure that we are smooth in terms of payout, right?
Yes, absolutely.
That is the reason why the borrowing has gone up sequentially.
Yeah. Part of that was funded through short-term borrowings.
Okay. Can you help me understand your ESOP cost because it's, you know, volatile. Q1 it was INR 17 crore. This quarter is INR 22 crores. On what basis we understand it would be going forward?
The ESOP cost of INR 17 crore in quarter one, large part of it was the grants were done in towards the third week of April.
Mm-hmm.
Hence in the quarter one, the entire 90 days cost was not there. Now, if you extrapolate that cost, it will come to about 22 odd crores, and that's what we've reported in this quarter. I said about 30 odd crores would be the cost for the next half year of the grants that have already been done.
INR 25 crore each quarter.
Yeah, roughly about that. No, INR 25 crores each quarter, no. INR 30 crores would be the incremental cost for the entire half year, going forward, H2.
Okay. Okay, got it. Sir, if I look at your number of orders, the September month was significantly higher than July and August. Was there any one-off because we were running at 7 crore orders and, you know, suddenly in September month it was 9 crore plus. Just help us understand if there was any one-off or some event because of that the orders have gone up, or we are consistently going above 1.9 cr. I mean, can you just throw some light on that?
Yeah. See, I think the September month, this month was a good month for the market overall. But just to keep things in perspective, had the global political situation not been so tense, naturally this year you would have seen most months operate at this number. Okay? Because if you look at the history of where the market was two years ago and the rate of growth, the growth got muted from its normal rate of growth. It actually got muted because of the geopolitical climate. We see what is happening is at the macro level, India is being one of the few countries. In fact, I would say in developing economies is perhaps the only country which has operated with a very high degree of, you know, of economic resilience and
Mm-hmm.
Very good economy, you know, very good fiscal policies by the Reserve Bank of India, which has helped us kind of deal with these headwinds in a much better manner. This is why capital markets, the impact is not as high as GDP itself. The rate of growth, I don't think anybody can explain to you what is the if there is any one event that has caused it. No. In fact, if you look, the fourth interest rate hike actually went on September thirteenth, right? If you look at the history that the RBI has been doing it, almost all of those have actually protected our country against severe inflationary pressures and severe fiscal pressures.
I think what you're seeing in the market is this is a way of the market to reward and kind of show that trust back in our entire financial ecosystem. That's really the only explanation that at least I have to this. There's no other macro trend which has changed.
It's purely a normal number, right?
There's nothing unique that has happened except that the country has done a good job.
Okay. The final question is, we have provided some, you know, reversal of margin payment which we charge to the client around INR 16-INR 17 crore.
Yes.
That is one-off, right? That is not recurring. I mean, that won't come in Q3, Q4, right?
No, that's not a recurring item. No.
Okay. Thank you so much and all the best for the future.
Thank you very much.
Thank you. The next question is from the line of Sahil Mittal from HDFC Securities. Please go ahead.
Yeah. Hi, good morning, everyone. Sir, congratulations on a great set of numbers. Couple of questions from my side. Firstly on the marketing spends. In FY 2022, the marketing spends were close to about INR 300 crore, which formed about 55% of your admin and OpEx, right? What percentage of your marketing spends are fixed in nature? I mean, if your customer relations go to zero, right, in a hypothetical case, even then, how much would we continue to incur? The second one in regards to this question was about what proportion of our customers are now coming from the organic channels?
Yeah.
That was the question.
Two questions. I'll go one by one. First is, you know, see, we don't on the marketing spend. See, we don't divulge the split or we don't talk really about how we. We don't talk about the makeup of our spend in a public domain. This is where our key competitive intelligence and our strategy is kind of playing out in those numbers. Obviously, for obvious reasons, I cannot tell you why and what and whatnot. Right? Now let's talk about I guess your important question is what is the degree of elasticity in the marketing spend?
The elasticity is almost 100% in the sense that, yes, there is some residual spend which comes quarter, you know, which is there month-over-month, obviously, for example, things like brand. We cannot just turn that down to zero, right? 90% of whatever we spend every month is elastic by nature and by nature it is dependent on market conditions, which is what we continue to monitor and then steward. I wanna have Prabhakar Tiwari, who is our head of marketing and growth. I want him to just add a few things here. Prabhakar, over to you.
Yeah. Hi. Thanks, Narayan. See, we operate in a competitive market, and you know, our venture-backed competition, you know, they are also hungry for growth. We have been keeping on the top-notch in terms of incremental acquisition, and we are going after market share. Of course, our marketing spends will be a higher percentage of our cost. I agree with Narayan that it's 100% elasticity as far as our marketing spends are concerned. There are basic levels of maintenance level of spends which are required, and rest of it directly goes into you know, brand building and getting better and more incremental market share. We have a growth path where we want to be number one. This marketing spends, we are very efficient on that, as Narayan already pointed out.
That's what I wanted to comment on.
Right. Sorry, I respect the confidentiality, but just to get a sense, maybe some flavor around what percentage of your customers are coming from the organic?
I mean, we cannot comment on the, you know, individual makeup numbers, but I can tell you that this has gone up and it's on a higher double-digit number.
As the line of Mr. Mittal has been disconnected, we move on to the next participant. The next question is from the line of Darshit Pandya from Fintrust Capital. Please go ahead.
Hello, sir.
Hello.
Sir, as we have seen, you know, our commodity and F&O segment share going up, but one is that, you know, where do you look at this stuff? The other is the cash segment part, which, you know, we have seen, degrowing or you can say a stable part. Can you throw some light on that? Where do you see it in the next few quarters?
We don't see the mix between these three segments change dramatically within the next two quarters, you know. That's largely because, as we have discussed, our Super App strategy is just going to materialize in this quarter. You know, this quarter, next quarter is a big time for us. We are gonna be launching the Super App. We are gonna launch new journeys. As of this point, there is no product impetus to actually change the composition of F&O to cash or such, you know. I expect this current split to kind of remain the same, you know, or within the same standard deviation. If the standard deviation is 5%, then you can do the math on what it will be. Right? I think it will continue to be within these bounds.
Now, obviously, as we have already communicated, you know, our long-term strategy, however, is to introduce more diverse financial products, which will eventually have an impact on the revenue streams which you are seeing today. Right? Today we are not ready to have that conversation because our very first leg of the journey has not gone live from a product side.
Okay. Sir, one more question. You know, we have around 28% of the you know, population which is on the young side, or we can say a major population coming into the younger side. Do you see the addressable market? You know, I saw the investor presentation, but do you see the numbers going much higher than what is anticipated in the investor presentation part?
That is an excellent question. To be honest, I am 1,000% bullish on this because my personal prediction is that number is only going to explode, right? Because of exactly the reasons that we have been discussing in this call, right? You have a captive customer base who's already digital. The cost of acquisition in the sense their cost of learning is kind of next to zero, and they are already familiar with the instruments available in the market. Now, maybe they are not really, you know, maybe they don't really understand the full scope of those instruments well because they're still learning.
My sense is that, as Prabhakar was saying earlier, right, with tier two, three, and then eventually four, five, and six opening up, my belief is that the numbers will be actually higher, you know. Of course, for when we do the math, we only back test it like normal based on whatever we Our line of sight is only related to the markets that we operate in today, right? We don't really try to extrapolate more than where we know we can, than what we know we can get in and make a difference. Right?
Right. All right, sir. Thank you so much, and, congratulations on the good numbers. Looking forward to see you in the next quarter.
Thank you very much.
Thank you, sir.
Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Hi, Sarvesh.
Hi. Most of my questions have been answered. Just one thing on the expense side, and the flexibility that you now have, maybe because of the launch of Super App, which has already been done. You know, in terms of, you know, the major incremental spends on your OpEx side, you know, how much more flexibility do you see now? Is it that, you know, we should take this as a new norm in terms of the OpEx that we have? Or there are some big chunky items that you foresee in the coming quarters or years?
Sarvesh, we are a company that is growing. Okay? Our goal is not to, we are not a Hindustan Unilever or anything like that. You know, we are not a commodity shop. We are a fast-moving growth company. If you look at the next five years of the company, it is going to be in aggressive investment phase. The metric that we hold ourselves to is really the operating margin. At the end of the day, whether the operating expense goes up or even it goes down or whatever or it stays the same, right? What I am looking at is top line and the OPM.
Within those parameters, if that means on an absolute level, if the revenue continues to go on a tear, and if I'm spending even 2x more, I think from as far as the business is concerned, it still doesn't matter because we are maintaining a absolutely healthy and growable business, right? You know. My focus is really our focus as a company.
Hello.
Getting to the number one position.
Sir, you are not audible. I'm sorry.
Who? I was not audible or.
Sorry. Yes, sir. You were not audible. Could you repeat your last line?
Okay.
Yeah.
I was saying that we are given that we are in this investment phase for the next five years, I see us continuing to build out multiple products, multiple portfolios. To that end, I also see that our operating expenses, our operating expenses will continue to reflect that. At the same time, we are holding ourselves to the 45%-50% OPM, and that's really the overall metric that the business is gonna be. That's the framework in which we are operating the business. The actual absolute number may go up or go down. I don't think that's very relevant, you know.
Sure. That is well understood that if the revenues were to go up on a tear, then you can rapidly expand your OpEx as well. I just wanted to understand that do you have that flexibility on the other side? For example, if you were to see headwinds coming through because of macros or anything.
Mm-hmm.
Do you have that enough flexibility or the levers in your operating structure to also maintain that sort of margin for those risks?
Correct. That's a very good question. I think here the proof is in the pudding, right? We have been sharing our numbers for the last now 6 or 7 quarters. If you go and look through all the quarters, there have been cycles in which the VCs have pumped in a lot of cash. You yourself can see that. Look at last year's number. You see our margin when the VC community was going guns blazing on the acquisition route. We have stayed the course. Today, when the VC funding has dried up, our strategy is still the same. If you look, there is actual. I can answer your question just with last 18 months data that we have already presented to you. Presented in our financials.
Going forward, obviously, from what I see, the only real headwind that we truly are facing at this particular point is if there is some macro event that happens which is completely not within our control. From my perspective, our mission is very clear. We have to get to a number one position in equity and start introducing other wealth management journeys within our Super App. To that end, there is no other extraneous tailwind which I see that is working either against the industry or against the business as a whole. This is at least my two cents on the whole topic. You know.
Understood. There was recent news of the regulator might be considering, you know, ASBA sort of a structure when it comes to the maintenance of excess margin at the client level.
Yeah.
Do you have any comments to offer, you know, if that were to be implemented? You know, of course, in FNO, you know, there is a requirement of a margin and so from your understanding, you know. Of course, I know that this is not yet implemented, but if this were to be implemented, then what can be potential impact on our interest income and other revenue line items?
See, the ASBA thing is an eventuality. Okay? It's going to happen. I feel that it is one of those regulatory changes which is going to increase our market penetration. It is actually gonna help us accelerate it. Because what has happened is that SEBI has created an excellent safety net. They have created a very good safety net, then they have eliminated every margin of error from the broking side. My hats off to them because they have done their job. When this regulation gets imposed and when it comes into pass, we as in our business, we now have to come up with clever and interesting ways from a product perspective to continue to drive that to build on that innovation.
Just the funds payout, we used to do funds payout, you know, now this is the first time it went live, you know, October seventh, we had it, right? We harnessed all our energies, and to our very surprise, the very next Monday, we actually ended up trading more than what we did the previous Monday. Because we channelized that energy from the product side, from the tech side, we introduced better product features, better journeys that lets the client engage continuously on a continuous basis. Now, similarly, with ASBA, yes, there will be some loss to interest income. We have not done any quick math which says how much it is. Maybe Vineet can comment on it. It doesn't look that material, at least as of this point.
By then, I think we will continue to innovate on the product side. We would have had multiple journeys live, so the compensation itself will be very different. Vineet, do you wanna add anything here?
Actually, it's very difficult to, you know, forecast anything. This entire concept is at a very nascent stage. Let us have some clarity around it and the timelines and perhaps then we can do some math and come back with some numbers. Today it's very difficult to quantify anything.
Understood. Thank you and all the best for the coming quarters.
Thank you.
Thank you.
Thank you. The next question is from the line of Anshuman Jain from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. I had a question regarding the Super App launch. As you said, this is going to happen this quarter on the Android app, and one of the metrics which we should see ideally is a you know, improvement in activation ratio. If you could share the outlook on client addition and the activation ratio in FY 23 and FY 24. That is my question.
Yeah. See, what I see is that obviously, the engagement, right? I think your question is mostly around the engagement. What I see is that as the app launches, it generally takes about two quarters for the app to mature, okay? This is true for any application, not just our application. Case in point, if you look at Flipkart's app, if you look at PhonePe right? I mean, every major tech company, there is a baking period for this app. Now, what we are seeing is that in our gestation period, we call it baking period, that we do post-launch, I expect the numbers to continue to remain the same.
I expect no major change on, either the activation journey or anything of that sort, whether it is, 15-day activation or 1-month activation or 1-year activation. I don't expect a lot of movement, largely because customers are getting acclimatized. As the product scales, as in as it gets to 100% rollout and such, I do expect that over time the level of engagement will go up. Now, in absolute terms, I can't quantify it for you, what that would look like because our client base also will continue to accelerate at the same pace. If you were to just, look at a macro level, I think you can expect these robust numbers to continue, you know. Historically, we have done a phenomenal job on the activation side.
We were only at somewhere in the 30%, you know, in the low 30s or even late 20s as early as 1.5 years, 2 years ago. Whereas you look at the number now, I mean, it's substantially higher, right? That's largely because of improvements in product and tech, and that is likely to continue. That trajectory will continue.
Thank you, sir. In terms of, you know, the 100% launch, you know, so all these parameters, the progress that we have, you have been giving periodic updates obviously, which has been very helpful. In FY 2023, by FY 2023, we should have a fully, you know, the full launch of the app, right? The benefits, you know, we should start accruing from FY 2024, on a steady-state basis.
The launch will be done by FY 2023. I think you're spot on about that. What I see is post that we will be starting to launch other journeys, right? I'll have Ankit, who's our Chief Product Officer, just comment on this. Basically, at a macro level, we are obviously building this Super App platform to launch other new journeys. I'll let Ankit just talk about how he's thinking about the long-term roadmap.
Also other new journey, if you could also share that, what are those specific journeys chronology, as such? Yeah. Ankit, if you could just,
Right. As you heard, right, we are pretty clinical in the way we are launching. iOS we have already done. We'll be starting with Android very soon in this quarter. As you mentioned, it'll be done by FY 2023. The way we are looking into this is that the first asset class, while we are robustifying our equities, after that would be mutual funds. We have already informed this, the direct mutual funds and we will closely monitor each of this, right? This is the fundamental definition of a Super App, right, how better we are able to cross-sell, engage across these asset classes, right? This is across trade, pre-trade, all the customer plans. I think one metric which you mentioned in the earnings call.
Which continues to be our obsession is the net promoter score. We closely monitor our feedback. We'll continue doing that. As a result, I think its rollouts will be monitored.
Okay. If I summarize. You know, just one last thing from my side. Basically in FY 2023 we will have a full launch, and in FY 2024 we would have some of the benefits of the launch. In terms of new product, it would be, you know, the MF part which would be activating in a big way in FY 2024.
Correct. That is absolutely correct. Yes.
Thank you.
Thank you.
Thank you. The next question is from the line of Kajal from ICICI Securities Private Limited. Please go ahead. Ms. Kajal, I have unmuted you.
Hello. Hi.
Yeah.
Hi. Congratulations on good set of numbers, sir. Thanks for opportunity.
Thank you.
Couple of things, sir. As I think it was initially also discussed that the activity level has gone up, because you have seen orders going up and also the per ticket size per order has also gone up accordingly because volumes have gone up. The activation rate per se in that way is quite low. Any other specific reason that you have seen why activation is only 2 lakhs versus that 12 lakhs new additions?
Yeah. Let me actually give you first a macro answer, and then I'll have turn it over to Devender, who can give you a little bit more deeper insight into how we are looking at it. At a macro level, our overall activation numbers are still within the healthy range that we have that we are personally targeting. Okay? From that perspective, if you look at the total number of orders. The proof is in the total number of orders. Actually, ultimately that's the proof of the pudding, right? If you look at total number of orders, that's steadily grown. If you look at the engagement, that has also steadily grown. Clearly that is visible in the bottom line numbers.
Now, macro level, obviously because of the current economic climate, there has been a headwind against it. I'll turn it over to Devender now, who can just shed some more light on it and give his perspective on how we are thinking about activation and how do we see this trend changing going forward. Devender, over to you.
Yeah. Hi. Thanks. Thanks, Narayan. Hi, Kajal. Kajal, I think there are two questions. One on the activity level and the second one is on the activation rate. I think if you look at the activation rate in the last quarter at an overall industry level, I think what Narayan has highlighted, again, I will say the same thing, is basically the market conditions have been muted. I know large activation is constituted by the large number of investments and investment opportunities that are existing because of market conditions. We have seen industry-wide, you know, difference and change in the last quarter particularly, which is also reflective with us. The difference can be that the, you know, the whole industry has gone down more steeply.
Whereas, you know, we have been in the positive side, you know, reflective, driven by the positive active clients that we have added in the last quarter, which is around 1.6 lakhs, you know, whereas the industry has actually de-grown. It actually talks about at an overall level what are the market conditions and opportunities looking like and how are the participants participating. We are seeing that we have done better than the industry. That's from the point of view of activation side. I think a lot of activities, you know, that we do is, you know, to teach clients in terms of, you know, what is the right reason for investments. You know, what is the right ways of investments with the right instruments of investments.
Obviously there is a whole industry level which guides, you know, how people will actually be proactive towards taking positions in that. You know, that trading has remained robust. We have found that a lot of people are still engaging at a very, very high level and, you know, the various kind of trading activities, investment activities that we are doing, you know, and the investment that we're bringing in terms of investments are really, really showing high engagement and which we'll continue doing. There are now people who are finding the right opportune time, which as the industry is again I think, I believe as it goes up, will bring back all the people in a much more larger phase. That should now address the same part on the activation side.
On an activity level, as we can understand that why the orders are going up is that the opportunity in terms of, you know, for the trading clients has been very high in the last quarter. You know, opportunities reflecting in the ticket size of a client or let's say the activity level of a client, which is actually, you know, creating a lot of, you know, a large number of orders for us. There are two sides to it, and both are now reflected in the last quarter. You know, we see now very opportune times because, you know, Indian economy has been resilient in these tough times.
This will be reflected more prominently as we go ahead, where more people will find the right reasons to invest in more towards the Indian markets. That's where-
Mm.
We are going to tier two, tier three, tier four markets, which are maturing to these, you know, understanding and taking positions in them.
Yeah.
I hopefully that addresses your question in terms of how activation rate is actually moving.
Thank you, Devender.
Yes. Second one question is on, during the conversation sir answered some terminal value you see no change in your tier two, three or like one clients. Is it in terms of like traded value that you see that tier one client or a tier two, three is saying the same number? Or is it that ARPU provided by these clients is the same across geographies? What is your reading there?
Yeah. See, generally speaking, right, they are all within the same vault.
[Foreign language] . Of course, micro level mein, for example, the tier ones always have a greater concentration of folks that are greater than the age of thirty and who are professionals. If you take GR R2, obviously it will be higher than somebody who is equally placed, you know, who's in a tier three city in the same age group, right? There are differences like that, but those differences are not material enough for me to change our product strategy or our acquisition strategy. They are just simply data points which we, you know, which we see, and we continue to hone in our acquisition play based on them. Macro level, there isn't much difference.
To answer your question very precisely, it's within the same margin of error.
Okay. Then lastly, one question on, since you are one of the highest in F&O space, and even now also in this market, you saw your share rising. Did you do any study since you have retail customers that what will be the share of making profit versus making losses? If 100 are trading, what will be that ratio?
Yeah. See, I think let me first answer this question. This is a very philosophical question. We'll have to answer it a little bit. You know, we have to look at what our vision is as a company. Okay? First of all, Angel is a platform. Angel is a platform. Okay? Our job is when customers come on the platform, we have to educate them, we have to curate them, and we have to give them the right kind of information to make the right decision. Now, within our responsibility is to provide enough guardrails in the system so the client doesn't accidentally do something stupid. Okay? So when folks come onto our system, we take extra precaution to make sure they understand the market. We teach them.
We are the only company today, the only one in Fintech that invests so heavily in education. The proof is, if you go look at the number of Angel videos, there are more than 6,000 videos that are there that cover everything under the sun, right from option strategy to intraday, to how you can make money, to what is a stop loss order, what is a product, you know. We go into a lot of detail to educate. Secondly, on the product side, as Ankit told you guys just a few minutes ago, right. The product is built with enough guardrails so that the customer understands what are the parameters within which he can exercise his financial outcome.
If you look at Instatrade, which is one of our most popular features, it is the only feature in the market where you can actually quantify your risk even before you make the first investment. Our job is to provide these kind of tools, provide these kind of levers. Now, beyond that, what happens from a client perspective, you know, how many of them make money, how many of them lose money, this and that. That actually, in many ways is not even ethical for us as a company to go look at, because it's not some intrusion into their privacy, which we don't want to do, right?
Ours is as a platform, build the right platform, give the highest level of transparency, give client enough tools using machine learning and AI so they can understand how equity trading fits into their overall wealth management strategy. This is why we are investing in the Super App, because some of our customers, in fact a lot of our customers want the mutual fund product. It's not like we woke up one morning and said, "We need to do mutual fund." Our customers have asked us for it. We are coaching our customers that you should be investing in bonds, you should be investing in corporate bonds, right? We are the only ones who have even a product around that. Our job is to give this diversification.
Ultimately the client can decide based on their level of risk, what works and what doesn't work. Hopefully that gives you a. It's a little long-winded answer, but I wanted to give you the philosophy behind how we are approaching the company, you know.
Okay, sir. Yeah. Thank you. Thank you very much.
Thank you.
Thank you. The next question is from the line of Sumit Chandorkar from Motilal Oswal Financial Services Limited. Please go ahead.
Yeah. Thank you for providing me the opportunity. My question is related to commodity market share. From last year it is increasing every month. What actually has helped you to in growing your ADT here? Also you are acquiring now half of the market share. Can you please put some light on this? My second question is what is your current currency market share?
Yeah. I will defer this over to Ketan who heads our commodity business, and he can give you an idea on what's going on there. Ketan, over to you.
Yeah. Thanks, Narayan. Commodity, you know, see, if we look at commodity markets, market, you know, largely the industry market, the volumes are growing in options, you know, which is a new product launch from MCX side. We were the first entrant, you know, in terms of providing options on mobile platform and a web platform. You know, that's the large reason, you know, for us to gain the market share.
Yeah. As Ketan just said now, that sums up very, very well actually. As you said, in futures the market share is kind of constant for us and in options obviously increased. I think one of the things, correct, Ketan, correct me if I'm wrong, right. We also have built a mobile journey, right, in the options for this since last year or something like that. Isn't-
Yeah.
Didn't we launch that? Yeah.
Yeah, two years.
Yeah. That's another thing. It's a combination of that product as well as what Ketan just said. Thank you.
Thank you. The next question is from the line of Sakshi Goenka from Motilal Oswal. Please go ahead. Ms. Goenka, I have unmuted your line. Kindly proceed with your question.
Yeah. Hi team. Am I audible?
Yes, you are audible. Yes, you are audible. Yes.
Yeah. Thank you so much for your time, and congratulations for your good set of numbers. I just had a quick question around your NPS books. What I'm seeing is that client exposure has gone up significantly. I think few quarters back it used to be in the 45,000-50,000 range. It's now trending more towards much higher levels. I just wanted to understand, has there been some kind of restatement or do you have seen a trend of higher client exposure?
Please take this.
Hello? Hello?
Yes, Dinesh. You're audible. Go ahead.
Yes, the per-client exposure is growing, but if you see the overall spread of the book, almost 84% of the clients are less than INR 1 lakh in exposure. About, I think, 10 or 11% are between INR 1 lakh to INR 5 lakhs. That, I think, is a healthy trend. This is, you know, a complementary product, a bridge financing kind of arrangement for clients. If they see an opportunity to leverage their margins and, you know, take some exposure in some stock where they see some value in between, let's say, 30-90 days, they opt for this.
In terms of the you know, the churn and all, this book churns in about 30, 45-60 days. There is not a very long exposure in this book. I don't see any reason to be concerned about this you know, increase in the exposure per client.
Understood. I just another question. Since the industry has slowed down significantly, but you know, you guys are doing a great job in terms of customer acquisition. Has our CAC for incremental customers gone up vis-a-vis what we were spending maybe 6, 8 months back? Or you think we are pretty much okay in terms of CAC?
Yeah. See, you know, as we discussed earlier, right? Even a year ago, we were aiming to break even in six months, and even today we are breaking even in six months. From a risk reward adjusted perspective, I think materially nothing has changed. Now, the actual numbers, you know, some months, as you know, like during IPL time, the CAC actually does go up. But then we acquire it in a way that we know we can still recoup it in six months. From our perspective, really nothing changes. Prabhakar, if there is anything you wanna add here, you can just add. You know, if you wanna throw something, go for it. PT over to you. Yeah.
Narayan, I think, what you commented is absolutely right. Nothing much to add.
Understood. Just one final question from my end. Any outlook on your expense, you know, post this year once the Super App has been launched and the ball is rolling? Do you think expense can start to come down going forward?
See, as we said no, we are in an investment, right? As of this point, we don't expect that, you know, we are not optimizing for conserving our expenses. We are optimizing for growing our client. That also includes growing other businesses that we want to get into. At a macro level, we are trying to keep. Our stated goal is to keep the company operating between 45%-50% OPM. Some months it might be higher, just as the last few months ago or last quarter, I think it was a little over 50. It has even gone as high as 56%, right? Some months or some quarters it might go below 45 also, right? That said, we will always normalize it to between 45%-50%.
To that end, yes, you know, as we enter next year, I do expect the operating expenses to increase. At the same time, there'll be diversification. You know, there'll be enough other new businesses that we need to build out, we need to scale. I still expect the OPM to be within the same number that we have just talked about, you know.
Understood. Thank you. That is very clear. Thanks a lot.
Thank you.
Thank you. As that was the last question that the management could answer today, I would now like to hand the conference over to Mr. Narayan Gangadhar for closing comments.
Yes. Actually, I would hand it over to Dinesh Thakkar for his closing comments. So let me hand it over to DT. You know what? Actually, let me just take it. Okay? Again, finally, thank you everybody for joining us on this earnings call. You know, New Age India is gradually understanding the potential of equity markets as stacked up against conventional risk-free and physical assets. In times to come, as the ecosystem scales up and more investors gear up to learn and better understand benefits of long-term investing, coupled with continuous development of mobile and internet infrastructures, I am very confident that more individuals will have larger wallet share towards financial assets. We have a clear pathway laid out to provide access to capital markets to a large population.
Our endeavor is to garner a large share of the 65% population that resides in Tier 2 and Tier 3 cities. Our superior products give us an ability to stay ahead of the competition. The resilience of our business, as demonstrated over many quarters, gives me a lot of confidence about the growth trajectory going forward. Angel will be the torchbearer of equity proliferation in the country. We continue to endeavor to partner our clients in achieving their financial goals while improving their overall investment journey. We have successfully demonstrated the superiority of our digital strategy and plan to augment the same as we move forward to attain the number one position in the industry. I am certain this goal is not too far away. I wish to thank all of you for your continued support, confidence in Angel One.
For further inquiries and queries, please do reach out to Hitul Gutka, our Head of IR or SGA, our Investor Relations Advisors. I wish you all a good day ahead. Stay safe. Stay strong. Thank you.
Thank you. On behalf of Angel One Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.