Ladies and gentlemen, good day, and welcome to the Angel One Limited Q1 FY24 earnings conference call. 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 0 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 expectation of the company as on date of this call. These statements are not 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, sir.
Thank you, Ryan. Good morning, welcome, everyone. Thank you for joining us today to discuss Angel One's Q1 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 the press release are also available on the website. For today's call, Angel One is represented by Dinesh Thakkar, Chairman and Managing Director, Vineet Agarwal, CFO. We also have the other senior leadership team of Angel One on the call, 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 Dinesh Thakkar for his opening remarks.
Thank you, Hitul. Good morning, everyone. I'm happy to share that Angel One has continued to deliver strong performance, and I will take you through some of the key development of the quarter and important initiatives we have lined up during the financial year. Vineet will walk you through our financial performance thereafter. During the quarter, we maintained our focus on investing in technology and product to offer our clients a seamless experience on all our digital platforms. We endeavored to develop a user-friendly platform for new-to-market clients while making it swift for experienced traders. We continue to refine our customer journey on our Super App, shipping out key functionalities and enhancements regularly. This has led to a further improvement in our overall NPS to historic high.
I am happy to share that Angel One features in the top 15 club of free finance apps across Play Store and App Store, outperforming many of our peers as we compete with banking, payment, lending, wealth apps. We'll be rolling out several exciting features this year, such as the Always-On Order feature, which will enable client to place order at any time of the day, including even when they are out of the network, thus improving engagement with our app. We are also developing an advanced conditional order platform, on which a statement will be translated to an order via a large language model. We have further enhanced our SmartStore, a marketplace offering a wide range of exclusive rule-based fintech apps, catering to clients' diverse needs. Its integration with our SmartAPI facilitates trade execution for client.
In addition, the SmartStore provides educational resources, including blogs and webinars, that keep clients updated with the latest trends and insights in the investment space. We are in the process of enhancing the SmartStore basket in a manner that is relevant and comprehensive across all the financial needs of our customers. Angel One is a dominant retail-focused fintech platform with a large and growing client base. With our focus on a more comprehensive financial services playbook, we commissioned the direct mutual fund journey on the Super App, which has been a resounding success. This model has witnessed a fourfold growth in registered SIP to over INR 4.30 lakh in quarter one, FY 2024, over a sequential quarter. I am happy to share that Angel One is amongst top two players in India in terms of incremental registered SIP in June 2023.
We are building partnerships and journeys to operationalize the distribution of consumer credit products, which is expected to go live over the course of the year. This year, we have planned a formidable brand campaign to enhance awareness of our full-stack fintech platform, which aims to address all our customers' financial needs and aspirations. Our network of Authorized Person, AP, the affiliate business channel, remains one of the important growth engine in the business. We continue to dominate the industry with the largest network of Authorized Persons in the country at over 21,000 channel partners. As of June 2023, we further augment and build greater efficiency in the channel, ensuring highest level of compliance and governance.
To facilitate the APs to serve their clients better across multiple asset classes, we have further upgraded the NXT platform, which is an industry-first dedicated digital platform to them. For us to capture the full potential of our distribution capabilities of digital financial products, we believe all affiliate channels, including IFS, insurance agents, MF distributors, are extremely important. These channels represents large untapped potential for us. With our ability to harness big data at Angel One through our AI ML capabilities in discerning patterns, trends, and the preference of customers, and to offer service digitally, our Fintech DNA will be able to better empower such affiliates to serve a larger audience than has been hitherto been possible. This will further enable them to expand their product basket, thus ensuring customer retention.
This will help us fulfill our aspiration to positively influence the lives of underserved population of the country, which relies purely on such affiliates for achieving their financial goals. Our comprehensive digital capabilities, combined with such affiliate channels serving a large customer base, will foster a mutually rewarding partnership. We are in a process of hiring a chief business officer, affiliates channel, to comprehensively capture this large potential. Since we now have a large pool of clients and a huge data lake, we are focusing on better utilizing this by further augmenting our data analytic capabilities. Over the past nine months, we have centralized several heterogeneous data sources to produce fact-based data set on a common data platform. This centralized database collects, integrate, and integrates various eligible client data, including user persona, engagement, trading behavior, product touch point attributes, clickstream data, and transaction data.
This comprehensive repository empowers our product, tech, and growth function as they gain holistic insight into clients' behavior and preference to further personalize engagement, thus improving client satisfaction and retention. During the quarter, we collaborated with U.S.-based service provider to conceptualize and implement GPT-driven chatbot for our customer support system. The chatbot is being trained on a large language model with our client-specific and other temporal data. This initiatives has delivered a 70% success rate as of now. We aim to incorporate real-time insights into a conversational model and go live during the current financial year. To scale this up more effectively, we have expanded our management bandwidth with onboarding of Mr. Deepak Chandani as Chief Data Officer.
Deepak comes with a strong grounding in business intelligence, data analytics, and data science, and possesses strong AI ML-related capabilities, having led this initiatives in his past assignment with companies such as British Petroleum, UBS, Apple, and Infosys. In our pursuit to become India's most trusted and preferred Fintech brand, we will continuously explore opportunities that are synergistic to this objective. In this context, we are also exploring inorganic acquisition and partnerships opportunity across the consumer financial products and service landscape, including core tech, product distribution platform, wealth tech, learning and content engagement platform, which could enhance and complement our existing and future offerings.
Last but not the least, it gives me great pleasure to announce that we have been ranked 52nd amongst top 100 best company to work for in India by the Great Place To Work Institute, besides topping the Fintech category and also being amongst top 25 in BFSI sector. These achievements are possible because of our firm belief in our core values of innovation, speed, thinking big, collaboration, trust, and customer centricity, thus bringing about a collective sense of purpose and passion amongst all Angelites. Coming to the operational performance in quarter one, FY 24, we continue to demonstrate healthy progress. Our overall NPS continues to grow handsomely. Angel's share of India's incremental demat accounts stood at 21.3%, as we concluded the quarter with a total client base of over 15 million.
Our orders, a key revenue driver for our business, remained robust at INR 249 million, with the underlying ADTO growing by 23% quarter-on-quarter to nearly INR 23 trillion, as we continue to expand our market share in overall retail equity turnover by 175 basis, quarter-on-quarter to 24.5%. I hope these insights have given you a flavor of our tech-driven business and our efforts to have a more integrated financial product play. Vineet will now take you through our financial performance, after which we will be happy to answer your questions.
Thank you, Dinesh Bhai. Good morning, everyone. FY 2024 has commenced on a positive note for us as we surpassed the 15 million clients mark in June 2023, and achieved our highest ever market share across retail, overall equity turnover, and NSE active clients. Whilst the business continues to be on a very strong footing, quarter one, FY 2024, has its own peculiarities in terms of 3% or two lesser number of trading days compared to quarter four, FY 2023, impact of annual increments and continued investments in tech and product. To this extent, quarter one has to be looked at slightly differently. In quarter one, FY 2024, our total gross revenues stood at INR 8.1 billion.
Gross broking revenue was lower by 4% sequentially, to nearly INR 5.6 billion, accounting for about 69% of our total gross revenues for quarter one, FY 2024. Share of F&O segment in gross broking revenue reduced to 84% in quarter one, FY 2024, from 87% in quarter four of FY 2023. Contribution of cash and commodity segments expanded to 10% and 5% respectively, as compared to quarter four of FY 2023. Approximately 78% of our net broking revenues are contributed by clients from direct channel, and 22% by our clients associated with the affiliates channel. It is important to note that as clients mature on the Angel One platform, their contribution to the net broking revenue continues to remain strong.
This trend is evident from the rising share of net broking revenue from two to three-year cohorts in quarter one, FY 2024. This cohort has consistently grown over the quarters and now stands at 22%, up by almost 3x, from 8% in quarter one, FY 2022. The longevity of these young, new-to-market revenue generating clients on the platform is further being fortified through various initiatives, developments, and offerings across the entire spectrum of Angel One Super App platform. Interest income, which includes interest earned from client funding book and from deposits with exchanges, grew by approximately 6% quarter-on-quarter to INR 1.4 billion. This accounted for about 18% of total gross revenues in quarter one of FY 2024.
Ancillary transaction income linked to the turnover, stood at approximately INR 0.7 billion, accounting for 8% of quarter one, FY 2024 total gross revenues. Employee benefit expenses, which stood at INR 1 billion in quarter one, FY 2024, include the impact of annual increments to employees, non-cash accrual of costs towards annual grants of stock options, and proportionate accrual of the budgeted variable pay for the current financial year. Other OpEx for the quarter stood at nearly INR 2 billion, which grew in line with our operations, driven by spends on client acquisition, software connectivity and maintenance expenses, demat charges, CSR, and other expenses. Our consolidated operating margin for the quarter stood at 48.6% versus 51.2% in quarter four of FY 2023.
It may be recalled that in Q4 FY2023, employee benefit expenses had an one-time positive impact of INR 405 million on account of reversal of stock option grants and year-end variable pay provision, leading to a higher than usual operating margin percentage. Therefore, on an adjusted basis, there is a 7.4% decline in EBITDA on a sequential basis from INR 3.3 billion in Q4 FY2023 to INR 3.1 billion in Q1 FY2024. Similarly, on an adjusted basis, our consolidated profit after tax from continuing operations declined 6.9% quarter-on-quarter from INR 2.4 billion in Q4 FY2023 to INR 2.2 billion in Q1 FY2024.
The board has approved distribution of 35% of the quarter's post-tax profits as first interim dividend to the shareholders, aggregating to INR 775 million. This translates to INR 9.25 per equity share. Period end cash and cash equivalents increased to INR 66 billion on the back of increase in client margins. Client funding book remained stable at INR 11.4 billion as of June 2023, compared to INR 11.5 billion as of March 2023. Consolidated net worth of the company grew by 9.6% to INR 23.7 billion. As we continue to operate the business within the desired margin profile, our quarter one, FY 2024 analyzed return on average equity remains a healthy 39%. With this, I conclude the presentation and open the floor for further discussion. Thank you.
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. 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 request you to restrict to one question and one follow-up question per participant. We will wait for a moment while the question queue assembles. Our first question comes from the line of Swarnab Mukherjee with BNK Securities. Please go ahead.
Hi, sir. Thank you for the opportunity, and good morning. Couple of things that I wanted to understand was, first, on the employee expense side, if you could give us a breakup of fixed and variable components and how to think about this for the next three quarters. Is the variable component provisioned only in this quarter, or will it be spread over the next few quarters as well, which means that we should see a run rate of in a similar level about this? Also, your comments on the any add-on interest cost that you had highlighted, INR 40-50 crores earlier. Now that it has gotten shifted by a couple of months. Is there a kind of a change in guidance from your side regarding that? I would have a follow-up on also on the client acquisition. After your answers, maybe I can ask that.
Sure. Mr. Mukherjee. let Vineet answer your two questions. Vineet, if you can just take it over.
Sure. Swarnab, we do not disclose the breakup of the fixed and variable employee cost. To answer to your question about how much of the variable cost has been factored in, this is spread over the entire year, one-fourth of the budgeted variable pay for the current financial year would be part of the Q1 expenses, proportionately, it will be spread over the other three quarters. Your question about the update on the additional expenses that we are going to incur because of the circular. Well, it's more or less in line with what our guidance was in quarter four, we continue to maintain that guidance. Again, that depends on the, you know, the movement of the turnover and volumes on the platform. I mean, the variance could be maybe 5% or 7% here and there. That's it. Not more than that.
Okay, understood. In the balance sheet on the borrowing front, that number is over the last two quarters, around INR 750 crore-INR 850 crore. It used to be upwards of INR 1,200 crore, two, three quarters back, even before you had that additional working capital requirement for paying out clients on by the first week of every quarter. Can you point to the reason why this borrowing numbers have come down from INR 1,200+ crore to this INR 800 crore around?
Sure. Largely, our borrowing is linked to the onward lending that we do towards MTF and T+7. As this number has come down over the last quarter or so, similarly, the borrowing has come down. Again, whatever cash we generate from the business, quarter-on-quarter, that is again fed back into the business to fund the MTF and the T+7.
Sure, sure. Very helpful. Just quickly on the client acquisition. I just looking that, looking at your numbers over the last six months, around 2.5 million customers have been added. If I look at the active clients number, it has gone up by around 0.2 million only. Just wanted to understand, you know, whether you are seeing any different trends in terms of activating these clients or what it means for your payment periods in the current standpoint. Yeah.
Yeah, thanks. Devender, if you can just answer.
Yeah. Hi, Swarnab. This is Devender. If you look at the overall market, Swarnab, the overall market has also been adding very large amount of clients, where the total base of clients is almost as 12 crores now. If you look at the active base of NSE, which is close to 3 crores. If you look at from an overall industry point of view, the overall active base, which is the active participation of retail, has been subdued in the last two quarters. As a result, the same is reflecting in our case as well, where our active base is kind of has been stagnant, or let's say, has been stable to an extent.
From an overall point of view, during this period, you know, when we look at our market share in terms of NSE active clients, we have been gaining market shares. Now, almost 2% points is what we have gained in the last two quarters, which is reflective of the robustness of the way we have been doing our digital business. From an overall per se, I think, you know, we are launching multiple services on the mutual funds side, and we have plans to monetize or let's say, provide various kind of products and services to our clients, which will further, you know, enhance the active base that we are going to look forward at. That precisely is the reason.
Swarnab, just to add, what you need to also monitor is the number of orders executed on our platform, because that is something which translates into revenue for us. If you see, as I mentioned in my comment, that our two -three-year, one-two and two-three-year client base has been giving us higher revenues. That kind of shows the stickiness on the platform. That is something that people need to be aware of. As a Precentage, it may vary, the active client versus the total client base, but it is more important to see the number of orders and the longevity of the revenue-generating clients on the platform.
Mm-hmm. Yeah, yeah. like, just if I would calculate two and a half, I mean, that number comes around 10%, but I'm pretty sure that you will be actually activating more customers because few older ones might actually be also dropping out. just wanted to understand that if I were to just look at the incremental customer base, compared to the market, what you are seeing, do you see your rates kind of, reactivation rates to be on the higher side? Maybe not as much as on the peak of the market, but right now on the higher side compared to market, or would we be fairly at a similar level?
From an overall point of view, if I look it from an industry point of view, the overall industry activation rate is close to 25%, and we are close to 30%. We are doing better than what the industry average looks like. You know, in the long period of time, we are looking at with the current market outlook and the current market conditions, this has remained subdued, and we feel that, you know, it will in line with what market, you know, performance and market behavior is looking like in the coming time. We are doing better than our peers and in, from an industry point of view, with our overall rate being 30% in comparison to the industry rate of 25%.
Just to add to that, Swarnab, see, this is a very interesting data point because it only shows a client who's traded once in the trading 12 months, that client might have done number of orders instead of one, but that somehow is not being captured in this data point, which is available for the industry, and therefore, you know, if to that extent, you can't really concentrate on this data point.
Got it. Got it. Very helpful, sir. Thank you so much for the detailed answer, and all the best for upcoming goal.
Thank you.
Thank you. Our next question comes from the line of Prayesh Jain with Motilal Oswal. Please go ahead.
Yeah, I had a few questions. Firstly, you know, if I look at the industry, the MTF book has been on a rise, for us it has been kind of a steady trend, rather than, you know, in fact, you know, from the peak, we are on the much lower side. What is the reason why we have not focused on this business, given that, you know, the margins have been much, you know, the peak margin norms have kind of made it much better than, you know, than the earlier scenario? That is first. Second, wanted to check, you know, with respect to the threshold level of the broker-wide limits, where are we and what happens in case we hit those thresholds?
In the past, I think there has been some mention about having a different card and getting, implementing the same there. Is it really possible to do that execution? That is my second question. Third one is, you mentioned in the opening remarks about focus on the AP network. Does it mean that we are kind of, you know, changing our approach and saying that, you know, on the lower tier or tier 3 and tier 4 towns, you need stronger presence through AP network? How should we read into this?
See, on your first question about MTF book, as I always have maintained my stand, that we are not into kind of like everything in margin funding, lending and all that. Mostly, it is in kind of like bridge funding given to people who are trading in cash, and they want some fund for their interim need. We are not very much focused to increase our margin funding book beyond, it is a part of service that we provide in our brokerage book. We don't do resolve funding and all that. We believe that as market like small cap, mid cap, we'll see a rally. There will be a proportionate growth. To expect a linear growth in MTF, that is not our focus.
Okay, second, on our threshold, kind of limit, I think still we are far away from that, but we have enough kind of, like, contingency plan to take care when we hit that. On the third point, on affiliate channel, if you look at India, that population, apart from digital, there are lots of population who are dependent on bit-assisted model. When we are going into all services beyond broking, if you look at mutual fund, if you look at insurance and lending products and all that, still it is like an assisted kind of like, model. To have a proper focus and have a market share and leadership position in all segments that we'll be offering on our fintech platform, we thought it is best to have a scale in all offering that we do.
Plus, if you look at the platform that we provide to our affiliate channel, it is high on technology. Now, when we talk about data science and all that, today, if you look at affiliate channels, they are unable to guide customers very effectively because of lack of information and data with them. With kind of like competency that we have to build technology and to build platforms rich with the kind of like AI, ML tools, we believe that we will be able to achieve a better market share across all the product offering, be it on digital platform or B2C, or be it people who want an assisted model in products like mutual fund, insurance and lending products and all that.
That's the reason we want to create a proper focused kind of division who does not miss out on any kind of like, market share across all this kind of like, offering. Our focus remains on being a technology player, using this technology data science, so that we are able to be effectively grow and expand this market across all categories.
Okay, got that. Just a follow-up on the second question: What are the contingency plans in case we hit that threshold level?
See, like, there are lots of kinds of things which can be worked out. Today we allow clients to keep do trading on all kinds of instruments and all that. When time comes, we'll be very specific in terms of what how we can save that benefit. Apart from that, we have one more membership that with us, so we can split that business also. That is not an issue. When time comes, we will address it appropriately. Right now, that is like, under our consideration to see that how we are going to take care of threshold.
Oh, that's. Vineet, just one last follow-up. when you mentioned that, you know, MTF book is not a focus area and just more of a offering to the customers, don't you think this is a very safe business now and relatively much safer than what it used to be earlier and, you know, can be a very good revenue stream and profit stream for you? you know, why not increase the focus in this product and or improve the offerings that we have currently? do you see that, you know, because on our platform, the cash volumes are much lower and you don't earn a lot of revenues out of the cash delivery segment, you would want to focus continue...
Your focus will continue to be on our F&O segment and not so much on cash segment. Is that the way to think about it? Because, you know, we see-
No, no. No, that is wrong way of thinking, Prayesh. I said that our focus on retail lending is there. We would like to be a leader in that. What I was trying to say, when you look at this lending book, it consists of retail lending and plus many other components, HNI and all that we are not interested. The focus is not to increase this MTF at any cost. We are a focus player. We want to achieve more market share, better market share in retail segment. In retail segment, if you see, we are growing. Retail does not work in a linear way because when they're buying some good opportunity on option side, they're very active on option side. Suddenly when you see small and mid-cap picking up, they will come to cash segment.
Mm.
My point is that when it comes to retail offering or retail requiring this kind of service, we would be very aggressive. We would like to have a highest market share.
Okay.
being focused on MTF and trying to go into other segments, where, we are not interested to serve other kind of like needs of that customer, we would not like to, just for the sake of increasing margin funding book, would like to go into that segment. That is what I meant.
Sure. Thank you so much for all the detailed explanation. Thank you. All the best.
Thank you. Ladies and gentlemen, a reminder, we request you to restrict to one question and one follow-up. Our next question comes from the line of Nidesh with Investec. Please go ahead.
Thanks for the opportunity. On SIPs, so when we are saying that we have become number two player in SIPs, is it on number of SIPs? And does it include all the participants, including banks, non-banks? And how will be our positioning in terms of value of SIPs?
Okay. Saurabh would be right person to answer this. Saurabh, if you can.
Thanks. The number includes banks, non-banks, fintechs, everyone. We are second overall in the market. In terms of the value of the SIP, this is not an information that we disclose proactively, but we'll be in line with most other players in terms of direct mutual funds in the market.
Sure. Secondly, how are the trends on payback period, which used to be two quarters earlier? How are the trends for this, in this quarter on the payback side?
Vineet, if you'd like to answer this.
Nidhesh, again, we would want you to concentrate more on the LTV to CAC. Of course, the payback remains more or less in that bandwidth. It's more important to understand what the LTV to CAC is, and that, as we explained in our presentation, it's a very healthy eight times the CAC. I think that is more important a metric to concentrate on.
Lastly, when you're talking about this affiliate channel strategy, we already have some 21,000 channel partners, and probably as we scale it, this number may become much larger. Do we have also plans to have insurance booking license? Because without insurance booking license, the value proposition on the insurance side will not be that, material.
Currently, like, we are in the process of creating this strengthening this vertical. In terms of granular detail of this kind of business model and affiliate channel, I think give us some time, we will be more clear and give more disclosures by the next quarter.
Sure. Thank you. Thank you. That's it from my side.
Thank you. Our next question comes from the line of Sumit Rathi with Centrum PMS. Please go ahead.
Thank you for giving me the opportunity, sir, to ask this question. My questions are partially answered, but wanted to check that our active client as a percentage of gross client has been in a declining trend, and that you rightly said it's been with competitors also. How do we see this trend getting going forward basis, or would it get stabilized at what level? If you can give some color on that.
Yes, Sumit, activity of a customer depends on market conditions. You know that, we are into kind of like cyclical market, where we see activation of customer. For a year, it appears to be normal. If we track it month-on-month and all that, it may appear to be going up and down. My point is that we are introducing lots of services to make this customer base active. For us, what is important, that what is the lifetime value we are creating from a customer? Are we able to extend that? That is where our focus is. Our focus is not on day-to-day what customer is doing, we try to compare ourselves with competition and all that. Our journey that we are building on FinTech is far different than what industry is building.
Slowly and progressively, you will see we also wanted activation ratio of an customer should increase, and that customer should become active on many other products, which may not be captured by NSS database.
Okay, makes sense, sir. Lastly, on the ESOP cost, how would the trajectory be going forward if we have to see, like, next two, three years down the line?
Vineet, if you can answer this.
I can't give you know, forward-looking kind of number, but for this year, the budgeted spend on ESOP is about INR 55 crores.
All right, sir. Any update on our AMC business launch, where we are progressing in that? Like, that would be my last question.
Vineet, if you can answer.
Sure. We are in the process of creating the entire infrastructure and the organization. We've already incorporated the asset management company and the trustee company, hopefully, in the next couple of weeks or three weeks, we should be able to file our application for final approval.
Okay, and with the final approval, what time does it take to really launch the products and all that?
It depends. Normally, our understanding is it will take about two quarters for SEBI to come back with their final approval. Immediately, we can launch schemes.
All right, sir. Thank you. Thanks a lot for all the clarity.
Thank you. Our next question comes from the line of Gautam Jain with GCJ Financial Advisors. Please go ahead.
Good morning. Congratulations for good set of numbers, thanks for giving the opportunity. My first question is, how much is the gap between us and other top two player in terms of rank based on NSE active client?
See, that data is available on the website. Somebody can answer, Bhavin or Ketan.
Yeah, hi. The top two players.
NSE active.
No, no, what the rank he's asking. The rank, I think right now we are in terms of top active client, we are third, right?
Yeah, we are rank number three.
That is his question.
Gap between our market share and top 2 market share.
Gap between market share, you are saying?
Yeah.
If you can just share the numbers here.
Yeah, 66 is the number 1, 44.
14.5%.
Today, our market share is 14.3% in the June month. They're just checking, the top player, that is close to 20% market share. The gap is-
Gautam, let me clarify. This gap does not show you anything in terms of revenue and all that. This would be a wrong parameter for you to track. We are giving you data.
Mm-hmm.
the revenues and all that will be more better kind of like representation of health of business and where a particular player stands.
Okay. Yeah, very good. My second question is, your gross broking income to your order, if I calculate, is INR 22.4 per order, and that has, I think, we have seen the bottom in Q4, which was INR 22.1, and it has gone up now, INR 22.4. It's like, yield has improved or, because of mix change between, you know, discounted scheme and traditional plan or direct to channel revenue. Because of that, the fee, broking income to number of order has gone up sequential.
I'm not sure whether we are tracking it. Devender, you have any like clarity on this?
We tracked it. It's in stable nature, but we don't really disclose, you know, how it is trending to the market.
Yeah, okay. Fine.
Okay. Last is, can we get the breakup of interest income between, you know, interest received from the client and interest on our investment book?
Vineet, do we disclose that?
No, we don't disclose, but I can give you a directional view. As we mentioned in our annual report as well, about 75%, 80% of the interest that we generate on the fixed deposits comes from the client margins and the balances on our own proprietary funds. That's how the trend is. The number that we've disclosed in the quarterly financials is the consolidated number of the interest earned from MTF, as well as interest earned on fixed deposits.
Okay. What will be our cost of borrowing?
Well, the cost of borrowing is remaining in that same ballpark of about 8.5%.
Okay, great. Good. Lastly, the other cost has gone up sequential, despite number of orders have declined. Was any one-off in that, or have you increased some, you know, variable cost to acquire the client or some fixed costs have gone up? How to read that?
No, it's in line with the growth of the business, that's what I mentioned in the comment as well, that the other expenses are growing in line in terms of the number of clients that we are acquiring and the growth in the volume of the business.
Okay, great. Are you seeing any improvement in number of orders since market has started doing good, even after June? Daily number of orders.
You will see the number being published at the end of or the early part of August for the July month. We will not be able to disclose any number right now.
Okay, great. Thank you so much. I'm done.
Thank you. Our next question comes from the line of Pallavi Deshpande with Sameeksha Capital. Please go ahead.
Yes, sir. Thank you for taking my question. Just wanted to understand on the SIP book, how much would be from a regular plan versus the direct plan? Second would be on this on the credit business that you're looking. Have you hired the chief credit officer and other tie-ups with the NBFC system?
Thank you. Pallavi, Saurabh, if you can just answer, please.
Sure. In terms of the breakup between the direct book and the regular book, that we are disclosing for now. The second question around credit, right. Since we are largely into the distribution of credit products and not being a lender ourselves, we don't need to hire a chief credit officer. Having said that, I mean, the team in terms of building the lending business is getting hired, and we are hiring top quality talent there to take the lending business forward.
What would be the size of the team you would be looking at?
That is not something we can to disclose.
Okay. Thank you, sir.
It will be commensurate to the, you know, the kind of business that we develop. It's not something that will be static.
Right. Right. Right. Thank you so much.
Thank you. Our next question comes from the line of Sanketh Godha with Avendus Spark. Please go ahead.
Thank you for the opportunity. sir, what I understand from the mutual fund strategy is that you typically sell largely a direct plan on the app, on the Super App. the incremental strategy, what you have been seeing on affiliate people selling the third-party products, which is mutual fund, insurance, and everything. just wanted to understand that 21,000 people who, in your view, how many are already into this product distribution? incrementally, why they need to switch it to Angel to distribute on your behalf?
Also wanted to understand when you are going offline, which means that with the tech solution to them, whether you will be focusing unlike app, Super App story, more selling regular plans there so that your third-party fee income will grow. Just wanted to understand the broader strategy there, how you are looking at it, and how much it could potentially contribute since you are already looking to hire a Chief Business Officer to cater to this particular segment, how much revenue you are targeting to generate from this particular base?
Coming to your second question, that is very important. When we talk about affiliate channel, currently 21,000 are Authorized Persons, primarily focused on stock market activity, plus they are selling our third-party products.
Yeah.
We feel that if you want to be successful in all the products, because, when we are introducing everything on inside platform, it makes sense for us to have a scale of that business. Look at all kinds of like third-party products, apart from this stock, including stockbroking, sorry.
Yeah.
There is an audience who would like to have some assistance when they are going for that service or buying product, like insurance, lending product and all that. Given the fact that we have a best technology platform already for stockbroking, we extend a platform called NXT, and because of that, they are able to be more effective in terms of serving their client need. We want to enhance that kind of like capabilities of our authorized people, plus attract the people who are into distribution of mutual fund, IFAs and all that, so that they are also able to take benefit of advanced technology platform that we have. Plus, as I said, that we are getting deep into data science and all that.
All said and done, we want to see that affiliate channel everywhere, on all the channels, whatever they are selling, they have a right kind of information for products they are selling, so that we are able to include more people in this financial service. Digital is one way. We have proved that we are able to acquire customers 1,000 better. When we look at mutual fund industry, when you look at insurance, when you look at lending, still we feel that there is enough, kind of like, business in those affiliate channels. What is the gap between currently what is happening is a good technology bridge, a good technology platform, which can help them to be more effective in terms of servicing their customers.
Our approach of Super App, giving all kinds of services on platform, remains same, but we feel this is a kind of like natural extension to digital capabilities that we have created, and that will help us to get more market share. We are not, as in broking also, we are not focused that affiliate channel should sell only like traditional products and all that. We are going to extend all digital, all kinds of like latest kind of like services to them also. They can sell traditional, they can sell whatever we think is right for end customer. It is up to them. What we are going to give them, a scale, better price and better kind of like data management and information management of end customer. Sanketh, I just missed your first question. Direct plan, what were the...
No, the in a Super App, we preferably sell direct mutual fund plans so that your customer remains more engaged with the app and probably ends up trading more. That's broadly the strategy which I understand.
Right. Right.
then if it is the offline mode, which is AP model, then the mutual funds, what you will distribute there would be typically the regular ones, where you will earn commission. That's the whole idea is what I wanted to understand, or it will be very similar to-
See what happens, Sanketh, when somebody is providing some kind of like additional service, he's entitled, he or she is entitled to charge some fee. It makes sense for a customer also who is not totally digital or who wants some kind of like assistance in terms of their services.
Mm-hmm.
It makes sense for them to pay some small premium so that their asset management and everything is managed properly.
Got it. sir, just wanted to understand, given our distribution income quarterly run rate is, say, 8 crores today, which is coming from third party product. Given the strategy, any number you have in mind, this quarterly run rate, maybe in two years or three years, can become 3x or 4x, compared to what you generate on per quarter basis?
Sanketh, our expectations are very high, in terms of gaining market share and gaining revenue also from that. If you see third-party product, which is sold in affiliate channel, it has a revenue attached to that.
Sure.
Difficult to put a number right now, but as you know, that whichever division or vertical we'll go into, we'd like to be a leader in that.
Got it.
Fairly, you can say that's what the market share of an leader in that segment, we would like to be closer to that.
Okay, sir. Great. Last, Vineet, one small question. This, this 90, our finance cost, or our interest cost is INR 18.3 crores, and we have guided that the number would be INR 40 crores because of the change in rules with respect to upstreaming of client money. Just wanted to understand, out of the INR 40 crores for nine months, FY 2023, how much is already sitting in first quarter, FY 2024?
Sanket, this INR 18 crores does not include this INR 40 crores. INR 40 crores, we'd calculated effective 1st of July. If you read it carefully, we said that the upstreaming circular is going to be implemented from 1st of July.
Right.
That's how we'd calculated it for a prorated period of nine months in the current financial year.
Mm-hmm.
- to INR 40 crores, and the annualized cost, we had estimated to be about INR 50-52 crores. We more or less stand by that. Again, there could be some changes due to the change in volume and growth in the business, but as I mentioned earlier, it's not going to be a very significant number.
Basically, if I go by that run rate, INR 18 crores, which you reported in first quarter FY 2024, probably will become maybe INR 30 odd crores or INR 32 odd crores in next year as these rules get implemented, right?
Again, it's very difficult to estimate because, you know, the cost of, finance cost is also linked to what my client funding book is going to be.
Mm.
benefits of the efficiency in the clearing corporations are going to come back to us. It's difficult to estimate that number.
Okay, Vineet. Thanks for that. That's it from my side.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Our next question comes from the line of Nidhesh with Investec. Please go ahead.
Thanks for the opportunity again. On the, again, on the question on the SIPs, can you share some data around how much SIPs are taking from active customers and how from non-active customer? I'm trying to understand that because of SIPs, because of these new product additions, are we able to get incremental engagement from non-active customers, or largely the active customer are providing, are coming for the SIPs and other products?
Nidesh, we don't have a breakup of that, but I can tell you this, all this SIP, whatever mutual fund, we are selling, we are selling to only our existing customer base. Saurabh would be able to add more light to this.
The idea is to understand basically the existing customer base is divided into two parts, active and inactive. Active customers are giving us revenue, non-active are not giving us revenue. If we are able to engage more with non-active, in future, there is a possibility of to monetize them. From that point of view, I was trying to understand.
Yeah, Saurabh, you can just take it.
Yeah, I'll just give you a directional flavor, right. Active versus inactive, what is the share in terms of SIP, that we can't disclose, but what we have already started to see is because of the customers who are buying mutual funds from us and having a portfolio with us, their engagement and their retention on the platform has started to already show green shoots. That will materialize into decent broking numbers going forward. We are still quite early into the mutual fund journey, so it is difficult to really quantify those numbers. In terms of engagement and retention, we are already seeing good traction.
Sure. That is from the active customers, but any color on the inactive customers, are we able to sell mutual funds to the customers who are not trading? They have app, our app, but not trading, but maybe interested in mutual funds.
Yeah, I mean, in terms of the mix of the customers of active versus inactive, as I just told a few moments back, we can't give the exact split, but we are seeing good chunk of inactive customers also starting to buy SIPs and do lump sums with us.
Sure. Okay. Thank you, sir. Thank you. That's it from us.
Thank you. Our next question comes from the line of Prayesh Jain with Motilal Oswal. Please go ahead.
Yeah, hi. Just a couple of questions again. Firstly, on this finance, consumer finance business, I missed that part when you were mentioning about, you know, what kind of strategy you would be implementing there. If you could throw some light again on, you know, what is the strategy about distribution of finance products? That is one. I'll ask the second question after that.
Saurabh, if you can just take this.
Hi, Prayesh. In terms of the strategy around consumer credit, right? We'll be starting with launching personal loans. The opportunity is quite large there, and we are looking to tap into that business. In terms of the model, we will be undertaking distribution without taking any risk on our books, which can actually help us scale big. However, in the medium term, we don't intend to just be a vanilla distributor. We are building intelligence around AI/ML-based models to assist our lending partners in all aspects of the lending journey, using internal and external customer data. This can potentially enable us to get higher distribution margins going forward.
What looks good for us, primarily with the initial analysis that we have done and the engagements that we are in the process of with our lenders, is one, the overall base quality in terms of the credit profile of the customer looks quite good. Secondly, the engagement on the platform with our customers is already high, mutual fund is scaling in a very short timeframe without any external marketing is a testimony to that, which can enable us higher uptake even for credit from the platform. Third is we have proprietary data around clients and high-quality data intelligence, which will enable us to get higher approval rates and higher commissions from our lenders. This is largely our consumer credit strategy. Personal loans being the product to go live with in a few months. We'll also look at credit cards in some time, but still early to comment on that.
Okay. Have you tied up with any NBFCs or banks currently?
Yeah, we are in the process. I mean, discussions are happening with the top banks and NBFCs in the country, and you could hear something good for us from us in the coming quarters.
Okay, got that. Just on this finance book again, does Angel also charge to customers who bring in 100% collateral, and the 50% is funded by Angel? Interest is charged to those customers?
We do not charge anything for that. Any customer who brings in incremental non-cash collateral, at over and above 50%, we allow them to bring that collateral, but we do not charge anything for that.
Okay, got it. Just lastly on this, the strategy on the associated person. Your associated person network is a franchisee network, right? Is that the right way to understand? There could be just individuals also having working from their own home?
You are talking in terms of affiliate channel that we are talking about?
Yeah, associated persons network. Could you just give some more clarity as to these are having a brick-and-mortar presence in their areas, or they could be just working from home?
Sure. Sure.
Yeah.
Ketan, if you can address this.
Yeah. It's a mix of, you know, this Authorised Person, you know, they are individual, they are corporates, you know, all mix people are there.
Okay, okay. You mentioned that you'll be also looking at hiring IFAs and these individuals who can bring us volumes on distribution, right? Is that what I got it correctly?
Yes, yes, correct.
Got it. Got it. Thank you so much.
Thank you. Our next question comes from the line of Sumit Rathi with Centrum PMS. Please go ahead.
On the lending business segment, only, sir, though you've given a lot of clarity already. Just wanted to check, that, the risk is not on our balance sheet, but are we going to also get engage ourself into collection process over there? Or that collection would also be the responsibility of your NBFC partner?
Saurabh?
Yes, sir. In terms of collection, just nudging the customers to remind them that their EMIs are due, et cetera, which is what we call soft collections, is something that we can help our lenders with. Hard collections, where, which is what we call collections in the industry, is something that the lenders only will undertake.
All right, sir. Thank you for the clarity.
Thank you. Our next question comes from the line of Sumit Jankar with Sai Ganga Niwas. Please go ahead.
Thank you for providing the opportunity. I had a question regarding the active clients. What is the share of active clients who are trading into derivatives? How much share contribution of derivative clients has increased in active clients? My next question is that derivative clients tends to make loss, the tendency or the lifespan of derivative clients is lower as compared to cash. Is there any way that you're looking to for retention of these type of clients?
Okay, Sumit, first of all, we don't give breakup of active clients in derivatives and all that. Second question, when you look at customers' journey, always whenever it starts in equity, especially traders, most probably they are going to make losses at all. You have seen people around you who have started their equity journey, and if they are bit kind of a risk taker, they'll get into a product which may result in losses, but that does not mean they stop being into the market. When we talk about lifetime value, what happens when a customer comes, he's looking for some extra income initially, one or two years. He's trading, or she's trading. After 3rd year, they tend to look into wealth creation opportunities. They don't shy away from, kind of, totally from equity market.
They change their approach, they change their strategy, they change their investment into this market. When we calculate lifetime value, it includes all these phases. When we are saying now we are looking beyond just the people who are active as a trader or into just equity, where we would like to expand this lifetime value by offering them so that they can continue with mutual fund, some insurance product or some lending product and all that. Overall, we should not put any color to traders, that they come to the market, they make losses, and they forever go away from the market. There is no other asset class where they can invest, where they can get a good wealth creation opportunity.
We have seen across, like, whatever my experience in this, in this industry for 30 years, initially, everybody trade, they make some losses, and people who understand virtue of equity, they remain in equity market for almost ever.
Okay. Thank you, sir. Thank you for answering and all the best.
Thank you.
Thank you. Our next question comes from the line of Sahil Shah with Bridge Capital. Please go ahead.
Yeah, hi. Am I audible?
Yeah.
Yeah. Sir, I have three questions. First is on the account of the aggregator and CAMS tie-up, will it be a level playing field for everyone right now?
You want to ask all three questions, or you want one by one?
Yeah, I'll ask all three. Yeah, second would be on the mortality. I just wanted to ask on active versus inactive, and how do we currently make our inactive clients active? The last question is on the cohort analysis. We have highlighted for FY22, this analysis. How do we see this trend in the past four, five quarters play out? How was it?
Okay. On account aggregator, Ankit, if you can just answer that.
Hi, Sahil. Ankit here. We have gone live with account aggregator. An account aggregator is a service from Symity, is available for all the fintech players. We are one of the consumers, and we see the beauty of account aggregation is that as more and more aggregators and including suppliers and the requesters come to the platform, it will be the exponential growth for all. More and more accounts get linked, irrespective of who does that, it will be beneficial for all. Right now, our onboarding is being powered by that, and we'll also look into further use cases of that.
Okay, thank you.
Sahil, can you repeat your question on mortality?
Yeah. Basically, it was on active versus inactive, and how do we make our inactive clients active again? The process behind that.
Yeah, process is to introduce more services, like we are working out with, kind of like coming out with lots of things like new services. Devender, if you would like to continue from here.
Yeah. Hi, hi. Hi, Sahil. From the point of view, making an inactive client active and inactive mortality and active and inactive clients, there are two points here. From an overall point of view, there are multiple services that we have, no? We have launched MF, and we have multiple insurance as well. We look at the overall spectrum, where IPO, ETF, all services come into picture, where we, you know, look at exposing our clients and making them learn about these new services to get them into it. From the point of view of, you know, getting the clients active again in the broking segment, different clients have different, you know, activation rate. Let's say some clients will, you know...
Let's say, like a delivery clients, will activate maybe six, once in six months and once in two years, maybe. Some clients are active on a daily basis. We have a very clear program for each cohort of clients, where, you know, they're looking at a delivery client who has done delivery investments, let's say, one year back, and now what are they looking at, and how are they going to look at rebalancing? Similarly, trader who are trading for a monthly cycle, for a weekly cycle, so we actually cohortize them in every aspect. The way we actually make them active is basically offering them a lot of in, you know, a lot of education in terms of what are the tools that the different clients are using within the app.
Which is what is making them progress into a better, mature state of usage of a service as well. Obviously, we do a lot of, you know, discounting offers in terms of our pricing, to an extent, for clients who are inactive for a very large period of time. As to see, you know, how we can initiate them back into the system as well. We look at these two pro strategies, plus multi-product strategies to really, you know, work on the overall base of our clients.
Okay, thank you. Lastly, just wanted to ask about the trend over the past four, five quarters on the cohort analysis.
Devender, if you can just take this.
We will not be sharing this data on a quarterly basis, because this data gets curated, we test the data and then we publish it. You will have to, you know, wait for some time for us to refresh this data.
No problem, no. Thank you so much, and all the best.
Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Our next question comes from the line of Hardik Jain with Whitestone Financial Advisors . Please go ahead.
Good afternoon, sir. Thank you for the opportunity. My question is on the distribution platform for the lending business that we are trying to build. From what I understand, you'll help your NBFC and bank clients to source borrowers or clients based on from our app. Also you'll use, you know, machine learning and other technologies to assess the credit quality of the borrower. You will do this business only through your platform, or you can also give this, you know, API of this of your software to the lending partner, where your credit assessment engine can run behind the front end of your credit partner?
Currently, objective is to use our platform so that we are able to give more services to our customer. Saurabh would be the right person to take it from here.
Yes, I mean, the thing that you are trying to mention is us being a TSP, right? Just a technology service provider.
Yeah.
Fundamentally, TSP as a business, is or is starting to become a low margin business because there are too many players offering the same services to NBFCs in terms of just the platform play. There is much more money to be made by being a distributor and by being an intelligent distributor. We don't intend to just hive out our technology platform to other lenders to underwrite their customers and without us being a distributor there.
Okay. Good. Thank you. Thank you very much.
Thanks.
Thank you. A reminder, ladies and gentlemen, if you wish to ask a question, please press star and one. Once again, ladies and gentlemen, if you wish to ask a question, please press star and one. Our next question comes from the line of Pratik Shah, an investor. Please go ahead.
Yeah. Am I audible?
Yeah, you're audible.
Yeah, yeah. Thanks for taking my question, and congratulations, Angel team for putting a great set of numbers and increased market share. I have a couple of questions. The first one is, as we know that the company is in a process of hiring a new CEO, just wanted to check the status of that and by when we can expect this announcement. Second one is, how, you know, Angel One is incorporating machine learning and artificial intelligence in this broking service or any advisory service?
Process of looking out for a right candidate is on. It would be very difficult to put a timeline because we are looking at someone very senior and seasoned, but all said and done, there are the hiring agencies who are looking out for candidate. Second on use of AI, ML on broking or any other services, Jyoti, would like to take this question?
sure, DT. Hi.
Deepak can add, because Deepak has just joined, so maybe you can just give a perspective on our business, and Deepak can talk about, new technologies and everything, what he would be using.
Sure.
We use AI ML across the customer journeys on our platform. For example, just in this, in our release, we talked about customer support. We have leveraged LLM model with contextual data specific to us to help answer customer queries, and it has got a 70% success rate. Besides this, we also leverage it from our acquisition during KYC for various things like signature recognition, et cetera. Even for our activations, right? For churn management of clients, we figure out what is the right campaign or right campaign needed for a particular persona to get activated on the platform. Deepak, you want to. Deepak, if you'd like to add on this, your vision, strategy of seeing the world.
Yes, thank you very much. I'm very excited to be here today. I think as Jyoti mentioned, a lot of things are going on here. I see a lot of technology play, while we can use artificial intelligence, machine learning, data science, to kind of enhance customer engagement, experience, and further revenue increase for us. I'm looking into all the initiatives which are running right now and have a lot of ideas from the past. We have done journeys at Apple, in which we have a lot of customer base, and we use that halo effect, in which a customer comes in and then we push them on to various journeys. That's what we are planning to do it in Angel One.
I'm in process of building a strategy roadmap and using technology, I'm hoping we will be able to enhance customer engagement, experience, and revenues for us. Please hold on for more coming quarters, and we'll come up with exciting ways on how our customers get benefit. Thank you.
Yeah, thanks, sir. One more question, sir. Like, all we know that BSE has also introduced this derivative segment with the launching of Sensex and BANKEX, but we are still not supporting that. Any plans to introduce that with our Super App?
Yeah. Bhavin can take this question, and Ankit can add on product side.
Sure. Yes, the BSE has actually started the Sensex weekly options and the BANKEX as well. We have evaluated that, and we have started working on this. In the start of quarter three, we should be live or a little before that. There is an integration which is already started in there, in towards that as well. Ankit?
Yeah, yeah, nothing to add there. Yeah, yeah. Thanks a lot, sir, and all the best to Angel team for coming quarter.
Thanks. Thank you.
Thank you. Our next question comes from the line of Prathamesh with Pro Invest Nirmiti. Please go ahead.
Hello. Thank you for the opportunity. I wanted to know what the impact will be with the changes in the expiry on our order volumes. Weekly expiry like BSE and NSE.
Prathamesh, if you could please, lift your handset and ask your question.
Hello, am I audible?
Yeah, I can hear you now. Yeah.
Yeah. I wanted to understand what impact will be there on our order volumes, with the recent changes in the weekly expiries that have been done by NSE and BSE.
When this thing, weekly expiry increases, definitely there is some kind of an uptick on customers engagement and all that. Devender, you would like to answer this question?
Generally, when the weekly expiries are coming up, we have seen no change, improvements in line with market. I think what we are seeing is much more distributed behavior rather than concentrated behavior, is what we are able to see, and which is overall increasing the engagement of people as multiple instruments are getting distributed across the week. It is overall increasing the engagement of people in a much more focused way, which was concentrated earlier in nature and which is helping the overall business. We can't quantify, you know, how much impact it will bring, but it is a benefit for the overall business that we are able to see.
Okay. Oh, thank you. That's just one.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Dinesh Thakkar for closing comments.
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 at IR or SGA, our investor relationship advisor. Good day.
Thank you. On behalf of Angel One Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.