Anand Rathi Stock Brokers taps IPO to expand margin trading, Chairman targets to keep leverage conservative

Anand Rathi Share and Stock Brokers CMD outlines post-IPO strategy

Anand Rathi Share and Stock Brokers, the second company from the Anand Rathi Group to tap the public market, opened its Rs 745 crore initial public offering on September 23.

The issue, anchored by marquee investors such as Morgan Stanley India Investment Fund, PineBridge Global, HDFC Mutual Fund, Kotak Mutual Fund and Quant Mutual Fund, will aim to raise about Rs 550 crore for margin-trading facility and other working capital requirements.

In an interview to Moneycontrol, Chairman & Managing Director Pradeep Gupta said, “Our margin-trading facility is designed to help clients boost returns without over-leveraging.”

“About 75% of the book is below Rs 1 crore and concentrated in Nifty 500 stocks, and we’ve had no delinquencies since inception. The IPO proceeds will largely strengthen this well-spread, well-managed book to meet rising demand," Pradeep Gupta said.

F&O Exposure and Sebi Regulations

Anand Rathi’s exposure to equity derivatives - including F&O, commodities and currency trading – contributes 20-25% of its total revenue. Chairman Gupta said the broking firm’s core focus remains AUM growth and advisory-led client engagement rather than chasing trading volume.

With Sebi tightening rules around weekly expiry contracts, discount brokers face potential revenue impact, however, Anand Rathi chairman said the company is well-positioned to navigate the change.

“Derivative trading contributes a relatively small portion of our revenue, and we are not dependent on market turnover for income. Our strategy is focused on expanding the investable surplus of our clients while staying fully compliant with Sebi regulations,” Anand Rathi’s CMD said.

Through conservative leverage limits and spreading derivative exposure across a broad set of stocks, Anand Rathi is targetting to offset volatility risk while continuing to grow the MTF and advisory business.

Also Read: Anand Rathi Share and Stock Brokers IPO: Should investors subscribe to it?

Revenue Mix and Outlook

Gupta said the brokerage currently earns roughly 60 percent of revenue from broking and 40 percent from non-broking services, which include mutual fund distribution, PMS, AIFs and corporate bonds.

“We are consciously moving toward a 50:50 revenue mix,” Gupta said, calling the non-broking side “largely annuity-driven, offering recurring income tied to assets under management rather than market volumes.”

The company has delivered a 34 percent revenue CAGR and around 65 percent profit growth between FY23 and FY25, and Gupta believes “those trends are sustainable as AUM keeps compounding.”

Debt–Equity Discipline

Anand Rathi’s debt-to-equity ratio stands at 1.8 times. “Even after expanding the margin book, we will keep leverage below 2x,” the chairman said, adding that IPO proceeds will further strengthen the balance sheet.

Also Read: Anand Rathi Share and Stock Brokers IPO subscribed 12% on Day 1 so far: Should you apply?

Strategy Versus Discount Brokers

While many new-age players chase scale with ultra-low brokerage, Anand Rathi has chosen a strategy that is more AUM driven.

“Our focus is on long-term investor relationships and high retention, not just trading volumes and market share,” the chairman said. “Technology already drives more than a third of broking revenue, but relationship managers are key to guiding clients and cross-selling wealth products. That combination sets us apart from pure-play discount platforms.”

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