The Rs 600-crore initial public offering of Angel Broking will open for subscription today, September 22, at a price band at Rs 305-306 per share.
The public issue, which will close on September 24, comprises a fresh issue of Rs 300 crore and an offer for sale of Rs 300 crore by promoters and investors. The company is going to use fresh issue proceeds for working capital requirements and general corporate purposes.
All brokerages recommended subscribing to the public offer citing incremental growth in market share in terms of active clients, consistent addition in customer base, increased retail participation in capital markets after pandemic etc.
Angel Broking is the first broking company to come out with IPO plans in the last ten years.
"Angel Broking has the ability to use technology to cut down on costs which gives it an edge against traditional brokers. It has witnessed consistent growth in customer base helping it command a market share of 6.3 percent, making it the fourth largest broker in terms of active clients. The pandemic has been a boon for the broking business as the number of retail investors has increased substantially," Nirali Shah, Senior Research Analyst at Samco Securities told Moneycontrol.
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"But from a valuation perspective, Angel Broking is valued at a price to earnings multiple of 26.6 times which is slightly higher than expected. The company is well placed when compared to its peers and hence we recommend market participants to subscribe to this IPO too for listing gains only," she said.
Angel Broking is one of the leading players among the low-cost brokerages in India. It also has a strong management team with more than two decades of experience.
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The company provides broking and allied services through (i) online and digital platforms, and (ii) network of over 11,000 authorised persons, as on June 2020. The company managed Rs 13,254 crore in client assets and over 21.5 lakh operational broking accounts as on June 2020.
"The broking house has seen incremental growth in market share backed by digital and technology led initiatives which are expected to support company's overall growth in the industry. Major sourcing of accounts through online platform along with available research and ARQ based advisory on digital platforms has created interests amongst its existing customers. Major client sourcing from tier 3 cities also indicates potential opportunity in Indian markets," KR Choksey said.
The brokerage believes the company will continue to update products and services as per industry requirements to be competitive in the industry while pursuing to deliver high return on equity (ROE) for the company (over 14 percent since FY18).
Angel Broking has developed its Pan-India presence of 18,649 Pincodes (96.9 percent existence across India) with a healthy network of 11,000 authorised persons. However, its online and digital platform has enabled largest client sourcing in the recent times. Average client acquisition has improved to 1,15,565 clients per month in Q1 FY21 from 46,676 clients per month during FY20 backed by enhanced participation observed from retail equity investors.
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Investment in technology and research has engaged the young generation who are the end users of the company's integrated digital platforms (mobile app, Angel Broking web, Angel BEE app, ARQ advisory & NXT platform). Also, enhanced mobile network reachability in the country’s remote areas has delivered strong client acquisition from tier 2/3 cities.
Further, management believes under penetration in Indian financial markets provides a huge opportunity for growth in future.
The company, over the last 3 years, has acquired 85.2 percent of its clients primarily through digital platforms.
Anand Rathi believes Angel Broking IPO & OFS is fairly priced at current price band, considering its financial performance and growth prospects. The brokerage recommended subscribe for the IPO.
Angel Broking has reported a 3.6 percent fall in revenue at Rs 710.5 crore in FY20 compared to the previous year. Revenue in Q1 FY21 stood at Rs 236.1 crore. Profit grew by 12.9 percent YoY to Rs 86.6 crore in FY20 and in Q1 FY21, it was at Rs 38.2 crore.
In FY20, the company reported EBITDA of Rs 154 crore with margin at 22 percent due to healthy average daily turnover (ADTO) growth (led by flat brokerage) and controlled operating expenses.
Brokerage revenue formed 69.54 percent of its total revenue whereas other revenue from lending activities, income from depository operations, portfolio management services, income from distribution, and other activities formed 30.46 percent of the total revenue in FY20.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.