Fundamental Analysis of Angel One: The number of retail investors in India boomed in recent years with the onset of the pandemic. It brought a new set of small and big traders and investors learning and implementing their skills in their free time. This benefitted multiple companies which earn from activities in the financial markets.
In this article, we’ll perform a fundamental analysis of Angel One Ltd., an Indian stock broking company that got listed in 2020, and try to assess its future prospects.
Fundamental Analysis of Angel One
We’ll start off our analysis by getting ourselves acquainted with the history and business of Angel One. Later, we’ll look at the stock broking industry landscape in India. Then we’ll move at pace through the financials of the stock. A highlight of the future plans and a summary conclude the article at the end.
Company Overview
Angel One Ltd. (formerly Angel One Broking Ltd.) was founded by Dinesh D. Thakkar in 1996. Fast forward to the present date, it is one of the most prominent retail stock broking companies in India.
Angel One offers stock broking, advisory, margin funding, loans against shares, and other financial services through its mobile app, website, and authorized persons.
The stock broker employs over 3,300 people. In addition to this, it has the largest authorized persons network of close to 18,000 under its digital platform Angel NXT which helps the company to bring business while creating indirect employment opportunities at the same time.
Its client base stands at 13.8 million, accounting for 12% of the total Demat accounts held in the country. Furthermore, Angel One ranks second in terms of NSE active members having 4.3 million or 13.1% of the total active members. The company has been gaining market share across various segments for the last few quarters.
We got a good overview of the business and sector leadership of the company. Let us learn more about its business in the next section on the business segments of Angel One.
Business Segments
For reporting purposes, Angel One organizes its business into two segments:
- The broking and related services division earns from broking, advisory, third-party product distribution, margin trade facility, and other fee-based services.
- The finance and investing activities division houses the financial and investment activities of the company.
The finance and investing (F&I) segment is fairly small compared to the broking business of Angel One in terms of revenues and profits both. In FY23, the F&I division clocked a revenue and profit before tax of Rs 7.36 crore and Rs 6.19 crore respectively.
However, for internal and investor reporting, it segregates its revenue mix into various categories: traditional broking business, interest on margin facility & loan against securities, depository, distribution fee earned from selling of financial products, and others.
The image below highlighting the quarterly revenue mix of Angel One gives a good idea of the revenue diversity of the company.
Industry Overview
The number of Demat accounts in India grew at a CAGR of 21% during FY 2015-22 period to 90 million in 2022. During the same period, the active clients on NSE also increased from 5.1 million to 36 million showcasing higher participation of retail investors in the stock market.
Retail investors participate in financial markets through depository participants and stock broking companies. Thus, higher activity and more investors lead to the growth of the stockbroking industry.
The Demat account penetration in India steadily increased from only 1.7% in 2012 to 8.1% in 2021. Despite the growth, the nation is quite behind other countries such as China and the US where it is 15% (2023 figure) and 85% (2018 figure) respectively. This points to the large headroom for the growth ahead.
Going forward, growth in various key metrics such as internet penetration, adoption of handheld devices, disposable income, internet speed, and financial literacy is expected to lead the evolution of the stock broking industry in India.
Having learned about the huge prospects for Indian stock brokers, let us move on to study the earnings growth for our fundamental analysis of Angel One.
Angel One – Financials
Revenue and Net Profit Growth
In the previous six years, the operating revenue of Angel One quadrupled from Rs 764 crore in FY18 to Rs 3,002 crore in FY23. Meanwhile, its net profit increased eight times from Rs 110 crore to Rs 890 crore.
It may look like this sharp growth came because of the increased participation of retail investors as the Covid-19 led-pandemic lockdown resulted in idle time. This is not altogether true.
The management of Angel One also took necessary steps to bring business. For instance, even though the industry de-grew in FY23, Angel One continued to grow its client base, increase revenues and improve product offerings.
The table below highlights the operating revenue and net profit growth of Angel One for the past six fiscals.
| Fiscal Year | Operating Revenue | Net Profit |
| 2023 | 3,002 | 890 |
| 2022 | 2,291 | 626 |
| 2021 | 1,264 | 298 |
| 2020 | 725 | 87 |
| 2019 | 758 | 83 |
| 2018 | 764 | 110 |
Margin Analysis
Lately, Angel One has transitioned from a traditional broking business with a retail presence to a digital-led enterprise with a strong product suite. This has helped Angel One to grow at a fast pace while registering a sharp expansion in its profit margins.
This point is further strengthened by the decline in the cost to net income which came down to 48% in FY23 from 54% in FY21 (when the company started to focus on improving its digital stack).
The table below highlights the steep improvement in the operating profit margin and net profit margin of Angel One over the past six financial years.
| Fiscal Year | Operating Profit Margin | Net Profit Margin |
| 2023 | 39.7 | 29.7 |
| 2022 | 37.1 | 27.7 |
| 2021 | 35.6 | 23.5 |
| 2020 | 23.1 | 11.4 |
| 2019 | 25.9 | 10.5 |
| 2018 | 33.3 | 14.0 |
Return Ratios: RoE and RoCE
Angel One as a stock broking company is a highly profitable business with high return ratios. Its FY23, its return on equity (RoE) stood at 47.5% while its return on capital employed (RoCE) was 44.2%.
In the latest year, the discrepancy has reduced between the two return ratios was a result of debt reduction.
Overall, the growth in return ratios of Angel One demonstrates the strong underlying business model of the company.
The figures below present the RoE and RoCE of Angel One for the past six years.
| Fiscal Year | RoE | RoCE |
| 2023 | 47.5 | 44.2 |
| 2022 | 46.0 | 35.5 |
| 2021 | 34.6 | 26.8 |
| 2020 | 15.5 | 13.6 |
| 2019 | 16.6 | 12.9 |
| 2018 | 25.5 | 18.4 |
Debt / Equity and Interest Coverage
The growth in earnings has aided Angel One to deleverage itself over the last six fiscals. The debt-to-equity ratio has come down from its height of 2.4 in FY18 to only 0.4 in FY23. The interest coverage ratio improved along the same lines from 2.7 to 14.4 during the period making Angel One a financially strong stock.
The table below showcases the improvement in the debt-to-equity ratio and interest coverage ratio of Angel One over the last few years.
| Fiscal Year | Debt / Equity | Interest Coverage |
| 2023 | 0.4 | 14.4 |
| 2022 | 0.8 | 12.7 |
| 2021 | 1.0 | 12.0 |
| 2020 | 0.8 | 3.4 |
| 2019 | 1.6 | 2.9 |
| 2018 | 2.4 | 2.7 |
Shareholding Pattern of Angel One
The company had its IPO in September 2020 raising Rs 600 Crore as a mix of an offer for sale and fresh issuance. As per the recent shareholding data available for March 2023, the promoters hold a 38.48% stake in the company. FIIs and DIIs own 16.61% and 9.73% stakes in the company respectively. The balance of 35.17% lies with public shareholders.
During the March 2023 quarter, the promoters marginally reduced their stake by 5.2% while the public shareholding increased by 5.4%.
Future Plans Of Angel One
So far we looked at the previous fiscals data for our fundamental analysis of Angel One. In this section, we’ll try to get a sense of what lies ahead for the company and its investors.
- Angel One recently launched its Super App as a single-app solution for all investing, trading, mutual fund investing, insurance, loans, and fixed-income needs. The app uses data science, AI, and ML models to offer a personalized experience.
- The Super App further aids in distributing mutual funds because of its simplified user interface. This has resulted in a doubling of new monthly SIP registrations organically.
- The company has entered into partnerships with various other fintech players such as Smallcase, Sensibull, and Vested to develop a broader set of offerings for its customers.
Key Metrics
We are almost at the end of our fundamental analysis of Angel One. Let us take a look at some of the key metrics of the stock.
| CMP | ₹1,234 | Market Cap (Cr.) | ₹10,300 |
| EPS | ₹107 | Stock P/E | 12 |
| RoCE | 44.2% | RoE | 47.5% |
| Promoter Holding | 43.7% | Book Value | ₹259 |
| Debt to Equity | 0.36 | Price to Book Value | 4.7 |
| Net Profit Margin | 29.7% | Operating Profit Margin | 39.7% |
In Conclusion
As we conclude our fundamental analysis of Angel One, we can say that the company has grown steadily over the years into a strong player. Furthermore, such a large total addressable market allows plenty of room for various players like Zerodha, Upstox, etc. to operate.
As the stock trades at an attractive P/E of 12, it will be interesting to note if the growth in earnings can help with the re-rating of the company. Do you think Angel One will be able to challenge the likes of Zerodha and Upstox? What’s your take on this company? How about we continue our conversation in the comments below?
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