Dinesh Thakkar, Chairman and MD (CMD), Angel One, talks about the customer base and active client additions of the company, Daily transactions, broking business, distribution business, strategy to increase margin and PAT, Crypto Currency and his outlook on the market among others during an exclusive interview with Zee Business’ Swati Khandelwal. Edited Excerpts:
Q: There is euphoria in the market as a lot of IPOs are coming due to which a lot of people are being attracted towards the market. What kind of customer base now and what kind of active client additions have you done in the last two months?
A: We disclose our numbers every month. We have acquired 4.5 lakh, new customers, in November 2021, i.e., it has increased by 200% on a year-on-year (YoY) basis. The total customer base has gone up to 73.2 lakh, which is a growth of almost 150% YoY.
At the same time, we are just not acquiring the customers but if you will have a look at the number of orders, we have disclosed it last month when we executed 57.5 million orders, which is a growth of almost 120%. The total growth is a result of digitisation. I think the rural population – Tier-II and Tier-III population – for the first time have got good access to the market.
The customers who are coming from these pockets are aged around 29-30 years who are digitally savvy and social media savvy. It is a generation that has started earning when the interest rate from a discrete asset like bank FD among others stands just around 4%-4.50%. I think, this awareness about the asset class, which is an equity asset class, can provide a compounding interest of around 14-15% and you can invest small amounts here.
So, it has created a different kind of boom in the industry. Factors like COVID among others have aggregated it but if seen then the upcoming new population is coming from the pocket – that we never saw – are coming directly to this market. So, I believe that the visible growth numbers are an initial indication. Digitisation of this industry is happening and a lot of growth is awaited in it.
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Q: What are the average monthly customer additions at present? How much market share have you gained in the Broking business in this Quarter? (market share of 9.3% in active clients on the NSE: as per reports )
A: In turnover, our market share in overall equity is around 21%, which is almost 5.50% YoY growth. In the commodity, our market share stood at 36% last month which is a substantial growth in the commodity market. Overall, the growth in the F&O segment in which youth are engaged in options trading or making long term investments. So, these segments have seen huge growth despite we saw changes in regulations, peak margin and lending norms.
But, we are seeing that digital brokers particularly Angel One is continuously improving their market share, not only in absolute number but in terms of market share of active customer base, acquisition of customers and turnover. Today, we have a market share of around 21%, which is a huge improvement from when we started digitisation and has increased by around 2x in the last two years.
Q: What’s the share of futures and options in daily transactions and what is the Ratio of F&O to cash usually for Angel one?
A: It will be difficult for me to provide a break-up, right now. But as I have said that most of the youth are coming to the market are doing in both the cash segment as well as options. So, our market share in option is around 24-25% and 15% in the cash.
Q: Broking business contributes around 95% to your business at present. Going forward, what is the target and how much other segments like distribution will contribute to the revenue going forward?
A: We have a long term strategy. If we will talk about the distribution business then we have changed our name from Angel Broking to Angel One with an aim to provide a complete experience to the youth who are coming on this app so that they can trade and invest. Going forward, by the quarter-end or the first quarter of the next financial year, we will introduce a new app, which we call a platform for Super App under which our customers can use different services like a mutual fund, insurance buying and lending product among others. It will take time in contributing to the revenue because the broking business has grown a lot.
The new customers entering into a mutual fund and we are mostly focusing on customers who will opt for SIP as they will genuinely create wealth. In this, we will introduce direct funds. So, it will take around 3-4 years in contributing to the revenue. But it is seen in overall terms the market share in SIP and insurance business then we will initially focus on increasing the market share but we will have to wait for 3-4 years to see its contribution in revenue and profits. We are seeing that the base of growth in broking is so huge that it will take at least 2-3 years to overcome it.
Q: What’s the strategy to increase margin and PAT? How do you plan to compete with discount brokers going ahead?
A: There are two things. First of all, I think there is nothing like discount broking. In this digitalisation, there has been a substantial cost reduction. After the initial cost that is incurred in it, the incremental expenses are not for services but is for acquisition. So, I think, it is affordable for the digital brokers to give a price which is very low and still may be profitable. The strategy to improve the margin and PAT is that if you have got a good scale then there are many operating levers in this business, like when a new customer is acquired then it involves an acquisition cost as I said but no service cost, so we can expand our margin. But initially, we will focus on providing good technology and apps to India. For the next four to five quarters, we will focus on investment in technology and increase the market share.
So, we will invest in increasing the market share as well as on the technology front. But, if you will look at the overall operating margin, we are around 46-47% and our focus will be that we are happy with 50%. With the expansion that is happening in the margin, we would like to spend on acquiring more market share and investing more on the technology front, so that we are able to give an app that is up almost 99.99%. We are able to give an app, as I have said India’s market is present in Tier-II, Tier-III and Tier-IV where the app can work on a very light bandwidth and also on the lower end smartphone. So, a lot of investment will be required in App and technology development.
Q: There is a new favourite Asset class these days which is being talked about a lot and it is Crypto. If Government decides to regulate Crypto then what kind of opportunity do you see in this space?
A: If Crypto is regulated by the government then it will be a very big opportunity because if the youth are attracted towards crypto, blockchain and all that. We are just waiting for the regulation to be formed. Any asset class that is listed on the exchange like when commodity came, we marketed it aggressively and sold it.
Today, as you know that last month our market share stood at 36%. So, any asset class that will be introduced that interests the youth and they see an opportunity there then Angle One will be the first to achieve a leadership position in that but provided regulations are there in place.
Q: Your view on the market, which cooled off a bit after touching the lifetime highs and is strengthening again? What is driving the markets currently and what are the investment themes or ideas that you would like to share with us?
A: Generally, I focus more on the business and I do not track the sectors a lot. But if we will have a look at the economy then because of the lockdown the supply-demand chain has not aligned and people are struggling a lot to come back to the work.
So, after the COVID wave and digitisation, big growth will be visible globally and particularly in India. But I feel that the temporary teething phase of inflation among others will be in place but overall I feel that the market and the economy at least in the next 4-5 years will provide a good compounding.
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