Focus on broking business helped us gain market share, SEBI’s new rules a positive | Angel Broking Interview

Angel Broking’s IPO has seen positive response so far from investors despite the bearish equity market sentiment that has taken broader markets down. With subscription reaching 161% so far on the last day of bidding for the issue, retail investors have already oversubscribed their portion of the Rs 600 crore issue. Angel Broking’s Managing Director Dinesh Thakkar and it’s CEO Vinay Agarwal, in an interview with Kshitij Bhargava of Financial Express Online, shed light on how they expect their average daily turnover to grow in the future, discuss SEBI’s new margin trading rules and talk about the next big thing that the tech-savvy broking house could offer to its customers.

Your broking revenue contributed 72% to the total revenue of the company, some argue that it makes you too dependent on a particular segment, how do you tackle that?

Dinesh Thakkar – We are primarily into stock broking so definitely all our revenue will come from broking and services around broking. We have been focused from the beginning, our aim is to serve retail customers and we want to cater to their needs when it comes to stock markets, derivatives, margin trading or commodities. So, primarily our revenue will continue to come from the broking segment but I don’t think it is a cause of worry. If you look at our revenue it comes from stock broking, commodity trading, and other avenues related to broking. Overall, I think being focused has helped us gain market share. 

How do you SEBI’s new margin trading rules affecting the broking industry?

Dinesh Thakkar – SEBI’s changes are not coming out of the blue. Regularly, from the day SEBI was formed, they have been working to make stock markets safer. There have been norms and margins introduced to safeguard investor interests. The F & O segment started in a similar manner, first there was no regulation on reporting on an intraday basis, then all brokers had to report intraday positions and that we have to take margin from customers. At that time there were a lot of noises about liquidity not being there, volumes being hit but if you look at the last 10-12 years, evidently volumes have spiked significantly. Now I think the new margin rule for the cash segment will help in increasing volumes, there might be initial reaction for a month or quarter but in the long-run it is a good move.  

Angel Broking’s ADTO has grown from around Rs 25,000 core in the first quarter of the previous fiscal to now at Rs 62,000 crore, where do you see this figure heading to?

Vinay Agarwal – There are two factors here, one is the retail industry ADTO growth and then our ADTO growth. Industry rate is growing at 30% CAGR which is a healthy growth. For Angel Broking, you can see that our customer acquisition is very robust. We have 15% market share in terms of new customer acquisition. Now because we have been gaining more customers, we are likely to see more share in the industry turnover. A good healthy growth is expected in this regard.

You have earlier stressed in Tier-2 and Tier-3 cities for client acquisition, are these still in focus?

Vinay Agarwal – Absolutely, 50% of our customers are from Tier-3 cities and 35% from Tier-2 cities. We have seen very healthy growth in tier-2 and tier-3 cities. The penetration in these cities is very low. In tier-1 penetration is 6% and in tier-3 it is half a percent. There are young people there who are willing to deal with their phones, they read a lot and are aware of the market and the companies, so we believe this is a secular trend for many years to come. 

India’s equity exposure has been low, lowest among major economies, is that a cause of worry?

Vinay Agarwal – If you look at the industry, there is a trend of higher percentage of household saving coming into equity as an asset class which is a clear positive. This gives us an indication that more people are looking to invest their money into equity as an asset class. We have seen the United Kingdom, where they were in the 1980s, when inflation was in control. Then in around 4-5 years, there was a huge surge for participation in equity as an asset class. I think the time has now come for India, it could have started or it could begin in two-three years, we don’t know but I think we can expect a similar kind of a run.  

Angel Broking has been banking on technology for far too long now, so what is the next big thing?

Dinesh Thakkar – I think Artificial Intelligence and machine learning will be the next big thing. We are using it for client journeys right now. We have been a tech-savvy broker. We have always looked at what users will need in the next few years and how to do it digitally.