IPO’s are at a boom right now. We covered all the details of CAMS IPO you wanted to know before it was launched a few days back. Today, we are going to talk about the Initial Public Offering (IPO) of Angel Broking.
The Angel Broking public offer is the 8th IPO in 2020, and the 7th after COVID-19 lockdown. SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Happiest Minds, Route Mobile, Chemcon Speciality Chemicals and Computer Age Management Services (CAMS) are the previous seven companies to launch their IPO this year.
About the company
Angel Broking Ltd is one of India’s oldest stockbroking houses. It was incorporated in 1996. It provides broking, margin funding, advisory and financial services. The company also conducts research services and gives out investment advice.
Currently, Angel Broking is the fourth largest broker on NSE (in terms of active clients) with a market share of 6.3% as of June 2020. It has several applications like Angel Broking Mobile, Angel BEE, SpeedPro and NXT. As of June 30, 2020, Angel Broking mobile application had more than 4.3 million downloads. Also, it’s Angel BEE mobile application had nearly 1 million downloads.
The company was forced into adopting discount broking system, after the coming of new age brokers like Zerodha.
IPO Details
Angel Broking plans to raise to Rs 600 crore through the book-building issue. It will be a fresh issue of Rs 300 crore and an offer for sale of Rs 300 crore. Offer for sale means that the current promoters of the company are getting an exit. On Monday, Angel Broking raised nearly Rs 180 crore from more than 20 anchor investors. They have been allotted 58.8 lakh shares for Rs 306 each.
The quota for retail investors is fixed at 35%. QIB and NII quota are fixed at 50% and 15%. The leading book managers for this IPO are ICICI Securities Ltd, Edelweiss Financial Services Ltd and SBI Capital Markets Ltd.
One market lot consists of 49 shares. For retail investors, the minimum lot is 1 and the maximum lot is 13. That means a retail investor has to pay at least Rs 14,945 to bid for the issue. Maximum limit says that a retail investor cannot invest more than Rs 1,94,922 (13 Lots X 49 Shares X Price). The tentative date for IPO’s listing date is 5th October 2020.
| IPO Date | Sep 22, 2020 – Sep 24, 2020 |
| Issue Type | Book Built Issue IPO |
| Issue Size | Up to Rs 600 crore |
| Fresh Issue | Up to Rs 300 crore |
| Offer for Sale | Up to Rs 300 crore |
| Face Value | Rs 10 per equity share |
| IPO Price | Rs 305 to Rs 306 per equity share |
| Market Lot | 49 Shares |
| Min Order Quantity | 49 Shares |
| Listing At | BSE, NSE |
Financial Highlights
Angel Broking’s total revenue from operations was Rs 724.62 crore in FY20. Total revenue for the month ending June or Q1FY21 was Rs 238.42 crore. During this period, Angel Broking earned 14.65% of the income from interests and 85.21% from fees and commissions. As of June 30, 2020, they have more than 21.5 lakh operational broking accounts.
Angel Broking’s Revenue and Profit After Tax is growing at a CAGR of 15% and 32% respectively. Their ROE has remained stable at 15.2 from 2019 to 2020, which is nothing extra-ordinary. The broking firm’s client base has increased from 10.6 lakh in FY18 to 21.5 lakh as on June 2020. Thus, at a CAGR of 38.61%, which even though it looks good is not as good as peers. In the first quarter of FY21, they have seen a monthly client addition of 1.15 lakh clients on an average.
| 2017-18 | 2018-19 | 2019-20 | |
| Revenue | 738.5 | 737 | 710.5 |
| PAT | 101.1 | 76.7 | 86.6 |
| EPS | 14.04 | 10.65 | 12.03 |
The Pros
- Angel Broking is the fourth largest broking house based on active clients after Zerodha, ICICI Securities and RKSV (Upstox).
- Robust client base through the online and digital platform. They also have a strong sub-broker network.
- Track record of strong financial performance over the years.
- Ability to use technology to cut down on costs which gives them a larger net profit margin.
- Huge untapped brokerage industry. Retail trading has taken a quantum leap. Domestic broking industry’s revenue has increased by 10.5% CAGR between FY15-FY20.
- Experienced management team leading the business.
The Cons
- A lot of competition in the market already. Its listed peers are ICICI Securities Ltd., Geojit Financial Services Ltd., IIFL Holdings Ltd., Motilal Oswal Financial Services Ltd. and JM Financial Services Ltd. Its unlisted peers are Zerodha, RKSV Securities and 5Paisa Capital, etc. New age brokers are coming in with newer and faster tech faced products which Angel Broking may find hard to follow.
- Their valuation is on a bit higher side. Its valuation is 26.84 times FY20 earnings.
- Emerging low-cost brokers will pile more pressure on the company in the future to retain their clients.
Do make your own studies before investing in any company. To get a complete idea of the company, you can find the red herring prospectus submitted by Angel Broking, here.
