Angel One steady on client acquisition, but active client base needs monitoring

  • While operational performance appears strong there are a few concerns on growth in active clients. With macroeconomic uncertainties, there is a slowdown in retail participation in the equity market. If this trend persists, it may impact client acquisition and Angel One’s overall growth

Bavadharini KS
Updated8 May 2023, 02:40 PM IST
Angel One’s market share in retail turnover across segments grew 70 bps month-on-month to 22.6%. (File Photo: Reuters)
Angel One’s market share in retail turnover across segments grew 70 bps month-on-month to 22.6%. (File Photo: Reuters)

Shares of Angel One Ltd have risen 12% from their 52-week lows seen on 1 March. A large portion of this rise can be attributed to the broking company’s February business update. Gross client addition rose 15% month-on-month to 0.45 million - the highest since May 2022, as per a report by Motilal Oswal Financial Services. 

Further, total client base rose 3.4% sequentially to 13.3 million last month. The number of orders per day was higher by 2% month-on-month at 4.2 million, again the highest ever, pointed out Motilal Oswal.

As such, it remains to be seen if customer activation ratio sees an improvement in the coming quarters. This ratio indicates the number of active clients in the company’s overall client base. The ratio was at 33% in the December quarter (Q3FY23), staying under pressure on account of volatile market conditions, according to HDFC Securities Q3 review report. “While the customer addition run rate remains healthy, the poor activation ratio is reflected in a 10% QoQ dip in average revenue-generating orders per customer,” according to the HDFC Securities report.

Coming to the February performance, Angel One’s market share in retail turnover across segments grew 70 basis points (bps) month-on-month to 22.6%. One basis point is one-hundredth of a percentage point. This includes equity, cash, futures and options, and commodity. While the cash segment saw a 23bps sequential drop in market share to 12.7% in February, the commodity segment recorded a sharp improvement of 573bps to 56.9%. This growth was led by 27.7% increase in average daily turnover (ADTO) of the segment. Angel One’s overall ADTO saw a 3.2% increase on a monthly basis.

While the company’s operational performance appears strong there are a few concerns on growth in active clients. With macroeconomic uncertainties, there is a slowdown in retail participation in the equity market. If this trend persists, it may impact client acquisition and Angel One’s overall growth.

Further, the possible impact on business momentum on account of the exit of the company’s CEO Narayan Gangadhar, is a key risk, noted ICICI Securities analysts in a report. 

Additionally, regulatory risks could come from possible impact on float income on account of proposed blocking of funds for trading in secondary markets. This, along with targeted action to curb the rising derivatives volumes on the exchanges are key risks for the Angel One stock, according to analysts from ICICI Securities.

Having said that, as per the company’s Q3 statements, the revenue contributed by mature clients--who have been with the broking firm for more than two years--is slowly increasing, indicating the longevity of clients. This bodes well for long-term revenue growth outlook. Angel One is among top players with the highest active client base in NSE.

To be sure, despite the recent appreciation in share price, the Angel One stock is down as much as 11% over the last one year.

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First Published:8 May 2023, 02:40 PM IST
HomeMarketsMark To MarketAngel One steady on client acquisition, but active client base needs monitoring

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