5Paisa Capital Ltd

NSE:5PAISA

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Good afternoon, ladies and gentlemen. I'm Soumya, moderator for the conference call. Welcome to 5paisa Capital Limited Q1 FY '25 Earnings Conference Call. We have with us today Mr. Gourav Munjal, Whole Time Director and CFO; Mr. Ameya Agnihotri, Whole Time Director and CTO; and Mr. Mehul Jain, Product Head from 5paisa Capital Limited.

[Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to the management. Thank you, and over to you.

[Gourav Munjal, executive]

Hello, everyone. Good afternoon, and welcome to our Q1 FY '25 earnings call. On this call, I'm joined with Mr. Ameya Agnihotri, Whole-Time Director and CTO; and Mr. Mehul Jain, our Product Head.

Quarter 1 FY '25 has been an excellent quarter for the investors as well as broking industry. During this quarter, both indices, Nifty and Sensex, has touched all-time high and generated good returns for the investors. And also, overall industry saw a significant addition of more than 11 million demat accounts. The total demat accounts of this country now stood at 16.22 crores. In quarter 1 FY '25, we also acquired 2.34 lakh customers, reflecting a 116% growth Y-on-Y, and our total customer base has reached to 44.7 lakhs.

The small drop in acquisition is a result of our conscious goal that we took from last from 1 to 2 months to improve the quality of customers which we are acquiring. During the quarter, our ADTO, which stands for average daily turnover, grew to INR 3.67 trillion, a growth of 27% Y-on-Y. Our client funding book stood at INR 271 crores, a growth of 20% Y-on-Y, and our mutual fund AUM reached to INR 1,124 crores, a 90% growth Y-on-Y.

Coming to our financial performance. In quarter 1 FY '25, our broking revenue has grown to INR 40 crore, a growth of 11% Y-on-Y. Allied income grew to INR 29.7 crores, a growth of 27% Y-on-Y. And overall, our total revenue stood at INR 102 crore, which is a growth of 21% Y-on-Y.

Our employee benefit expense of INR 13.6 crores includes the impact of annual increment of employees, RSU/ESOP cost and proportionate of annual variable performances incentives. In this quarter, this also includes a onetime positive impact of INR 8.66 crores with respect to unvested ESOP and RSU cost as per Indian Accounting Standard 102.

With focused approach on quality customer acquisition, product improvement and cost optimization, we are happy to report that we have achieved our lifetime highest ever PAT of INR 20.1 crores, which is a growth of 248% quarter-on-quarter and 39% Y-on-Y, along with PAT margins of 20%.

At last, I want to assure investors that we will continue to work towards product development, investment in technology, customer experience, cost optimization, and we are confident that the same will accelerate our revenue and profitability in coming quarters.

Mr. Ameya Agnihotri, our CTO, will now take you through our technology and product key initiatives. And after that, we will be happy to answer your all questions. Ameya, over to you.

[Ameya Agnihotri, executive]

Hi, everyone. I'm Ameya Agnihotri, CTO and Whole Time Director of 5paisa Capital Limited. When it comes to products, our primary focus is development, is to prioritize digital innovation and maintain a technology-first approach. We continue to make significant advances in our technology and product.

Our mobile app now offers enhanced features for option traders, including straddle chains, bulk order placement from the option chain and seamless execution of custom option strategies. In our FnO 360 product, which is our dedicated platform for derivatives, users can access basket strategy advised by our technical research team with defined parameters like max profit, max loss and breakeven points and execute them in single click.

We have also introduced a new feature for our web platform users, scan and pay via QR code for quick and easy fund transfers using our UPI app. It's designed to make adding funds faster and more convenient than ever. In our pursuit to provide best-in-class product experience to our users, we have made significant progress there as well.

We are happy to report that our revamped mobile app for both iOS and Android will be live and available to our users by end of Q2 FY '25. TradeStation 2.0, our revamped web platform, previously in beta, is now accessible to all users, offering enhanced user interface and a smoother experience for high-end traders. We will continue our pursuit of technical excellence and modernize application and infrastructure in coming quarters.

With summary of our performance, as explained by Gourav and me, I open the floor for further discussion. Please feel free to ask questions if you have any. Operator, you may proceed.

[Operator]

[Operator Instructions] Our first question comes from [ Vidur Dayal ], an individual investor. There is no response from the line. Our next question comes from Aaliya Sarnobat from MOFSL.

[Aaliya Sarnobat, analyst]

I wanted to know what is the market share of cash and F&O.

[Gourav Munjal, executive]

Our market share stand between 2% to 2.5% for both, cash segment as well as F&O segment.

[Operator]

[Operator Instructions] We have a follow-up question from Vidur Dayal, an individual investor. There is no response from the line. [Operator Instructions] Our next question comes from [ Sumit Jankar ], an individual investor.

[Unknown Attendee]

My question is related to lending. Some players are entering into the lending business. So going forward for next 5 to 10 years, how do you see this business growing in terms of the broking -- along with the broking business for cross-selling income -- in terms of cross-selling income?

[Gourav Munjal, executive]

So yes, it is an important aspect for the cross-selling. But right now, 5paisa is fully concentrating on the broking business. As of now, there is no plan to do any lending business. And that's our stand as of now.

[Operator]

Our next question comes from Vidur Dayal, an individual investor.

[Unknown Attendee]

Can you hear me?

[Operator]

Yes, sir, we can hear you.

[Gourav Munjal, executive]

Yes, yes.

[Unknown Attendee]

Yes. My first question is, could you help us understand the circumstances around the departure of Narayan Gangadhar and is he still part of the IIFL Group? Second question is that with ESOP reversion that has happened, is this linked to the ESOPs that were given to Narayan Gangadhar?

And the third question I had was that in one of the conference calls, you had said that you're looking to double our market share from 3.3%. Then in the following quarter, our market share, I think, dipped to 2.5%. So are we still aiming at that 6%, 7% sort of market share?

And my final question is that all this regulatory action around high-frequency traders and options trading and curbing of all this, we haven't really been able to grow the company very well in the last 4 years when the market has exploded, right? So in case there are curbs, do we have any strategies for diversification of our revenue? Because if the market itself starts to slow down in terms of customer acquisitions, then how are we going to play in this market?

[Gourav Munjal, executive]

Okay. So Mr. Narayan Gangadhar is still a part of IIFL Group, and we have disclosed in -- as per in our exchange filing also. And yes, the major portion of -- in this quarter reversion impact of RSU is related to the Mr. Narayan Gangadhar-sir and some other employees also.

Regarding the regulatory changes, yes, actually, we do have a 16 crore demat account industry, and it is growing 30% annually. So the regulators are bound to create these kind of steps. But we have seen in the past that whatever the changes has happened, it has not impacted much on volumes. Rather, it has grown in the past also.

If you see our, that peak margin, then segregation of client securities, then upstreaming of clients and then quarterly payout, and now we have another regulations may come. But every -- but we have seen in every steps, the volume has grown up.

Coming to this regulation side, which is anticipated that now there will be a INR 20 lakh minimum value will be required for option selling, to enter into option contract and there will be a few expiries. We feel that, yes, it can impact our volumes. But we need to see at what extent it is going to impact.

And lastly, yes, we had 3% to 3.5% of market share earlier. And over the last 1 year, it has fallen to 2% to 2.5%. We are still continue to working towards 6% market share. And for that, we understand that only the quality acquisitions will work. We don't want to acquire just for the sake of the numbers. And we are really having a diversified strategy internally and the key metrics in terms of RPC, CAC, so that our ADTO market share will grow in future.

I hope, Vidur, I answered all the questions.

[Unknown Attendee]

Yes. Can you still hear me?

[Gourav Munjal, executive]

Yes, yes.

[Unknown Attendee]

Yes. Just one final question for Ameya that Narayan also spoke about how our product had not seen any investment for a long time. The iOS and the Android app didn't work in sync and were separately built up. The web application didn't -- the website also didn't work very well.

So is there any update on the product? Are we -- do we think we have a robust product or we still think that we're lagging in terms of having a product which we can target for the 6%, 7% market share that you're talking about?

And I understand the answers that you're giving, but please understand that the company has been dropping market share for a while. So generic comments don't inspire confidence. And is there a search for a new CEO? When is the new CEO expected?

[Ameya Agnihotri, executive]

Sure. So I will answer the technological questions. Yes, I'll answer the tech related parts, the CEO related part, Gourav will take up.

So like Narayan had mentioned earlier, we did not have updated apps for iOS and Android. As articulated earlier, our mobile app for iOS and Android are ready and are in sync. And by end of Q2 FY '25, we are -- they will both be available for all the retail users. And the effort has already been underway and they are ready. So there is a good progress that we have made there.

Apart from that, in terms of our web experience, TradeStation 2.0 which is our revamped web platform, previously in beta, is now available for all the users. And that also is an enhanced user experience and smoother experience for high-end traders. So in terms of revamping and investing in our technology, particularly user experiences for mobile as well as for web, we have made significant progress. Over to you, Gourav.

[Gourav Munjal, executive]

Second, regarding that CEO, yes, the search is on and we will update the investors as soon as we got the clarification on that.

[Operator]

[Operator Instructions] There are no further questions. Now I hand over the floor to the management for closing comments.

[Gourav Munjal, executive]

Yes. Thank you for joining us on the call today. I hope we have been able to answer all your queries. If you require any assistance or have further queries, please feel free to get in touch and mail us at [e-mail].

[Operator]

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may all disconnect your lines now. Thank you, and have a pleasant evening.