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Ladies and gentlemen, good day and welcome to the Angel One Limited Q1 FY '24 Earnings Conference Call.
[Operator Instructions] Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.
I now hand the conference over to Mr. Hitul Gutka from Angel One Limited. Thank you.
And over to you, sir.
Thank you, Ryan. Good morning and welcome, everyone. Thank you for joining us today to discuss Angel One's Q1 FY '24 financial and business performance.
The recording of today's earnings call and transcript will be uploaded on our website, under the Investor Relations section. The financial results, investor presentation and the press release are also available on the website.
For today's call, Angel One is represented by Dinesh Thakkar, Chairman and Managing Director; Vineet Agrawal, CFO. We also have the other senior leadership team of Angel One on the call, along with SGA, our IR consultants. The leadership team will give us a brief overview of the operational and the financial performance of the quarter gone by, followed by a Q&A session.
Please note that there may be certain forward-looking statements during the call, which must be viewed in aggregate with the risks that the company faces.
With this brief introduction, I now invite Dinesh Thakkar for his opening remarks.
Thank you, Hitul. Good morning, everyone.
I am happy to share that Angel One has continued to deliver strong performance. And I will take you through some of the key development of the quarter and important initiative we have lined up during the financial year. Vineet will walk you through our financial performance thereafter.
During the quarter, we maintained our focus on investing in technology and product to offer our clients a seamless experience on all of our digital platforms. We endeavored to develop a user-friendly platform for new-to-market clients while making it [ swift for experienced players ]. We continued to refine our customer journey on our Super App, [ shipping out ] key functionalities and enhancements regularly. This has led to a further improvement in our overall NPS to historic high. I am happy to share that Angel One features in the top-15 club of free finance apps across Playstore and app store, outperforming many of our peers as we compete with banking, payment, lending, wealth apps. We'll be rolling out several exciting features this year such as the always-on order feature which will enable clients to place orders at any time of the day, including even when they are out of the network, thus improving engagement with our app. We are also developing an advanced conditional order platform on which a statement will be translated to an order via a large language model.
We have further enhanced our SmartStore, a marketplace offering a wide range of exclusive rule-based fintech apps catering to clients' diverse needs. Its integration with our smart API facilitates [ trade execution ] for clients. In addition, the SmartStore provides educational resources, including blogs and webinars, that keep clients updated with the latest trend and insights in the investment space. We are in the process of enhancing the SmartStore basket in a manner that is relevant and comprehensive across all the financial needs of our customers.
Angel One is a dominant retail-focused fintech platform with a large and growing client base. With our focus on a more comprehensive financial services playbook, we commissioned the direct mutual fund journey on the Super App, which has been a resounding success. This model has witnessed a fourfold growth in registered SIP to over 430,000 in quarter 1 FY '24 over a sequential quarter. I am happy to share that Angel One is amongst top 2 players in India in terms of incremental registered SIP in June 2023.
Next, we are building partnerships and journeys to operationalize the distribution of consumer credit products, which is expected to go live over the course of the year. This year, we have planned a formidable brand campaign to enhance awareness of our full-stack fintech platform, which aims to address all our customers' financial needs and aspirations. Our network of authorized person, AP, the affiliate business channel, remains one of the important growth engine in the business. We continue to dominate the industry with the largest network of authorized persons in the country at over 21,000 channel partners. As of June 2023, we further augment and build greater efficiency in the channel, ensuring highest level of compliance and governance. And to facilitate the APs to serve their clients better across multiple asset classes, we have further upgraded the NXT platform, which is an industry-first dedicated digital platform to them.
For us to capture the full potential of our distribution capabilities of digital financial products, we believe all affiliate channels including IFAs, insurance agents and the distributors, are extremely important. These channels represents large untapped potential for us. With our ability to harness big data at Angel One through our AI, ML capabilities in discerning patterns, trends and the preference of customers and to offer service digitally, our fintech DNA will be able to better empower such affiliates to serve a larger audience than has been -- hitherto been possible. This will further enable them to expand their product basket, thus ensuring customer retention. Besides, this will help us fulfill our aspiration to positively influence the lives of under-serviced population of the country which relies purely on such affiliates for achieving their financial goals. Our comprehensive digital capabilities combined with such affiliate channels serving a large customer base will foster a mutually rewarding partnership. We are in the process of hiring a chief business officer, affiliates channel, to comprehensively capture this large potential.
Since we now have a large pool of clients and a huge data lake, we are focusing on better utilizing this by further augmenting our data analytic capabilities. Over the past 9 months, we have centralized several heterogeneous data sources to produce [ fact-based ] data sets on a common data platform. This centralized database collects and integrates various eligible client data, including user persona, engagement, trading behavior, product touch point attributes, [ mix-in ] data and transition data. This comprehensive repository empowers our product, tech and growth functions as they gain holistic insight into clients' behavior and preference to further personalize engagement, thus improving client satisfaction and retention.
During the quarter, we collaborated with U.S.-based service provider to conceptualize and implement GPT-driven chatbot for our customer support system. The chatbot is being trained on a large language model with our client-specific and other temporal data. These initiatives has resulted -- has delivered a 70% success rate as of now. We aim to incorporate real-time insights into a conversational model and go live during the current financial year. To scale this up more effectively, we have expanded our management bandwidth with onboarding of Mr. Deepak Chandani as Chief Data Officer. Deepak comes with a strong grounding in business intelligence, data analytics and data science; and possesses strong AI-, ML-related capabilities, having led these initiatives in his past assignment with companies such as British Petroleum, UBS, Apple and Infosys.
In our pursuit to become India's most trusted and preferred fintech brand, we will continuously explore opportunities that are synergic to this objective. In this context, we are also exploring inorganic acquisition and partnerships opportunity across the consumer financial products and service landscape, including [ core tech ] product distribution platform, wealth tech, learning and content engagement platform, which will enhance and complement our existing and future offerings.
Last but not the least, it is my pleasure to announce that we have been ranked 52nd amongst top 100 best company to work for in India by the Great Place To Work institute, besides topping the fintech category and also being amongst [ top 25 in BFSI sector ]. These achievements are possible because of our firm belief in our core values of innovation, speed, thinking big, collaboration, trust and customer centricity, thus bringing about a collective sense of purpose and passion amongst all Angelites.
Coming to the operational performance in quarter 1 FY '24. We continue to demonstrate healthy progress. Our overall NPS continues to grow handsomely. Angel's share of India's incremental demat accounts stood at 21.3% as we concluded the quarter, with a total client base of over 15 million. Our orders, a key revenue driver for our business, remained robust at 249 million, with the underlying ADTO growing by 23% quarter-on-quarter to nearly INR 23 trillion as we continued to expand our market share in overall retail equity turnover by 175 bps quarter-on-quarter to 24.5 percentage.
I hope these insight have given you a flavor of our tech-driven business and our efforts to have a more integrated financial product slate. Vineet will now take you through our financial performance, after which we will be happy to answer your questions.
Thank you, Dinesh bhai. And good morning, everyone.
FY '24 has commenced on a positive note for us, as we surpassed the 15 million clients mark in June 2023 and achieved our highest-ever market share across retail overall equity turnover and NSE active clients. Whilst the business continues to be on a very strong footing, quarter 1 FY '24 had its own peculiarities in terms of 3% or 2 lesser number of trading days compared to quarter 4 FY '23, impact of annual increments and continued investments in tech and product. To this extent, quarter 1 has to be looked at slightly differently.
In quarter 1 FY '24, our total gross revenue stood at INR 8.1 billion. Gross broking revenue was lower by 4% sequentially to nearly INR 5.6 billion, accounting for about 69% of our total gross revenues for quarter 1 FY '24. Share of F&O segment in gross broking revenue reduced to 84% in quarter 1 FY '24 from 87% in quarter 4 of FY '23. Contribution of cash and commodity segments expanded to 10% and 5%, respectively, as compared to quarter 4 of FY '23.
Approximately 70 -- 78% of our net broking revenues are contributed by clients from direct channel and 22% by our clients associated with the affiliates channel. It is important to note that, as clients mature on the Angel One platform, their contribution to the net broking revenue continues to remain strong. This trend is evident from the rising share of net broking revenue from 2- to 3-year cohorts in quarter 1 FY '24. This cohort has consistently grown over the quarters; and now stands at 22%, up by almost 3x from 8% in quarter 1 FY '22. The longevity of these young, new-to-market revenue-generating clients on the platform is further being fortified through various initiatives, developments and offerings across the entire spectrum of Angel One's Super App platform.
Interest income, which includes interest earned from client funding book and from deposits with exchanges, grew by approximately 6% quarter-on-quarter to INR 1.4 billion. This accounted for about 18% of total gross revenues in quarter 1 of FY '24. Ancillary transaction income linked to the turnover stood at approximately INR 0.7 billion, accounting for 8% of quarter 1 FY '24 total gross revenues. Employee benefit expenses, which stood at INR 1 billion in quarter 1 FY '24, include the impact of annual increments to employees, noncash accrual of costs towards annual grants of stock options and proportionate accrual of the budgeted variable pay for the current financial year. Other OpEx for the quarter stood at nearly INR 2 billion, which grew in line with our operations, driven by expense on client acquisition; software, connectivity and maintenance expenses; demat charges; CSR; and other expenses.
Our consolidated operating margin for the quarter stood at 48.6% versus 51.2% in quarter 4 of FY '23. It may be recalled that, in quarter 4 FY '23, employee benefit expenses had a onetime positive impact of INR 405 million on account of reversal of stock option grants and year-end variable pay provision, leading to a higher-than-usual operating margin percentage. Therefore, on an adjusted basis, there is a 7.4% decline in EBDAT on a sequential basis from INR 3.3 billion in quarter 4 FY '23 to INR 3.1 billion in quarter 1 FY '24.
Similarly, on an adjusted basis, our consolidated profit after-tax from continuing operations declined 6.9% quarter-on-quarter from INR 2.4 billion in quarter 4 FY '23 to INR 2.2 billion in quarter 1 FY '24.
The Board has approved distribution of 35% of the quarter's post-tax profits as first interim dividend to the shareholders, aggregating to [ INR 775 million ]. This translates to INR 9.25 per equity share.
Period-end cash and cash equivalents increased to INR 66 billion on the back of increase in client margins. Client funding book remained stable at INR 11.4 billion as of June 2023 compared to INR 11.5 billion as of March 2023.
Consolidated net worth of the company grew by 9.6% to INR 23.7 billion. As we continue to operate the business within the desired margin profile, our quarter 1 FY '24 annualized return on average equity remains a healthy 39%.
With this, I conclude the presentation and open the floor for further discussion. Thank you.
[Operator Instructions] Our first question comes from the line of Swarnabha Mukherjee with B&K Securities.
So a couple of things that I wanted to understand was, first, on the employee expense side, if you could give us a breakup of fixed and variable components and how to think about this for the next 3 quarters. So is the variable component provision [ probably in ] this quarter? Or will it be spread over the next few quarters as well, which means that we should see a run rate of a similar level around this? And also, your comments on the add-on interest costs that you highlighted, 40 crores to 50 crores, earlier. Now that -- it has gotten shifted by a couple of months, so is there kind of a change in guidance from your side regarding that? And then I would have a follow-up on -- also on the client acquisition, so after you answers, maybe I can ask that.
Sure, sure. [ And so maybe we'll let ] Vineet answer your 2 questions. Vineet, if you can just take it all.
Sure. Swarnabha, we do not disclose the breakup of the fixed and variable employee costs. And to answer to your question about how much of the variable cost has been factored in: This is spread over the entire year, so 1/4 of the budgeted variable pay for the current financial year would be part of the Q1 expenses. And then proportionately it will be spread over the other 3 quarters. Your question about the update on the additional expenses that we are going to incur, because of the circular: Well, it's more or less in line with what our guidance was in quarter 4 and we continue to maintain that guidance. Again that depends on the movement of the turnover and volumes on the platform, but I mean the variance could be maybe 5% or 7% here and there. That's it, not more than that.
Okay, understood. So in the balance sheet, on the borrowing front. So that number is, over the last 2 quarters, around [ 715 crores ] to 850 crores. It used to be upwards of 1,200 crores to 3 quarters back, even before you had that additional working capital requirement for paying out clients on -- by the first week of every quarter, so can you point to the reason why these borrowing numbers have come down from 1,200-plus to this 800 crores, [ around ]?
Sure. So largely, our borrowing is linked to the onward lending that we do towards MTF and T+7, so as this number has come down over the last quarter or so, similarly the borrowing has come down. And again, whatever cash we generate from the business quarter-on-quarter, that is again fed back into the business to fund the MTF and the T+7.
Sure, sure. Very helpful. Just quickly on the client acquisition: So just looking that -- looking at your numbers over the last 6 months. Around 2.5 million customers have been added, but if we look at the active clients number, so -- it has gone up by around 0.2 million only. So just wanted to understand whether you are seeing any different trends in terms of activating these clients or what it means for your payback periods and the current standpoint.
Yes, yes...
Yes, thanks. Devender, if you can just answer here.
Yes. Swarnabha, this is Devender of -- so if you look at the overall market, Swarnabha, the overall market also has been adding very large amount of clients, where the total base of clients is almost 12 crores now. And if you look at the active base of NSE, which is close to 3 crores -- so if you look at from an overall industry point of view, the overall active base, which is active participation of retail, has been subdued in the last 2 quarters. And as a result, the same is reflecting in our case as well, where our active base is kind of -- has been stagnant or, let's say, has been stable to an extent, but from an overall point of view, during this period, when we look at our market share in terms of NSE active clients, we have been gaining market shares. Almost 2 percentage point is what we have gained in the last 2 quarters, which is reflective of the robustness of the way we have been doing our digital business. From an overall [ per se ], I think we are launching multiple services on the mutual fund [ side ]. And we have plans to monetize or, let's say, provide various kinds of products and services to our clients which will further enhance the active base that we are going look forward at. So that's -- precisely is the reasons.
Swarnabha, just to add. What you need to also monitor is the number of orders executed on our platform because that is something which translates into revenue for us. And if you see and as I mentioned in my comment, that our 2- to 3-year -- 1- to 2- and 2- to 3-year client base have been giving us higher revenues, so that kind of shows the stickiness on the platform. So that is something that people need to be aware of. As a percentage, it [ may vary ], the active client versus the total client base, but it is more important to see the number of orders and the longevity of the revenue-generating clients on the platform.
Yes, yes. So like just if I will calculate [indiscernible] 2.5, I mean, that number comes around 10%, but I'm pretty sure that you will be actually activating more customers because a few older ones might actually be also dropping out. Just wanted to understand that, if I were to just look at the incremental customer base and [indiscernible], but compared to the market, what you are seeing, do you see your rates kind of -- activation rates to be on the higher side, maybe not as much as on the peak of the market but right now on the higher side compared to market? Or will they be fairly at a similar level?
So from an overall point of view, if I look at it from an industry point of view, the overall industry activation rate is close to 25%. And we are close to 30%, so we are doing better than what the industry average looks like, but in the long period of time, we are looking at -- with the current market outlook and the current market conditions, this has remained subdued. And we feel that it will -- in line with what market performance and market behavior is looking like in the coming times, but we are doing better than our peers and from an industry point of view, with our overall rate being 30% in comparison to the industry rate of 25%.
Just to add to that, Swarnabha. See. This is a very interesting data point because it only shows a client who's traded once in the trailing 12 months. That client might have done a number of orders instead of one, but that somehow has not been captured in this data point which is available for the industry. And therefore, if to that extent, you can't really concentrate on this data point.
Our next questions come from the line of Prayesh Jain with Motilal Oswal.
I had a few questions. Firstly, if I look at the industry, the MTF book has been on a rise, but for us it has been kind of a steady trend rather than any impact from the fees we have on the much lower side, so what is the reason why we have not focused on this business given that the margins have been much -- the peak margin now have kind of made it much better than the earlier scenario? That is first. Second, wanted to check with respect to the threshold level of the broker-wide limits. Where are we? And what happens in case we hit that, hit those thresholds? In the past, I think there has been some mention about having a different [ card ] and getting -- implementing the same there, but is it really possible to do that execution? This is my second question.
And third one is you mentioned in the opening remarks about focus on the AP network. Does it mean that we are kind of changing our approach; and saying that, on the lower-tier or Tier 3 and Tier 4 towns, you need stronger presence through AP network? How should we read into this?
Yes. See. On your first question, about MTF book, as I always have maintained [ in my time ], that we are not into kind of like everything in margin funding, lending and all that. Mostly this is kind of like bridge funding given to people who are trading in cash and they want some fund for, let's say, like their interim [ lead ]. So we are not very much focused to increase our margin funding book beyond. It is a part of service that we provide in our brokerage book, so we don't do [ resolve ] funding and all that. So we believe that, as market like small cap, mid-cap, [ we'll see already ] there will be a proportionate growth, but to expect a linear growth in MTF, that is not our focus, okay? Second, on our threshold kind of limit, I think still we are far away from that, but we have enough kind of like contingency plan to take care when we hit that.
On the third point, on affiliate channel. If you look at India, that population, apart from digital, there are also population who are dependent on with -- assisted model. And when it comes to when we are going to all services beyond broking, to look at mutual fund, to look at insurance and lending products and all that, still it is like an assisted kind of like model. So to have an offer focus and have a market share and leadership position in all segments that we will be offering on our fintech platform, we thought like this is to have a scale in all offering that we do. Plus, if you look at a platform that we provide for our affiliate channel, it is high on technology. Now when we talk about data science and all that, today, if we look at affiliate channels, they are unable to guide customers very effectively because of lack of information and data with them. And with kind of like competency that we have to build technology and to build platforms which -- with kinds of like AI, ML tools, we believe that we will be able to achieve a better market share across all our product offering, be it on digital platform or B2C or be it people who want an assisted model in products like mutual fund, insurance and lending products and all that. That is a reason we want to create a proper [ focused management ] division who does not miss out on any kinds of like market share across all these kinds of like offering. Our focus remains on being a technology player using this technology data science so that we are able to be -- effectively grow and expand this market across all categories.
Okay, got that. Just a follow-up on the second question: So what are the contingency plans in case we hit that threshold level?
See, like, there are lots of [ kinds of ] things which can be rolled out. So today, we allow like plans to keep, do trading on all [ kinds of ] instruments and all that. So when time comes, we'll be very specific in terms of what -- how we can save that bandwidth. Apart from that, like, we have like [ one more membership back with us ], so we can split that business also. So that is not an issue. When time comes, we will address it appropriately. Right now I don't think we -- that is like under our consideration to see that how we are going to take care of threshold.
[ And Dinesh, just ] one last follow-up. When you mentioned that MTF book is not a focus area and just more of an offering to the customers, but -- don't you think this is a very -- I will say, very safe business now and relatively much safer than what it used to be earlier and can be a very good revenue stream and profit stream for you? So why not increase the focus in this product and -- or improve the offerings that we have currently? Or do you see that, because on our platform the cash volumes are much lower and you don't earn a lot of revenues out of the cash delivery segment, you would want to focus continue -- your focus will continue to be on F&O segment and not so much on cash segment? Is that the way to think about it? Because...
No, no, no. That is wrong way of thinking, Prayesh. I'll say that our focus on retail lending is there. We would like to be a leader in that. What I was trying to say, when you look at the lending book, it consists of retail lending; and plus many other components, [indiscernible] and all that, that we are not interested. The focus is not to increase this MTF at any cost. We are a focused player, so we want to achieve more market share, better market share in retail segment. In retail segment, if you see, we are growing, but retail does not work in a linear way because, when we are buying some good opportunity on options side, we are very active on options side. Certainly, when you see small and mid-cap picking up, they will come to cash segment, so my point is that, when it comes to retail offering or retail requiring [ these kinds of ] service, we will be very aggressive. We would like to have highest market share, but being focused on MTF and trying to go into other segments where we are not interested to solve other kind like needs of that customer, we would not like to -- just for the sake of increasing market -- margin funding book, would like to go into that segment. That is what I meant.
[Operator Instructions] Our next question comes from the line of Nidhesh with Investec.
On SIPs, sir. So when we are saying that we have become #2 player in SIPs, is it on number of SIPs? And does it include all the participants, including banks, nonbanks? And how will be the -- our positioning in terms of value of SIPs?
Okay, [ Saurabh ] will be right person to answer this. [ Saurabh, if you can ]...
The number includes banks, nonbanks, fintechs, everyone. So we are second overall in the market. In terms of the value of the SIP, this is not an information that we disclose proactively but will be in line with most other players in terms of direct mutual fund in the market.
Sure. Secondly, how are the trends on payback period, which used to be 2 quarters earlier? How are the trends for this -- in this quarter on the payback side?
Vineet, if you'd like to answer this...
So Nidhesh, again we would want you to concentrate more on the LTV-to-CAC. Of course, the payback remains more or less in that bandwidth, but it's more important to understand what the LTV-to-CAC is. And that, as we explained in our presentation, it's a very healthy 8x the CAC. So I think that is more important a metric to concentrate at.
Sure. And lastly, when -- so when you're talking about this affiliate channel strategy: We already have some 21,000 channel partners. And probably, as we scale it, this number may become much larger, so do we have also plans to have insurance broking license? Because without insurance broking license, the value proposition in the insurance side will not be that material.
See, currently, like, we are in a process of creating this -- strengthening this vertical, so in terms of granular detail of this [indiscernible] business model and affiliate channel, as you give us some time, we will be more clear and give more disclosures by the next quarter.
Our next question comes from the line of Sumit Rathi with Centrum PMS.
My questions are partially answered, but I wanted to check that our active client as a percentage of gross client has been in a declining trend and that you rightly said it's been with competitors also. How do we see this trend getting for going-forward basis, or will it get stabilized? At what level? If you can give some color on that.
Yes. I mean activity of a customer depends on market conditions. You know that we are into [ kind of a like cyclical ] market. Where we see activation of customer for a year, it appears to be normal, but if we track it month-on-month and all that, it may appear to be going up and down. So my point is that we are introducing lots of services to make this customer base active. For us what is important that -- what is the lifetime value we are creating from our customer? Are we able to extend that? That is where our focus is. Our focus is not on day-to-day what customer is doing, but we had to compare ourselves with competition and all that. But our journey that we are [ building up in tech ] is far different than what industry is building, so slowly in progress, you will see we also wanted activation ratio of an customer should increase. And that customer should become active on many other products, which may not be captured by NSE's database.
Okay, makes sense, sir. And lastly, on the ESOP cost, how will the trajectory be going forward if we have to see like next 2, 3 years down the line?
Vineet, if you can answer this.
So I can't give you a forward-looking kind of a number, but for this year, the budgeted spend on ESOP is about 50 crores, 55 crores.
All right, sir. And any update on our AMC business launch, where we are progressing in that? Like that will be my last question.
Vineet, if you can answer.
Sure. So we are in the process of creating the entire infrastructure and the organization. We've already incorporated the asset management company and the trustee company, and hopefully, in the next couple of weeks or 3 weeks, we should be able to file our application for final approval.
Okay. And with the final approval, what time does it take to really launch the products and all, sir?
Well, it depends. Normally our understanding is it will take about 2 quarters for SEBI to come back with their final approval. And immediately, we can launch schemes.
Our next question comes from the line of Gautam Jain with GCJ Financial Advisors.
Congratulations for a good set of numbers. My first question is how much is the gap between us and other top 2 player in terms of rank based on NSE active client.
See, that data is available on the website. Somebody can answer, Bhavin or Ketan.
Yes, yes, yes. The top 2 players of -- i.e...
NSE active...
No, no. What's the rank? He is asking, the rank. I think right now we are, in terms of top, like [indiscernible] we are third, right?
[indiscernible] -- yes.
Yes, so gap...
That is his question.
Gap between our market share and top 2 market share.
Gap between market share, you are saying...
Yes.
You can just share the number we have.
Yes. [ 66 ] is the #1...
14.5. So today -- so our market share is 14.3% in the June month. They're just checking the top player that is close to 20% market share. So the gap is...
Gautam, let me clarify. See. This gap does not show you anything in terms of revenue and all that, so this will be a wrong parameter for you to track, but we are giving you data. But if we look at revenues and all that, that will be a far more better kind of like reflection of health of business and where a particular player stands.
Okay, yes, sir, got it. And my second question is your gross broking income to your orders. If I calculate, it's INR 22.4 per order. And that has -- I think we have seen the bottom in Q4, which was INR 22.1. And it has gone up now, INR 22.4, so it's like yield has improved or because of mix change between discounted scheme and traditional plan for direct-to-channel revenue. Because of that, the fee, looking from the number of orders, has gone up sequential.
I'm not sure whether we are tracking it. Devender, do you have any kind of like clarity on this?
So we [ track it if it's ] in stable nature, but we don't really disclose how it is trending to the market.
Yes, okay, fine.
Okay. And lastly, can we get the breakup of interest income between interest received from the client and interest on our investment book?
Vineet, do we disclose that?
No, we don't disclose, but I can give you a directional view. So as we mentioned in our annual report as well, about 75%, 80% of the interest that we generate on the fixed deposits comes from the client margins. And the balance is on our own proprietary funds. So that's how the trend is, but the number that we've disclosed in the quarterly financials is the consolidated number of the interest earned from MTF as well as interest earned on fixed deposits.
Okay. And what will be our cost of borrowing?
Well, the cost of borrowing is remaining in that same ballpark of about 8% and 8.5%.
Okay, great. And lastly, the other costs have gone up sequential despite number of orders have declined, so was any one-off in that? Or have you increased some variable costs [ to like fund a ] client? Or some fixed costs have gone up. How to read that...
No. It's in line with the growth of the business. So that's what I mentioned in my comment as well, that the other expenses are growing in-line in terms of the number of clients that we are acquiring and the growth in the volume of the business.
Okay, great. And are you seeing any improvement in number of orders since market has started doing good even after June, daily number of orders?
You will see the number being published at the end of -- or the early part of August for the July month. We will not be able to disclose any number right now.
Our next question comes from the line of Pallavi Deshpande with Sameeksha Capital.
I just wanted to understand. On the SIP book, how much will be from a regular plan versus the direct plan? And second would be on this -- on the credit business that you're looking. Have you hired the Chief Credit Officer? And the tie-up with the NBFC...
Thank you, but let me -- [ Saurabh ], if you can just answer this.
Sure. So in terms of the breakup between direct book and the regular book, that is not something that we are disclosing for now. And the second question, around credit, right? Since we are largely into the distribution of credit product and not being a lender ourselves, we don't need to hire a chief credit officer. Having said that, I mean, the team in terms of building the lending business is getting hired. And we are hiring top-quality talent there to take the lending business forward.
And what will be the size of the team you will be looking at?
That is not something we tend to disclose.
It will be commensurate to the kind of business that we develop, so it's not something that will be static.
Our next question comes from the line of Sanketh Godha with Avendus Spark.
Sir, we -- what I understand from the mutual fund strategy is that you typically sell largely direct plan on the app, on the Super App, but the incremental strategy, what you have been seeing on affiliate people selling the third-party products, which is mutual fund, the insurance and everything, sir, I just wanted to understand. 21,000 people who -- in your view, how many are already into this product distribution? And incrementally why they need to switch to Angel to distribute on your behalf. And also I wanted to understand, when you are going offline, which means that [indiscernible] solution to them, whether you will be focusing, unlike app -- Super App story, more selling regular plans there so that your third-party fee income will grow. So just wanted to understand the broader strategy there, how you are looking at it; and how much it could potentially contribute, since you are already looking to hire a chief business officer to cater to this particular segment; how much revenue you are targeting to generate from this particular piece.
See, coming to your second question. That is very important. So when we talk about affiliate channel, currently 21,000 are authorized persons primarily focused on stock market activity. Plus they are selling our third-party products, but we feel that, if you want to be successful in all the products, because when we are [ introducing everything on ] fintech platforms, it should make sense for us to have a scale of that business. We look at all kinds of like third-party products apart from the -- including stock broking, sorry. There is an audience who would like to have some assistance when they are going for that service or buying product like insurance, lending product and all that. And given the fact that we have our best technology platform already for stock broking -- we extend our platform called NXT. Because of that, they are able to be more effective in terms of serving their client need. So we want to enhance that kind of like capabilities of our -- as far as people; plus attract people who are into distribution of mutual fund, IFAs and all that so that they are also able to take benefit of advanced technology platform that we have. And plus, as I said, that we are getting deep into data science and all that, so all said and done, we want to see that affiliate channel everywhere, on all the channels, whatever they are selling. They have a -- right kinds of information for products they are selling so that we are able to include more people in this financial service.
So digital is one way. We have proved that we are able to acquire customers [ out of that ], but when we look at mutual fund industry, when you look at insurance, when you look at lending, still we feel that there is enough kind of like business in those affiliate channel. But what is a gap between currently what is happening is a good technology bridge, a good technology platform which can help them to be more effective in terms of servicing their customers, so our approach of Super App giving all kinds of services on platform remains same. But we feel this is an -- kind of like natural extension to digital capabilities that we have created and that will help us to get more market share. So we are not -- as in broking also, we are not focused that affiliate channel should sell only, like, traditional products and all that. We are going to extend all digital, all kind of like latest kind of like services to them also. They can sell traditional. They can sell whatever they think is right for a customer. It is up to them, but what we are going to give them are scale, better price and better kind of like data management and information management of a customer. Sanketh, I just missed your first question. That is [indiscernible]...
Because we've got Super App, we preferably sell direct mutual fund plans so that your customer remains more engaged with the app and probably end up trading more. That's broadly the strategy which I understand. Then when -- then if it is the off-line mode, which is AP model, then the mutual funds, what you will distribute there would be typically the regular ones where you will earn commissions. That's the whole idea is what I wanted to understand. Or it will be very...
See, what happens, Sanketh, when somebody is providing some kind of like additional service, he is entitled -- he or she is entitled to charge some fee. And it makes sense for a customer also who is not total digital or who wants some kinds of like assistance in terms of their services. So it makes sense for them to pay some small premium so that asset management and everything is managed properly.
Got it, but sir, I just wanted to understand. But given our distribution income quarterly run rate is, say, 8 crores today, so -- which is coming from third-party products. So given this strategy, any number you have in mind? This quarterly run rate, maybe in 2 years or 3 years, can become 3x or 4x compared to what you generate on per-quarter basis.
Sanketh, our aspirations are very high in terms of gaining market share and gaining revenue also from that, but if you see a third-party product which is sold in affiliate channel, it has a revenue attached to that. So difficult to put a number right now, but as you know, that whichever division or vertical we'll go into, we'd like to be a leader in that. So fairly, you can say that, what's the market share of an leader in that segment, we would like to be closer to that.
Okay, sir, great. And last -- Vineet, one small question. This -- our finance cost [ on ] interest cost is 18.3 crores. And we have guided that the number would be 40 crores because of the change in rules with respect to upstreaming of client money, so I just wanted to understand. Out of the 40 crores of -- for 9 months FY '23, how much is already sitting in first quarter FY '24?
So Sanketh, this 18 crores does not include this 40 crores. So 40 crores, we'd calculated, effective 1st of July. If you read it carefully, we said that the upstreaming circular is going to be implemented from 1st of July. And that's how we'd calculated it, for a projected period of 9 months in the current financial year, to 40 crores. And the annualized cost, we had estimated to be about 50 crores, 52 crores. We model and stand by that. Again there could be some changes due to the change in volume and growth in the business, but as I mentioned earlier, it's not going to be a very significant number.
So basically, if I go by that run rate 18 crores which you reported in first quarter FY '24, probably will become maybe 30-odd crores or 32-odd crores in next year as these rules get implemented, right?
Again it's very difficult to estimate because the cost of finance cost is also linked to what my client funding book is going to be and what the benefits of the efficiency in the clearing corporations are going to come back to us. So it's difficult to estimate that number.
[Operator Instructions] Our next question comes from the line of Nidhesh with Investec.
So on the -- again on the question on the SIPs. So can you some -- share some data around how much SIPs are taken from active customers and how -- from nonactive customer? I'm trying to understand that -- because of SIPs because of these new product additions, are we able to get incremental engagement from nonactive customers? Or largely the active customers are providing -- are coming for those SIPs and other products.
Nidhesh, we don't have a breakup of that, but I can tell you this -- all this -- as I said, whatever mutual fund we are selling, we are selling to only our existing customer base. And [ Saurabh ] will be able to add more life to this.
So the idea is to understand basically the existing customer base is divided into 2 parts, active and inactive. Active customers are giving us revenue. Nonactive are not giving us revenue, so if we are able to engage more with nonactives in future, there is a possibility of -- to monetize them. The -- upon that point of view, I was trying to understand...
Yes. So I can give...
Yes. [ Saurabh ] is [indiscernible].
Yes. I'll just give you a directional flavor, right? Active versus inactive, what is the share in terms of SIP? That, we can't disclose, but what we have already started to see is, because of the customers who are buying mutual funds from us and having a portfolio with us -- their engagement and their retention on the platform has started to already show green shoots. And that will materialize into decent broking numbers going forward. We are still quite early into the mutual fund journey, so it is difficult to really quantify those numbers, but in terms of engagement and retention, we are already seeing good traction.
Sure. So that is from the active customers, but any color on the inactive customers? Are we able to sell mutual funds to the customers who are not trading? They have app, our app but not trading but maybe interested in mutual funds.
Yes. I mean -- so in terms of the mix of the customers of active versus inactive, as I just told a few moments, that we can't give the exact split, but we are seeing good chunk of inactive customers also starting to buy SIPs and do lump sums with us.
Our next question comes from the line of Prayesh Jain with Motilal Oswal.
Just a couple of questions again. Firstly, on this finance -- consumer finance business, I missed that part of mentioning about what kind of strategy you will be implementing there. Just throw some -- if you could throw some light again on what is the strategy about distribution of finance products. That is one. And I'll ask the second question after that.
[ Saurabh ], if you can just take this...
This -- so in terms of the strategy around consumer credit, right, we'll be starting with launching personal loans. The opportunity is quite large there and we are looking to tap into that business. In terms of the model, we'll be undertaking distribution without taking any risk on our books, which can actually help us [ scale back ]. And however, in the medium term, we don't intend to just be a [ one-in-all ] distributor. We are building intelligence around AI-, ML-based models to assist our lending partners in all aspects of the lending journey, using internal and external customer data. And this can potentially enable us to get higher distribution margins going forward. What looks good for us, primarily with the initial analysis that we have done and the engagements that we are in the process of with our lenders, is, one, the overall base quality in terms of the credit profile of the customer looks quite good. Secondly, the engagement of the -- on the platform with our customers is already high. And mutual funds scaling in a very short time frame without any external marketing is a testimony to that, which can enable us higher uptake of -- even for credit from the platform. And third is we have proprietary data around clients and high-quality data intelligence, which is -- which will enable us to get higher approval rates and higher commissions from our lenders. So this is largely our consumer credit strategy, personal loans being the product to go live with in a few months. We'll also look at credit card in some time but still early to comment on that.
Okay. And have you tied up with any NBFCs or banks currently?
Yes, we are in the process. I mean discussions are happening with the top banks and NBFCs in the country. And you could hear something good for us -- from us in the coming quarters.
Okay, got that. And just on this finance book again, the -- and so does Angel also charge to customers who give -- bring in 100% collateral? And the 50% is funded by Angel [indiscernible] to those customers.
No. We do not charge anything for that. So any customer who brings in incremental noncash collateral at over and above 50%, we allow them to bring that collateral, but we do not charge anything for that.
Okay, got it. And just lastly, on this, the strategy on the associated persons. So your associated person network is a franchisee network, right? Is that the right way to understand? Or this could be those individuals also having -- working from their own homes.
You are talking in terms of affiliate channel that we are talking about...
Yes, associated persons network. So could you just give some more clarity [ at least on these are ] having a brick-and-mortar presence in their areas or [indiscernible] working from their homes? Yes...
Ketan, if you can address this.
Yes. So it's a mix of this authorized -- sorry. They are individual. They are corporates, so all mix of people are there.
Okay, okay. And you mentioned that you will be also looking at hiring IFAs and these individuals who can bring us volumes on distribution, right? Is that what I got it correctly?
Yes, yes, correct.
Our next question comes from the line of Sumit Rathi with Centrum PMS.
Yes. So on the lending business segment only, sir, though you have given a lot of clarity already, just wanted to check that the risk is not on our balance sheet, but are we going to also get engaged ourselves into collection process over there? Or that collection would also be the responsibility of your NBFC partner.
[ Saurabh ]?
Yes, sir. So in terms of collection, just nudging the customers to remind them that their EMIs are due, et cetera, which is what we call soft collections, is something that we can help our lenders with, but hard collections, where -- which is what we call collections in the industry, is something that the lenders only will undertake.
Our next question comes from the line of [ Sumit Jankar ] with [indiscernible].
I had questions regarding the active plans. What is the share of active plans who are trading into derivatives? And how much share, contributions in -- of derivative plans have increased in active plans? And my next question is that -- or derivative plans tends to make loss, so the tendency -- or the life span of derivative plans is lower, as compared to cash, so is there any way that you're looking to -- for retention of these type of plans?
Okay, [ Sumit ], first of all, we don't give breakup of active clients in derivatives and all that, so -- and second question: When you look at customer's journey, always it starts -- whenever it starts in equity, especially traders, most probably they are going to make losses [indiscernible]. You have seen people around you who have started their equity journey, and if they are a bit kind of risk taker, they'll get into a product which may result in losses, but that does not mean they stop [ being into ] the market. So when we talk about lifetime value, what happens when customer comes, he's looking for some extra income initially, 1 or 2 year. So he's [ steady ]. Or he seems [ steady ], but on the third year, they tend to look into wealth creation opportunities. They don't shy away from -- kind of totally from equity market. So they change their approach. They change their strategy. They change their kind of like investment into this market. So when we calculate lifetime value, it [ includes all these spaces ]. So when we are saying -- now we are looking beyond just people who are active as a trader or into this equity, where we would like to expand this -- like, the value by giving, offering them, so that they can continue with mutual fund, insurance product or some lending product and all that. So overall, we should not put any color to traders that, "They come into the market. They make losses, and they forever go away from the market." There is no other asset class where they can invest where they can get a good wealth creation opportunity. So we have seen across -- like whatever -- my experience, is, in this industry for 30 years, initially everybody trades. They make some losses. And people who understand [indiscernible] equity, they remain in equity market for almost ever.
Our next question comes from the line of [ Sahil Shah with Bridge Capital ].
Am I audible?
Yes.
Yes, all right. So sir, I have 3 questions. So first is on the account of the -- aggregator and [indiscernible] tie-up, will it be a playing -- a level field for -- a level playing field for everyone right now?
Do you want to ask all 3 questions? Or you want one by one...
Yes, I'll ask all 3. So yes. Second will be on the mortality. So I just wanted to ask on active versus inactive. And well, how do you currently make our inactive clients active? And the last question is on the cohort analysis. So we have highlighted for FY '22 this analysis. How do we see this trend in the past 4, 5 quarters play out? [ How will it ]...
Okay, on account aggregator, Ankit, if you can just answer that.
Yes. [ Sahil ], Ankit here, yes. So we have gone live with account aggregator and account aggregator as a service from [indiscernible] available for all the fintech players. We are one of the consumers. And we see the beauty of account aggregation is that, as more and more aggregators, and including suppliers and requesters, come to the platform, it will be the -- a potential growth for all. So more and more accounts that link, irrespective who does that, it will be beneficial for all. Right now our onboarding has been powered by that, and we'll also look into further use cases of that.
And [ Sahil ], can you repeat your question on mortality?
Yes. So basically it was on active versus inactive. And how do we make our inactive clients active again? So it will be the process behind that.
Yes. Process is to introduce more services, like we are working out with [ kinds of like -- coming out with lots of kinds of like new-new ] services. Devender, if you would like to continue from here...
Yes. So from an -- from the point of making an inactive client active and inactive mortality and active and inactive clients. So there are 2 points here. From an overall point of view, there are multiple services that we have. We have launched MF and we have [ multiple insurance ] as well. So we look at the overall spectrum where IPO, ETF, all services come into picture, where we look at exposing our clients and making them learn about these new services to get them into it. From the point of view of getting the clients active again in the broking segment, well, different clients have different activation rate. Let's say some clients will know -- let's say, like, delivery clients will activate maybe 6 -- once in 6 months and once in 2 years maybe. And some clients are active on a daily basis, so we have a very clear program for each cohort of clients, where they're looking at a [ daily ] client, whereas on delivery investment, let's say, 1 year back -- and now what are they looking at? And how are they going to look at rebalancing? Similarly trader who are trading for a monthly cycle, for a weekly cycle. So we actually cohort-ize them in every aspect. And the way we actually make them active is basically offering them a lot in -- a lot of education in terms of what are the tools that they are -- that different clients are using within the app, which is what is making them progress into a better, mature state of usage of a service as well. And obviously we do a lot of discounting offers in terms of our pricing, to an extent, to -- for clients who are inactive for a very large period of time. So to see how we can initiate them back into the system as well. So we look at these 2-pronged strategies plus multiple of strategies to really, really work on the overall base of our clients.
Okay. And lastly, I just wanted to ask some of the trend over the past 4, 5 quarters on the cohort analysis, yes.
Then Vineet, if you can just take this...
No. So we will not be sharing this data on a quarterly basis because this data gets curated. We test the data and then we publish it, so you will have to wait for some time for us to refresh this data.
[Operator Instructions] Our next question comes from the line of Hardik Jain with White Stone Financial Advisors.
Sir, my question is on the distribution platform for the lending business that we are trying to build. So from what I understand, you'll help your NBFC and bank clients to source borrowers or clients based on who -- from our app. And also you'll use machine learning and other technologies to assess the credit quality of the borrower. So you will do this business only through your platform. Or you can also give this API of this, of your software to the lending partner, where your credit assessment engine can run behind the front end of your credit partner.
See. Currently objective is to use our platform so that we are able to give more services to our customers. [ Saurabh ] would be the right person to take it from here.
Yes. So I mean the thing that you are trying to mention is us being a TSP, right, just a technology service provider. So fundamentally, TSP as a business is -- or is starting to become a low-margin business because there are too many players offering the same services to NBFCs in terms of just the platform play. And there is much more money to be made by being a distributor and by being an intelligent distributor, so we don't intend to just hive out our technology platform to other lenders to underwrite their customers and without us being a distributor there.
[Operator Instructions] Our next question comes from the line of [ Pratik Shah ], an investor.
Yes. Am I audible?
Yes, you're audible.
Yes, yes. And congratulations, Angel team, for putting a great set of numbers and increased market share. I have a couple of questions. The first one is, as we know, that company is in a process of hiring a new CEO. I just wanted to check the status of that and by when we can expect this announcement. And second one is how Angel One is incorporating machine learning and artificial intelligence in this broking service or any advisory service.
Yes. So process of, like, looking out for the right candidate is on. It will be very difficult to put a time line because we are looking at someone very senior and seasoned, but all said and done, there are like hiring agencies who are looking out for candidate. Second, on use of AI, ML on broking or any other services, Jyoti, would you like to take this question?
Sure, D.T. So...
And then Deepak can add because Deepak has just joined. So maybe you can just give a perspective on our business. And Deepak can talk about new technologies and other things, what he will be using.
Sure. So we use AI, ML across the customer journeys on our platforms. For example, just in this -- in our release, we have -- we talked about customer support. So we have leveraged LLM model, a bit contextual data specific to us, to help answer customer queries. And it has got a 70% success rate. Besides this, we also leverage it from our acquisition, during KYC, for various things like signature recognitions, et cetera. And even for our activations, right, for churn management of clients, we figure out what is the right campaign or right campaign needed for a particular person to get activated on the platforms. Deepak, do you want to add...
Deepak, would you like to add on this your vision strategy? [ You have seen the world ].
Yes. Thank you very much. I'm very excited to be here today. I think, as Jyoti mentioned, a lot of things are going on here. I see a lot of technology play, while we can use artificial intelligence, machine learning, data science, to kind of enhance customer engagement, experience; and further revenue increase for us, so I am looking into all the initiatives which are running right now and have a lot of ideas from the past. We have done journeys at Apple in which we have a lot of customer base and we use that halo effect in which a customer comes in and then we push them on to various journeys. That's what -- we are planning to do it in Angel One, so I'm in process of building a strategy road map and using technology; and hoping we will be able to enhance customer engagement, experience, and revenues for us. So please hold on for more coming quarters, and we'll come up with exciting ways on how our customers get benefit. Thank you.
Yes. And one more question, sir. Like we -- as all we know, that BSE has also introduced this derivatives segment with the launching of Sensex and Bankex, but we are still not supporting that. So any plans to introduce that with our Super App?
Yes, Bhavin will take this question. And Ankit can add on product side.
Sure, yes. BSE has actually started the Sensex weekly [ of ] options and the Bankex as well. We have evaluated that and we have started working on this. In the start of quarter 3, we should be live, or a little before that, but there is an integration which has already started in the -- towards that as well. Ankit?
Yes, nothing to add there, yes.
Our next question comes from the line of [ Prathamesh ] with Proinvest Nirmiti.
So I wanted to know what the impact will be with the changes in the expiry on our order volumes. So weekly explaining that the...
[ Prathamesh ], if you could please lift your handset and ask your questions.
Am I audible?
Yes. I can hear you now, yes.
Yes. So I wanted to understand what impact will be there on our order volumes with the recent changes in the weekly expiries that have been done by NSE and [indiscernible].
See, when these weekly expiries increase, definitely there is some kind of like uptick on customers' engagement and all that. Devender, you would like to answer this question...
So generally when the weekly expiries are coming up, we have seen improvements in line with market. And I think what we are seeing is -- much more distributed behavior rather than concentrated behavior is what we are able to see and which is overall increasing the engagement of people as multiple instruments are getting distributed across the week. So it is overall increasing the engagement of people in a much more focused way, which was concentrated earlier in nature, and which is helping the overall business. We can't quantify how much impact it will bring, but it is a benefit for overall business that we are able to see.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Dinesh Thakkar for closing comments.
Thank you for joining us on the call today. I hope we have been able to answer all your queries. Should you require any assistance, please feel free to get in touch with Hitul Gutka, head, IR; or SGA, our investor relationship adviser. Good day.
Thank you. On behalf of Angel One Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.