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Earnings Call Analysis
Q2-2025 Analysis
Angel One Ltd
In the second quarter of FY 2025, Angel One reported an all-time high total gross revenue of INR 15 billion, representing a 7.5% sequential growth. This achievement is indicative of the company’s resilience as it navigates a regulatory environment characterized by changes introduced by SEBI aimed at enhancing market stability. The company noted that while regulatory changes may lead to some short-term softness in trading volumes, they are confident in their long-term growth trajectory due to previously successful adaptations to similar regulations.
The gross broking revenue experienced a modest increase of 2% sequentially, totaling nearly INR 9.4 billion. Notably, the cash delivery orders surged due to strategic client engagement and an absence of charges during the quarter. Furthermore, the client funding book averaged INR 39 billion, up by 48.1%, reflecting increased trading volumes driven by a growing client base and enhanced product offerings.
Given the recent regulatory adjustments, Angel One anticipates a potential impact of 13% to 14% on net income related to broking and ancillary income. Such changes stem from the true-to-label requirement and increase in contract sizes in derivative trading. The firm is proactively mitigating this impact through strategic adjustments in pricing and interest charges on client services, such as lowering the margin clearing interest rate to 14.99% from 18% starting November 2024. This adjustment is expected to increase competitiveness, particularly in the client funding area.
Amidst these revenue challenges, Angel One successfully managed operational costs, with employee benefit expenses rising by 14.6% to INR 2.3 billion due to strategic expansions in technology and analytics teams. Other operating expenses saw a significant decline, falling nearly 25% sequentially to INR 3.7 billion due to the absence of IPL-associated costs from the previous quarter. This effective cost governance bolsters the company's operating margin, which improved to 49.9% compared to the previous quarter.
Angel One emphasized a strong focus on client lifetime value rather than short-term revenue impacts. The company's strategy positions it to leverage rising market share—now at 15.7% of India's demat accounts—as it continues to acquire an increasing number of clients, particularly in Tier 2 and Tier 3 cities. The breadth of its services, including mutual fund distributions and wealth management, is designed to optimize value derived from each client, enhancing overall portfolio returns in the long term.
The firm's leadership expressed optimism regarding future performance, citing their operational strength and commitment to client satisfaction and technological advancements as core tenets of their strategy. They foresee their long-term growth trajectory remaining intact despite anticipated immediate challenges from regulatory changes. The organization aims to continue monitoring customer behaviors post-regulatory adjustments, positioning itself to adaptively respond to market conditions and to realize sustained profitability in the forthcoming quarters.
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Ladies and gentlemen, good day, and welcome to the Angel One Limited's Q2 FY '25 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 expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
I now hand the conference over to Mr. Hitul Gupta from Angel One Limited. Thank you, and over to you, sir.
Good morning, and welcome, everyone. Thank you for joining us today to discuss Angel One's Q2 FY '25 financial and business performance.
The recording of today's earnings call and the transcript will be uploaded on our website under the Investor Relations section. The financial results, investor presentation and press release are also available on the website.
For today's call, Angel One is represented by Dinesh Thakkar, Chairman and Managing Director; Vineet Agarwal, Chief Financial Officer. We also have the senior leadership team of Angel One, 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, which will be followed by a question-and-answer session.
Please note, there may be certain forward-looking statements made during the course of the call, which must be viewed in aggregate with the risks that the company faces. This is brief introduction. I now invite Mr. Dinesh Thakkar for his opening remarks.
FY '25 has been an eventful quarter characterized by regulatory changes and strategic initiatives at Angel One. First, SEBI introduced the true to label regulation with the goal of ensuring the standardization of transition charges for trading and investment fraternity. SEBI also introduced some tightening of regulation around the derivative segment for the industry with admirable intent of strengthening the equity index derivative framework, focusing on the long-term sustainability and protection of investors, particularly small retail participants while promoting growth and stability in India's capital market. This efforts include the rationalization of weekly index derivative product to for exchange, increased contract sizes for index derivatives and a 2% increase in the ELM on expiry date.
While these adjustments may potentially result in short-term softness in trading volumes, they're expected to fortify the market in the long run. We at Angel One will continue to monitor client behavior closely in coming quarters, and we remain optimistic about the long-term outlook measured as a lifetime value for our clients.
Our belief stems from our past experience of SEBI's earlier interventions such as peak margin regulations enacted in December 2020 and the margin segregation between cash and collateral in May 2022.
Taking into consideration the permanent impact of the true to label transition charges, we implemented several proactive tariff adjustments, including introduction of brokerage on cash delivery orders and the imposition of interest on disproportionate noncash collateral offered as margin exceeding INR 50,000. These measures, as communicated in our previous earnings call, were designed to mitigate the revenue impact while maintaining a sustainable business model.
In our ongoing effort to enhance our market share, we have rationalized the interest on the margin trading facility offering to a flat rate of 14.99% annually based on our successful experimentation in previous quarter. We believe this approach will help us continue to garner a larger market share in growing MTF segment.
Diversification remains a very important aspect of our overall growth strategy. Angel One went live with distribution of credit products on its platform after thoroughly testing and incorporating client feedback. The company launched unsecured personal loans through partnership with 3 NBFCs and plans to onboard more partners soon.
The digital distribution model offers deep penetration, providing access to credit to a diverse client pool. The platform utilizes a proprietary propensity scorecard for risk management. This scorecard was developed by leveraging our data analytics capabilities. As of the 30th of September 2024, cumulative disbursement through our platform totaled INR 3.6 billion. As we progress in this segment, we will take a calibrated approach in scaling up the credit distribution business based on enhanced risk understanding.
We also launched the distribution of fixed deposit on the app through ties with 6 partners, including banks, small finance bank and NBFC. Our clients can now invest in fixed deposits as the off-the-shelf product without the need to open a bank account, further diversifying our product offerings.
In mutual fund space, we achieved significant milestones, reporting our best quarter with more than 2.3 million unique SIP registration, including more than 8 lakh in September 2024 alone. Signifying the excellence of our mutual fund journey, we witnessed positive trend in terms of time to first SIP purchase, average ticket size, number of clients doing their second SIP, et cetera. The adoption and maturity achieved by the product on the platform suggests that the engagement and retention efforts are paying off well.
The expanding suite of products from equity broking to distribution of third-party financial products showcases the evolution of our Super App and its advanced capabilities. As we continue to enhance our product offerings, we are steadily becoming more capable of fulfilling all clients' financial needs and empowering them to close their financial life cycle loop within the platform.
On broking front, we remain committed to improving the trading experience through technological advancements. During the last quarter, we launched a refreshed version of Traders Spa with several key announcements, augmented clients' ability to change order preference and optimized search functionality for better QR matching to name a few advancements.
In addition, we integrated ChartIQ into our platform, providing an alternative to the existing charting option available on Super App. The strategic use of data continues to drive our operational efficiency and improve client engagement. Data democratization and advanced data science solution provide sharper client insights, improve client support through automation and streamlined operations, ultimately enhancing client retention.
During this quarter, we also witnessed notable progress in our assisted business. We redefined the partner acquisition, engagement and retention playbook, refined journey on the NXT platform and integrated a signaling mechanism to empower partners to engage with clients more effectively. Leveraging our strong data analytical capabilities to develop cohort personalization based on behavioral insights, the business vertical continues to experience significant growth as envisaged.
As a part of our ongoing effort to invest in building blocks of wealth management, we have expanded the team and our presence across different cities. We onboarded talent with deep knowledge -- with deep domain and tech expertise as well as decades of experience in client relations and proven track record of delivering success at the point -- at some of the large global consumer-focused tech companies.
In addition, we are augmenting our relationship managers bandwidth as we focus on penetrating and serving clients in Tier 2 cities. We strongly believe that there is a tremendous growth opportunity, especially in the HNI segment, which is currently the underserved segment.
Through our wealth management, we strive to leverage that domain expertise, coupled with our technology capabilities to disrupt the business and offer the service to the wider audience. Our asset management business awaits final regulatory approval, and we will provide updates on in due course.
During the quarter, we further solidified our management bandwidth with onboarding of A Nahmad as a Chief Business Officer, Direct business. Ari brings over 16 years of distinguished experience in e-commerce, scaling up business with a strong understanding of customers entirely superior engagement. Prior to joining Angel One, Aifoued as a Vice President and Head of Fashion at Flipkart. He led critical charters ranging from creating customers first strategy for shaping client engagement, spearheading loyalty programs, overseeing digital marketing initiatives, growing the mobile and fashion category by leveraging data.
Operationally, Angel One delivered strong results in quarter 2 FY '25, acquiring approximately 3 million new clients with about 90% coming from Tier 2, Tier 3 and beyond cities. These acquisitions mean our total client base exceeds 27 million clients, making us one of the largest player in the industry.
Our focus on gaining and sustaining our market share is evident from the 44 basis points of sequential expansion in our share in India's demat account, reaching 15.7% as of September 2024. Our clients executed nearly 490 million orders during the quarter, translating into an EBT of more than INR 871 billion on an equity option premium basis.
With a 19.3 percentage share in overall retail equity turnover, we continue to report improvement in our market share across all segments. Our sustained focus on growth, client satisfaction, technological advancement is further solidifying our position as a leading player in India's evolving financial ecosystem.
Here, I would like to emphasize that our focus on unit economics guides us towards healthy business growth, our digital model enables us to achieve economies of scale with superior lifetime value while optimizing the cost of acquiring clients, thus enabling us to sustain our robust profitable metrics despite the evolving customer demographics.
Now I will now ask Vineet to take you through our financial performance before we open the floor for questions.
Thank you, Dinesh bhai. Good morning, everyone. Amidst the quarter with muted volumes, I am happy to share that Angel One delivered a very strong operational and financial performance with sustained market share gains in demat accounts, active clients and retail equity turnover.
Our aggregate orders grew by 5.8% sequentially to nearly INR 490 million, aided by 6.7% higher number of trading days.
We clocked our highest ever quarterly total gross revenue as we crossed the INR 15 billion mark for the first time, registering a 7.5% quarter-on-quarter growth.
Our gross broking revenue grew by 2% sequentially to nearly INR 9.4 billion in quarter 2 of FY 2025. The growth in our gross broking revenue trailed the growth of our aggregate orders as we witnessed a healthy growth in the cash delivery orders from our direct business where we did not charge clients during the quarter. Gross broking revenues accounted for 62% of our total gross revenues with F&O contributing about 81% in quarter 2.
Share of cash segment rose to nearly 13% of our gross broking revenue, which shall improve further as we start charging for orders executed in the cash delivery segment under the flat fee plan from November 2024 onwards. Share of the commodity segment also increased to 6% in quarter 2 of FY 2025.
Since majority of our clients are part of our direct business unit, their share in the net broking revenue stood at approximately 77%, while the balance 23% was contributed by clients acquired through our assisted business unit.
With rising volumes in our cash delivery segment, we witnessed corresponding growth in our client funding book as well, which averaged at nearly INR 39 billion for the quarter, sequentially up by 48.1%. Our period ending client funding book stood even higher at INR 43 billion.
Growth in the interest earned on this book also factors the differential interest rate charged to our assisted business clients. The interest earned on client funding book, along with the interest earned on deposits with exchanges, grew by 22.1% sequentially to INR 3.6 billion, thus accounting for about 24% of the total gross revenues for the quarter.
Effective November 2024, the interest charge on margin clearing facility across all clients is being reduced to 14.99% from 18% earlier. We believe that this alignment of interest with other industry peers and our seamless offering of the product will help grow the client funding book and cash delivery orders, thereby offsetting the impact.
The ancillary income, transaction income linked to the value of the orders executed by our clients on our platform remained stable at INR 1.1 billion and accounted for nearly 8% of our quarter 2 FY 2025 total gross revenues. From October 1, 2024, it is this income that has got extinguished as per the recently introduced T2 label SEBI circular of July 2024.
In our effort to insulate the business from this impact, we have implemented several measures as highlighted by Dinesh bhai in his opening remarks. Income from distribution operations grew 53.4% sequentially to INR 257 million, accounting for nearly 2% of our gross revenues for the quarter. This was predominantly driven by higher number of IPOs, coupled with full-fledged distribution of credit products through our platform to our clients.
Finance costs increased by 35.7% quarter-on-quarter to INR 754 million on account of 38% quarter-on-quarter higher borrowings to fund the growing client funding book.
Employee benefit expenses, including cost of granting ESOPs, grew 14.6% sequentially to INR 2.3 billion on account of headcount increase in the wealth management technology, product and data analytics teams. Increase in employee benefit expenses and ESOP cost is on account of new joinings and accrual of variable pay for the wealth business, whilst the increase in ESOP cost is on account of fresh grants to new joinees across the businesses.
Other operating expenses for the quarter fell by nearly 25% sequentially to INR 3.7 billion. In quarter 1, we booked INR 1.1 billion on account of proportionate cost towards IPL associate partnership and related digital and media advert spends. The same does not form part of our quarter 2 financials. Net of this brand spend of quarter 1, our other OpEx declined by 2.1% sequentially despite nearly 16% higher gross client acquisition during the quarter.
Our quarter 2 reported consolidated EBIT margin stood at 49.9%. While this was higher by 1,220 basis points quarter-on-quarter as compared to our reported quarter 1 margin, it was still better by 191 basis points quarter-on-quarter when compared to the normalized quarter 1 margin at 48%. This operating margin also subsumes the expenses on incubating new businesses of Asset Management and Wealth Management. The robust margin profile validates our granular focus on the unit economics as we reap the benefit of higher lifetime value of our clients, which is core to our growth metrics.
Depreciation and amortization costs increased by 13% sequentially to INR 256 million in quarter 2 as this was the first full quarter post capitalization of assets in quarter 1, coupled with increased incremental assets capitalized in quarter 2.
Our reported consolidated profit after tax from continuing operations grew by 44.6% quarter-on-quarter to INR 4.2 billion, making this our historic best profit performance. The normalized PAT for the previous quarter was INR 3.8 billion after netting out the impact of IPL-related costs, and our reported profit for quarter 2 is higher by 12.2% sequentially.
Our H1 total gross revenues and profit after tax stood at INR 29.3 billion and INR 7.2 billion, representing a growth of 57.3% and 36.3%, respectively, over the corresponding previous quarter.
Our H1 profit after tax is 63.6% of our entire FY 2024 profit, demonstrating our sustained and strong growth trajectory.
Period-end cash and cash equivalent, client funding book, investments and security deposits with exchanges stood higher as on 30th September 2024 as compared to 31st of March 2024. Correspondingly, we also witnessed higher client monies and borrowings as of 30th September as compared to March 2024.
The consolidated net worth of the company increased to INR 52.8 billion as of 30th September.
As we continue to operate the business within our desired margin profile, our H1 annualized return on average equity remains healthy at 34%, an improvement over our quarter 1 annualized ROE, which was impacted due to softer margin and higher net worth on account of the fund raise. We strongly believe that our ROE is on the trajectory of -- to trend back to our historical levels in due course.
With this, I conclude the presentation and open the floor for further discussions. Thank you.
[Operator Instructions] The first question from line of [indiscernible]
Four questions from my side. First of all, the equity, you have already mentioned that the shorter term on the volumes in terms of some softness. I want to understand how we are seeing the impact for us. Maybe of you can give some quantification or they proportion of clients who might get impacted but the different context of say, regulation, particularly the lot size increase in specific? And what could be your [indiscernible] if we're on the same any corrective actions or pricing-related actions that you might want to take on the FM side?
Next, on the cash segment, I wanted to understand that the price increase [indiscernible] of customers because [indiscernible] to be not increase the price in this segment? And a few could give some color on realizing some of the pricing if you look at the 20 increase [indiscernible] that is there or it should be somewhere in between?
A couple of more things quickly. Sir, one is on the interest income side. The [indiscernible] of mechanism, how do you see this spanning out there? And related to the strong delivery in terms of the expenses this quarter, just wanted to understand what steps you took to control the cost this quarter and whether this [indiscernible]? Those are my questions.
First on circular on the delivery segment. We selectively how much would be the impact. Our guesstimation is that impact will be around 13% to 14% net income that we'll get from that. But if you look at tailwind that customer execution run rate which is in the region of around 50% to 60%, it seems this impact will be negated in not more than our [2 ] quarters. But with its important is that intent of is to reduce losses of retail audience. So if losses reduces, they're able to achieve, lifetime value of a customers going to [indiscernible]. So we really opted with that in terms of lifetime value, there is no impact. There can be impact of revenue from a customer in a week or a month or 2, but we work on a business network of cost of acquisition to lifetime value. That is not going to change.
And second factor, what we see is that gross rate of customer base, which continues to be in the region of around 50% to 60% for digital part in giving us, that will continue to be small [indiscernible] correction, regulatory changes, which made healthy. It's always good for long-term prospects of organizations like us. So we are very [indiscernible] bullish in terms of the revenue that we are going to get from the customer in terms of lifetime. It's going to be same or is going to increase.
Second, as we are entering into multiple products because customers will be retained on our platform, we'll be able to sell more products to the same customer. So overall, we are expecting that we will be able to get more wallet share from the same customer.
Second, on care segment...
Sorry to interrupt, just before we move to the care segment, I just wanted to clarify that this 13%, 14% number you mentioned, is the only on the broking or overall like broking distribution interest income altogether?
No, no, it is broking and related income from broking, [indiscernible] charges and all the related income that we get from customers related to broking activity. That is what I'm mentioning, impact on that total income from a customer. So when we calculate lifetime value from a broking customer, I'm talking about that income.
Okay.
Sir. And just one clarification, was that the new measures to neutralize it or as the lifetime value increases, you'll eventually see the group. I mean I just was curious but whether with should expect the industry level maybe pricing improving there and you might also want to take the step, that I wanted to understand.
Pricing is not connected to this. Pricing can be because we are offering a better product on other platform. And there's a big difference in pricing what we are offering and what a traditional a broker, but in [indiscernible] can connect exchanges providing, it can be factored of that. But if you look at by changes in derivative contracts, cost is [indiscernible]. So cost is not increasing. There's no impact on margin. So there is no reason for us to really think about pricing imminently till the time we see impact will not be able to recover. But if you look at customer base, the wage is growing to the tune of 50%, 60%. It's a matter of extra capacity that is created. But having said that, we are open to, if it all, needed to work on price and all that. But currently, we'd like to wait for a quarter or so to see the impact of volume.
As I said, I do not see any kind of impact in terms of cost escalation in terms of serving the customer or acquiring a customer. So it's a matter of time that we don't expect to [indiscernible] OPM. [indiscernible] for price increase and all the -- any impact in terms of customers not coming on our platform.
Time and again, we have seen no sense to [indiscernible] to the tune of [indiscernible] backward edition with 10 or and not that we were able to gain. It's important is that experience that in the fee value on this platform. And if you see, say, we need this price, there is nothing that okay, we feel that we lose from our customer will not come on our platform. So there's a big difference between pricing what technology players are offering and what traditional brokers are offering. Still, there is quite a headroom that we -- if we want, we can utilize that.
Understood. Sir, very clear. Sir, if you could address that.
Yes. Second, on care segment, it appears to be blended kind of realization will be closer to what we get in [indiscernible] because we have seen ticket as is quite decent in care segment. So it will be somewhere around what we get in F&O segment.
Third, you were starting about UP blocking mechanism. Vineet, if you can take this or some [indiscernible] going to take this?
This secondary market or UPI block, as you have mentioned, this is mandatory offering for [indiscernible] from January onwards. Let's wait and see how the trend behavior pans out. We don't see that there is going to be any significant impact on this because of the ticket size of our clients. But again, this is something which we'll again discuss maybe or during the fourth quarter call once this mechanism becomes active.
On your fourth question on experiences this quarter, primarily, we have accounted for all the expenses for all the businesses in this quarter. And what you will see is that, okay, in future quarters, like as you saw that if we are able to [indiscernible] able to sell our [indiscernible] products and all that. So slowly, we'll see lots of revenue coming from the vertical were already we [indiscernible] for it. But there is one factor of expenses, which is very important for you to keep in mind, acquisition of plant. If we get an opportunity to acquire more customers, given that we are entering it in 2 quarters, [indiscernible] and all that, if these are the project we always, as I say, it is an operating cost, where revenues going to fall for the next 5, 6 years. So we would not shy away from taking more expenses if we get an opportunity to acquire more customers and get a better market share.
The next question is from the line of Prayesh Jain from Motilal Oswal.
Congrats on great set of numbers. Just on the new businesses, we've disbursed around 3.6 billion in terms of loans just to [indiscernible] rather. So what is the kind of realization that you're getting? What is the kind of asset or the segment to be, say, in the next 1 year or so.
Sure. We are very bullish all these new businesses because as we said that we migrated from broking app to super app. The reason was that we want to be leading in all can connect distribution business be it loan products, be it insurance, with anything but a retail customer wants. So we have very even high aspiration in terms of being leaders in that segment.
In terms of better than market standards right now in the distribution business and more and more details of the business will get out once we ramp up the business over the next few quarters. Okay. And where are we in terms of wealth management with regards to products, RM addition and so where are we in terms of wealth management?
So this is more a combination of very strong domain expertise and bringing technology together to deliver that and add efficiency. We've already started to do 2 set of activities, first one being that we have already started to publish content, which is across 3 different categories of content, which you will see in the Investor Relations presentations as well across macro views on asset classes, across using overall macro economy and specific news on loans which happened. So those things have started.
And separately, we've already initiated third-party distribution business with a combination of mutual funds, PMS AIS have already started to get offered to customers.
So where are we in terms of on counts? And what are the addition plans there?
So the relationship team is getting higher. The combination of people, some people on board, some people joining us over the next few months serving their notices. The RM team is under the ramp-up stage right now. The full team should be built out over the next month or so, so we'll see the full build-out of the R&D in the next quarter?
[indiscernible] partners, what is the kind of [indiscernible] network as we have today? And how many have you added in the last 6 months. Although the mutual fund business is mentioned to be scaling up from that, so will the distribution revenue start growing from that channel as well? And what kind of potential do you see there?
See, AP business, we are very bullish on AP business, and that's the reason. We have working 15. And these changes in AP business, we believe that not only we would be kind of looking at distribution or getting the revenue from broking but also distribution of mutual fund, insurance and all that. For further detail, let me get in Nishant over here, if it all he's online. There was some disconnection. Okay. So Nishant is disconnected. Let me take this.
So in terms of number of APs, we are in the region of around 9,000 to 10,000. And this business is also growing as it to our digital business. So share of AP business is around 22% to 23% of our revenue. But we feel that this also business will be able to keep pace with this growth in digital business.
And last question, on the bond rate of these new businesses, what should we think? And when do with see real contribution from these businesses, say, from FY '26, '27, how do with say the burn rates in the use businesses and going ahead?
For new business distribution of loans and all that, all in fashion in terms of getting revenue from that. And in a few quarters, you will see we'll start distribution of insurance on our platform. So this new business is where we happen invested for 18 months, and there have started doing revenue.
And on wealth side, I think is a matter of reflected a few quarters that will start giving good revenues. So as previous earning call, we landed everyone but this burn rate would be around 2% to 2.5% of our total revenue. So that way, we maintain that because we want to grow all that vertical. So I -- with believe that breakeven for new businesses would be in next 1.5, 2 years and maybe wealth may take around 2.5 to 3 years.
[Operator Instructions] Speakers, please go ahead.
[Foreign Language].
Our next question with question, all right. Our next question comes from the line of Sveta Jain with Whitestone Financial Advisors.
I have two questions. One was on the lending distribution that we have started. Just wanted to understand what would be our revenue model there? Are we getting some onetime kind of a fee for distributing this [indiscernible]? Or it to be like the -- what would be the income out of that? How you model basically for us there?
And secondly, on the NBFC lending, what happened with the loan default? So those loans that we are distributing, will it count as an NPA for us? Or the credit risk belongs to the banks or the NBFCs through which we are tying up for distribution? This is the first question. So answer this and I'll ask the second one.
As the second. So let us take all the questions and then we'll answer them one by one.
so second was on the transaction -- standardization of the transaction. I think you did mention some bit of it in the opening remarks that I kind of joined a little late, so I missed that commentary. So just wanted to understand how do we plan to negate that impact, because I think is an impact of INR 400 crores, INR 410 crores on an annual basis. So how do we kind of take care of that impact of the transaction cost?
Okay So impact of transition kind of -- we're talking about transition cost and it's due to later.
The transaction charges, which now -- we know these are charges -- this too charge our customer, which we...
So we have increased our can connect or maybe we have started charging for cash delivery transitions. We have put -- we are charging interest on [indiscernible] that we receive for -- so roughly, but putting all this additional kinds on care segment and charging for curators that we pursue a margin, we'll be able to get this impact of [indiscernible].
Second point, change in SNO contract size and rationalization of deeply expiries and all that, 1 contact for exchange. So we sell the impact will be around in the region of 13% to 14% of the total income from the client. And we are seeing that customer base is growing at a rate of 50%, 60%. So we would like to see some impact on overall behavior of customers. Then we'll take a call whether some action will be taken on price side or is there any under levers that we can use to negate that [indiscernible] and that impact? Too early to talk about that impact. But due level impact we have negated by charge on cash delivery and interest on collateral that we receive. And on NBFC, sort of if you can answer on onetime and risk of the credit default.
Sure. Sure. On your first question on how we intend to make money on the lending distribution piece, the idea is to charge a onetime payment for a loan that is disbursed by an NBFC. And each time the customer takes a repeat loan also, then again, we make the onetime payment for the loan itself. So the idea is to have the customer on our platform and to serve the customer continuously over his lifetime where if it takes multiple loans, we make money on each loan. So that is in terms of the income.
In terms of the default, right? I mean, we are purely in the distribution business, right. It all completely lies in the books of the NBFC and/or the bank that we have tied up with. There is no implication of the default on our business whatsoever.
The next question is from the line of Nidhesh from Investec.
So first, can you break down OpEx that is being incurred for wealth management and asset management business in quarter 2?
Vineet, if you can take this?
Yes. So Nidhesh, as we have guided in the past, the overall impact of the OpEx for incubating the asset management and wealth management businesses is about 1.8% of our OP. So this 49.9% OPM had we not spent on the wealth and asset management businesses would have been around 51.5%.
Okay. Secondly, in the assisted business, the mutual fund distribution that we will be doing, that will be regular plan or direct plans? And if you can share the quantum of AUM that you have gathered through assisted business, mutual fund distribution.
Nishant, you can take this.
Yes. So as far as the [indiscernible], we are about -- we are operating to a regular [indiscernible], if that was the first part of the question. On the AUM marketers.
Nidhesh, right now, we're not sharing the AUM numbers. We'll disclose it as we feel it appropriate at some later time.
Sure. And just last question on, again, on the system channel. Do we also have plans to distribute loans and other times service products through the AP channel? And what is the -- is there an update on distribution of such products as of the [indiscernible]?
Yes. As articulated in some of the previous interactions, assisted business is not only channel plays. We have players in small categories of products, and there are 2 or multiple channels. And therefore, a short answer to your question is yes. No details with follow once we have kind of rectified and initiated from those plans.
Okay, the next question is from the line of Sandia from Union Asset.
Firstly, congratulations for being [indiscernible] great set of numbers. [indiscernible] the business. My first question, sir, would be on multiple question, a small question for the [indiscernible]. So first, you have the market share increment in the incremental market share in the [indiscernible], so that is reduced by almost 2 percentage quarter-on-quarter. So do you see any impact on the SEBI circular for not going via the unregistered partners? Is there any impact from that firstly?
Secondly, on the INR 500 crore limit per trading members that would be reviewed, I think it now from January, I think maybe [indiscernible]. Thirdly, on the -- you're saying that lifetime value per customer would be increased. So wanted to if you can throw some numbers how things are actually would be increased because you are saying 13% to 14% impact on that net income from the customers with the broking side. So what other products do you think would be able to compete with this?
And lastly, if you could share the average ticket size or the per order value for the equity care segment for last year, not current year, but if we you can say that, that would be helpful.
Okay. Devender, you can take at this question on the INR 500 crore trading limit. On LTE, what I meant is that when a customer comes to this market, he or she allotted some share of wallet to the trading and do some activity in cash or community market. That is not going to change. So if a customer loses lesser amount in the market, that person would be encouraged to continue for the longer term in the market. So when we calculate lifetime value, we see that okay, what's the activity of a customer, which would be there on a block of say, 5 years. The data suggests that lifetime value customer is [indiscernible] 5 years as we have almost competed [indiscernible] next cycle where we can extrapolate data beyond 5 years. So we can see there is a life less 5 years also.
Now that you have introduced more products on our same platform, mutual fund, we have seen good traction of people buying mutual fund. And if you look at mutual fund and all that, almost we can say that customers will continue to invest in this market if they start them at '25, '26 until the time of retirement.
So one in [indiscernible] activity, we are seeing if they lose less money, they are going to be more active for a longer period they'll be active in the market. That will increase lifetime value. Plus, they will buy multiple products on our platform.
So overall, what is important is that retention on our platform is they move less, they are going to stay more.
On other questions, average order size, we don't disclose. As unit and trade limit, if it was Devender and Bhavin can take this question.
Can you repay the question on the market share reduction on [indiscernible] side? It was not clear on our side?
Yes, yes. Sure. If you see the presentation, so last Q1 FY '25, the incremental share in the net account was 32.8% whereas 21.1% share is incremental net account in Q2 FY '25. You only to understand almost 1.7% impact in the additional net amount, so is this because any impact due to the change in the regulation that we cannot now pay with the unregistered people with [indiscernible]?
Okay. Yes. So I think at an overall level, we have maintained that we have been working on the overall business metric of profitability of the client. And we -- keeping that as guideline is how different we are more in terms of market share acquisition. So at an overall level, we don't see any subdued in terms of market. And at our level, we have maintained our margins and there might be a small change in terms of growth here and there. But on the overall level, we see that the market share that we have been doing which is around 23% will remain constant and will progress from that point of view.
Okay. So no impact from the circular that you cannot tie the other [indiscernible], right?
Sanjay, if I may add. So the digital channel -- digital referral agent was not a large business for us any which way. So that doesn't have an impact on the customer acquisition. And as Devender pointed out, there will be times during the year where we could be lesser than the user of the quarters. That is more to do with how do with see the market panning out from a profitability standpoint. As Devender bhai also pointed out that our cost of acquisition is a function of want kind of opportunity with see in the market. So in the last quarter, we saw differential opportunity, and therefore, that plays out in the way the number of customers we acquired for that quarter. But in the subsequent quarter, things may again change. So this is a very volatile number. Nothing should be drawn on the basis of this.
And on the INR 500 crores limit, [indiscernible].
Yes. So on the INR 500 crores limit, as you know, there is a clearly defined number by SEBI. But we don't see this getting impacted to our retail base as of now. So we are not seeing this as a problem at our end.
So you're saying that there was no impact on our trading position even [indiscernible]. Okay, sir. And lastly, if I could ask you -- okay, you are not sharing the per order value for the [indiscernible]. If you did show the overall turnover for the last year?
Vineet, do we share the number which he is asking.
So we shared the overall cash turnover not the cash deliver turnover. Cash turnover for the...
Yes, Intraday and delivery both could share.
Yes. Yes. Can I just come back on this number?
Sure. One last [indiscernible]. So I wanted to say if we can have a separate call with the [indiscernible] once the business starts. There are a lot of questions in that.
Yes, sure. We are also equally excited to have a call, so definitely, like -- again, a separate call with wealth management team to their plant restoration and what they are planning in the next 2 quarters. Sure.
The cash turnover was INR 100 billion for the quarter.
No. Sir last year, if you can share, but we can extrapolate.
The next question is from the line of Sanketh Godha from Avendus Spark.
Sir, can you give me -- what is our equity derivative market -- options market? What is our premium to notional percentage means how much premium cost they typically we collect compared to the [indiscernible] AGT. What we do in only options market in this? If you can give me a disclosure, that would be helpful.
And second, because the premium turnover clearly is not available in your presentation. And second that just wanted understand how from your total volumes perspective in options derivative? How much is contributed by bank? Just that's the second question. And the third question I have is that you have indicated that there could be 13%, 14% impact from the net income, if you can give a waterfall on that impact, whether it will be more because of the lot size increase or reduction of the number of expiry days.
So in your assessment, which will be impacting that 13%, 14% of impact in the net income? And lastly, if there is 13%, 14% impact, would you still maintain that EBITDA guidance which you shared at the start of the last year -- or this year, around 42%, 44% for the full year? Yes, those are my questions.
Yes, in terms of premium volume and this summary to answer later. On this impact of 13%, 14%, see there is no ultimately very simple as it is what you are seeing that, okay? Is there anything impact of like Bankex and this. So we have seen lot size was decreased just in the revising of the financial year, if you fly that logic, our volume should have really gone up substantially, but that's not work that way. So based on past patterns and all that, we try to the working on what can customer activity would be. And instead of what they are doing, what they will do, so our data science team has rolled out the [indiscernible] understand complex message, which we're able to extrapolate based on whatever has happened on these changes was severe or not would be in the region of 13% to 14%.
See whatever permission we have made in the past also, you'll see they are very closer to what impact we see in the industry unlike those of our people competition gets worry. But I think it does not work very optimistically that okay person doing one we will stop doing it. So by that sense, even when losses was decreased, there would have been substantial rise in volume, which happened in April 2024. We do not see that rise in volume.
So I understand was not that in the market for 1 lot, if [indiscernible] is not available, they're going to totally withdraw on the market. You who wants to come and equity and want to trade, they will explore a few other opportunities. They will bring in more money on whatever.
So this is how we calculate. It's a bit complex based on all of the data science models. And yes.
Based on your assessment, maybe I understand that is a difficult number to quantify. But your model says that the whether it is more to do with a lot price increase or more to the with reduction in the number of expiry days, which will have an impact. I mean just wanted to understand which impact.
So it is a combination of both, but the weekly expense has been reduced more impact can come from that side. But as I said that, okay, if a customer is active in the market, instead of doing, let's say, like 10 lots, you do 6, 7 lots in that month. But if I take exchanges can like activity for a year, activity for a year with proportionately would be almost same, I would say. So sometimes weekly option not necessarily the plan is actually all the weeks. If you get some lesser expiry, so they may make in a year, they will take almost an equal quantity. So our model is based on the, okay, maybe based on this [indiscernible] there can be larger impact in a month or so, but it extend this for a later impact would be largely as high.
And the second question, whether guidance on EBITDA would be able to maintain that? Yes, definitely, we'll be able to maintain that. You can see improvement in that because now we are able to sell multiple products to the same customers.
Got it. Got it. Got it. Perfect. And maybe before Vineet can answer premium to an [indiscernible] number. Just if you can quantify your revenue from loan distribution in second quarter or 1H.
Only to say address because with half started that this quarter, give us 1 or 2 quarters as a that we are able to be a bit precise in terms of guidance and number.
Got it. Okay, sir. And 2 questions, the premium to notional and Bankex contribution to a total number of orders.
Bankex is a separate contract we don't disclose. Vineet, you can take that first question?
Yes. Sanketh, this is Bhavin here. Premium to notional, they show similar what exchange ratio were It's in the range of 16 basis points to around 18, 19 basis points over between that.
Okay. So basically, average what gets reflected MHCs, it is broadly reflected [indiscernible] into?
Yes.
Is fair to assume that in your volumes still Bankex and contribution is not meaningful because the premium is meaningfully as you know?
Sorry, Sanket, those are numbers we are not able to disclose today. So we can't give you index-wise what volumes we do.
The next question is from the line of Pallavi Deshpande from Sameeksha Capital.
Just wanted to note on the wealth management side, the INR 250 crores investment. So what is the stake we hold versus the co-founders that you've brought into the business?
Wealth management, company 100% subsidiary of AUM, and there has a separate [indiscernible] for that company.
So just wanted to have a sense of where do we see our holding, let's say, 4, 5 years down the line in this -- in the wealth management arm?
It depends on performance and all that. Too early to say that. There's a result, which we have completed based on performance.
[Operator Instructions] The next question is from the line of Aman Singh from Propagate Capital Services.
I have two questions. First, on the NPA side. So we highlighted a few quarters earlier that we'll focus on the NPS, and we have doubled the book in a year. And now we have reduced the interest rates on NPS. So is it the competition that is hunting the NPS and the growth slow down in coming quarters? This is first.
And second, so we are selling the regular mutual funds to the wealth management part of the business and direct mutual funds on the platform, the super that we have. So what are the plans to monetize the customers that are purchasing direct mutual funds from us? Are we planning to introduce regular plans on the Super App also? These are the two questions.
Okay. On MTF side, it is not that we get influenced by competition and all that. It is based on leverage with weekend get and growth prospects that we see in that vertical. We would like to increase our market share. So if you look at viability in terms of business volume and all that, it is viable at this rate. And in fact, if at all, we see higher volumes, you would be okay to adjust price because what is important, what's an offtake of this book that is important. So what we are seeing currently we saw a good opportunity in terms of growing at this book size. And keeping that in mind, we confirm in the price where it becomes viable for the customer to borrow money and trade in the market and all that. So all said and done, if it is going to give a certain written. We have to see that customers who are using this facility, it becomes viable for them to avail of the facilities. So based on that, we take decision and you look at those opportunity and what can find like, which is growth we can see in that area.
On second question on that platform, we offer direct, and there is no kind of need for us to monetize these customers are doing some other activity on our platform. As I always say, we don't look at revenue or profit per transaction. We look at the revenue that we can get from relationships. So a person who on boards and buys mutual funds on our platform, they are -- probably, they're going to be retained for a longer period of time. That whole lifetime, they are going to do far more other transitions, a lot of more services on our platform. So if you look at lifetime value, then you always say lifetime value for us. So we believe this person who starts with IP journey and would be buying more multiple products. Lifetime when you of this customer who starts onwards, are buying mutual fund directly are a customer who onboard as an equity, it appears lifetime value when you would be almost similar.
Sir, a small follow-up on the second part. So as we are now entering the wealth management business also, will it not make -- will it not be better that target the bottom of the pyramid, the people who are buying direct funds by monetizing and selling them the regular funds because we are entering the mutual funds distribution business to the wealth also.
See, that totally different models. Wealth management is more of an advisory patents for people who want on that well. Direct business on the platform, people who are making their own decision. And there will look for some custom digital advisory and all that. So we want to keep it separate. So because people who are coming out of wealth management side, they want to pay for advisory services or they want to pay for guidance that they get for the well and other assets. So we want to keep the mystery.
Distribution would be on our platform, which is direct. If at all, any customer who wants an assistance, there is a charge for that.
Right, sir. Sir, just a small clarification. As you highlighted earlier on the call that the company will not shy away from any up-front marketing that will give us more customers. So the IPL cost that we encourage last year to ITL sponsors of course that would be there for the next 5 years, and there are no change in plans because of the disruption and the SMO part of the business, correct?
Yes, yes. Because we would like to continue being, I would say, increase or market share. Wherever you are the port in terms of type top of the mind recall are people who want to consider to come into equity, our name should be a first choice for them. So we will continue to spend on IPL plus complement by pulling more content expenses on branding and all things what we did last year. So we have seen a big benefit because of doing this activity and complementing with some planning activities. So we'll continue with that.
Now we have more the reason because now more products are available on our platform, where commercially, we can just sell and earn from that.
The next question is from the line of Ajox Frederick from Sundaram Mutual Fund.
Just one question, sir. Sequentially, our admin and other expenses adjusting for IPL has come up despite clients or the customer acquisition going up about 15%, 16%. So what are we doing differently this quarter, one? And can this cost optimization sustain in the coming quarters? And that's my question.
See, we work on cost of accretion to lifetime value. So say, like every quarter, you see there is some kind of change because cost of [indiscernible] and all that changes, pricing on social media changes. So there can be small variation on what we look at average cost of requisition across the year. And we believe wherever we see opportunity that we have been able to optimize that cost, we would like to scale it up and acquire more customers.
Our focus is on getting market share. And wherever we see unit-wise economy is viable to acquire more customers, we would like to go for that. So current focus is not on optimizing cost, it is more on market share.
So there could be some elevated costs coming up and subsequently.
It will get an opportunity, yes.
The next question is from the line of Pat from Global.
Congratulations on a great set of number. Just have one question. How frequently do you hit the open interest limit of 15% given we have 20% of the market share of turnover -- of the market turnover? And also the consequent question is, how large do you think you can grow from here on this front?
Open interest, we haven't faced a like this problem. Bhavin, you'd like to take this?
So we have not seen this particular problem at our end. And as the market open interest, the 15% of market open interest, whichever is higher, we have a share of that. So we don't see an issue as of now.
Got it. And just one more question. The, 13% to 14% or NPAT that you are expecting from the incoming regulation, is this on today's stock user base? Or are you sort of also factoring the customers coming in and sort of adjusting for that as well?
I'm saying for impact of per clients who are active what are, but if I take a growth, automatically reflected middle it gets offset in 1 or 2 quarters because we are seeing agents in this industry in terms of acquiring new customers, new customer coming to this market continues at the rate of 50%, 60% from digital payers. So I'm not factoring in that growth rate, affecting the growth rate and impact is positive again in next year.
The next question is from the line of Arvind from [indiscernible]
Congratulations on a good set of numbers. When we talk about non-BSDA accounts, is it safe to assume all the active clients would make up the major portion of the non-BSDA accounts? Or we would be much more than that?
Bhavin, if you can take this.
So it's safe to assume that most of our active customers are non-BSDA also.
Okay. Would it make a significant proportion of it like we like 50%, 60% of non-wage account?
Yes, yes. Most of demand is non-BSDA, and it will not have an impact. And that's what we can say as of now.
Yes, okay. And sure, sir. And you were also talking about the operating profit margin would have been like 12% higher, like if it not had been for the investment we need in asset wealth management, is it primarily a one-off kind of an expense? Or is it going to be like every year, like such level of experiences need to be incurred for wealth management business, but the revenue will come a bit liter as you mentioned in 2, 2 or 3 years for the business to break even?
No. See, we have invested in different vertical and different [indiscernible]. So if you look at loan distribution and all that, they are already become active and they're selling the year product, so this 1.8% is like what we have been spending on other verticals, which we have accounted is still that revenue has not started from -- started from that verticals. But if you know at distribution of loan in this quarter, we are seeing some good numbers. Imminently, we will see for distribution of order verticals insurance and all that also in a few quarters, they will kind of coming.
Similarly, next year, you'll see revenue comes from wealth management and all that. So difficult to say what possibly worse decrease would be there, but in terms of our continuing to invest money in this vertical would be there because we want to grow this business. We want to see that we become market interest in reach area with get into.
And just one last thing, if I can squeeze in, sir. Other markets, especially the brokers are they confident of being able to increase the charges, there is significant considerable decline in a number of trades are a volume per client?
I don't see any concern for digital players because there are limited digital players who have excellent platforms, which are working at the scale and all that. If there's a need for anybody to change this coupon pricing, I see that we have lots of elasticity in terms of increase in oil price. Whether it's necessary or not, I think once we see what kind of an impact is there, and it is necessary, we'll increase it like for the total label, we call it is necessary. And we don't feel there's going to be any impact because of charges for cash.
Similarly, if you see that impact is beyond what we are anticipating, I'm talking about digital care. I think they have a good content platform where a customer wants to use digital platform. They don't mind paying [indiscernible] more, what is component is that they want to see experience and engagement that they are having on the platform, that should be superior, and we should be able to maintain that experience. So I don't think customers are [indiscernible] on patterns for order.
The next question is from the line of [indiscernible] from Adventures.
Yes, I just wanted to order with its the kind of revenue target that you are anticipating for FY '25?
We don't disclose forward-looking numbers. Sorry for that, but we can extrapolate what kind of some customer base at rate we are growing. So I don't see any [indiscernible] headwind on that side that will continue. And again, to impact world has told you and extrapolate for 3, 4 [indiscernible] will guide the number.
The next question is from the line of [indiscernible] from Equity Research.
First of all, congratulations on the numbers that have been promised. So my question is regarding the AMC license. Would you status update on that last quarter when you recall, you told us that is in progress in the next 2, 3 months? So when you can expand that?
Sure. Hemen, if you can take this?
Yes, sure. So again, in terms of the license, I can say we are in the final stages of getting the EMV license, and it could be any day, any time now that we hear it from the regulator, and that's what we maintain now also.
And any targeted revenue from that we are not [indiscernible].
So I think it will be too early to talk about the revenue metrics, even though we have to get the license and then the idea is getting the license and being on underground at the LDS. That is going to be our immediate next step.
Next question is from the line of Rucheeta Kadge from iWealth.
So my question is on the employee cost. So how do we see this panning ahead in the following quarter?
We have taken most of the cost that way. And if we look at -- we are talking about next quarter, there can be some impact and all that, I see there is enough capacity -- there is no need for us to really increase until that -- until the time we see some good opportunity somewhere, and we want to bring in that vertical. Otherwise, steady-state, business as usual, what we are doing. I think we have sufficiently spend on employee costs. There's no need to increase. Only we will see now optimization of [indiscernible] costs because after reaching certain [indiscernible] any digital business, there's optimization. But once we start spending on other vertical we can confident growth industry, there can be an opportunity where we would like to spend. But if you take businesses that we are doing, I think we're there, we have so much content spend on people need it for this vertical.
Okay, sir. And sir, just one more question, the 13% to 14% impact that you've said, so it's basically on the core order that a client places, right, because he was placing 5 orders for a month? So that we think that can reduce by 14%, right?
So again, as I said that, okay, the 13% to 14% impact is EBITDA. But if I take activity of a customer on this platform for year 2, 3, I don't see there will be any impact on lifetime value. If you take it this way that we take an activity of a customer for a quarter or 2, because there are less opportunities they may trade lesser by 14% to 15%. I take revenue from quarter or 2. But if I take a block of 1 year or 2 years, revenue from the same customer and what we got previous circular would be almost same.
Got you, sir. And sir, just one last question on the interest cost. So our interest cost is gotten elevated a little bit. So how do we see this for the value in the next year, maybe?
Vineet, if you can take this.
Sure. So interest cost is an offset of the MPF, the client funding book that we have, as we kind funding good growth, part of that will be funded through borrowings and the interest cost will go up. So it is linked to our borrowings for the client funding book.
Thank you. With time constraints, we have reached the end of our question-and-answer session. I would now like to hand the conference over to Mr. Dinesh Thakkar for closing comments.
Thank you for joining us on this call today. I hope we have answered your queries satisfactorily. Should you require any assistance, feel free to contact Hitul Gutka Gupta, Head of Investor Relations or SGA, our Investor Relation Adviser. Have a 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.