Angel One Ltd

NSE:ANGELONE

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentleman, good day, and welcome to the Q4 FY2022 Earnings Conference Call of Angel One Limited. [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 risk and uncertainties that are difficult to predict.

I now hand the conference over to Mr. Hitul Gutka. Thank you and over to you, sir.

[Hitul Gutka, executive]

Good morning, everyone. On behalf of Angel One Limited, I would like to welcome all of you to our Q4 FY2022 earnings call. I'm Hitul Gutka Head of Investor Relations at Angel One. Today we have on the call, Mr. Dinesh Thakkar, Chairman Managing Director; Narayan Gangadhar, Chief Executive Officer; Vineet Agrawal, Chief Financial Officer; Jyotiswarup Raiturkar, Chief Technology Officer; Ankit Rastogi, Chief Product Officer; Prabhakar Tiwari, Chief Growth Officer; Ketan Shah, Chief Strategy Officer, Dr. Pravin Bathe, Chief Legal and Compliance Officer; Subhash Menon, Chief Human Resources Officer; Bhavin Parekh, Head of Operations, Risk and Surveillance; Devender Kumar, Head of Online Revenue, SGA our IR Consultants.

We have published a detailed investor presentation and issued a press release to the stock exchanges, highlighting our performance for quarter four and for the full year 2022, I hope you had a chance to look at it. With this brief introduction, I now invite Dinesh Thakkar to give opening remarks. Over to you, sir.

[Dinesh Thakkar, executive]

Thank you, Hitul. Good morning, everyone. The recently concluded financial year 2022 have been a landmark year for the broking industry. As of March this year, the country had nearly 90 million DMAT accounts, representing about 18% of CAGR over the past 20 years. Despite multiple headwinds on the way, most of this growth has come over the past 5 years, during which industry has grown at approximately 30% of CAGR. This has been a result of massive changes in ecosystem, along with significant reforms within the industry, both from regulators as well as the participants.

Leading the macro transformation within the ecosystem has been a completely overall Internet infrastructure, access to affordable smart and feature phones, lower data charges, rising financial literacy, expanding income levels, digitization of various services and the bargaining desire from the younger generation to own equities as an asset class. The emergence of FinTech players and the dynamic changes they've got to the economy were largely responsible for the rapid transformation of financial landscape. These players leverage their digital progress and capacity to innovate, for innovation to build app that would expand their reach and enable them to seamlessly offer a wide variety of financial products to a significantly large and different markets.

Coupled with this, a plethora of recent regulation, and the development of large digital repositories ensured the safekeeping of personal data and motivated investors to upskill their awareness of financial products and actively pursue investments in Indian markets. The meteoric growth of broking industry in FY 2022 set a new record in terms of investors participation. For example, India added nearly 35 million new demat accounts, representing year-on-year growth of around 63%. On an incremental basis, India opened 2.4x more demat accounts in FY 2022 than FY 2021. This led to a steady improvement in equity penetration, which today stands at about 6.4 percentage compared to over 4 percentage last year. However, even at this level, we are far behind our global peers. Furthermore, FY 2022 has been the best year in terms of average daily turnover for the entire industry.

ADTO on NSE grew 2.6x in FY 2022 to INR 69 trillion from INR 27 trillion last year. This growth has been fueled by increasing retail participation. The share of the retail investor in cash segment of the NSE stood at 41% in FY 2022 compared to 33% in FY 2016. Direct investments for retail investors in cash segment of NSE in FY 2022 have been stronger with net inflows in 10 out of 11 months, amounting to approximately INR 2 trillion. This is nearly 2.5x of the inflows during the same period last year. All this reflects the changing behavior of retail investors in India. Today, they have a better understanding of significance of financial fitness.

Unlike the older cohorts, the newest individual value the potential of the handsome returns from equity in spite of unpredictability of current global economy, which significantly reduced return on low-risk asset, equity are strongly emerging as a natural choice of sustainable investments.

The United Kingdom had a similar experience between 1982 and 1992, when inflation and interest rates fell by 40% to 50%. During this period, the percentage of households investing in stocks and shares increased threefold to 25%. This phenomenon is being replicated in India. And over the next decade, I expect we will achieve 25% to 30% penetration. With all industry statistics progressively leaning towards new age digital businesses, a significant segment of the businesses, including incremental clients and volumes is turning to those innovation-driven intermediaries. The cornerstone of growth in the investment domain is pioneering technology, accompanied by reliable and relatable content that can be seamlessly integrated by new users who account for a large slice of market pie, both in terms of demat account and active clients.

We are already witnessing this trend as the top 5 digital brokers today account for approximately 58% of the total active clients on the NSE, compared to approximately 12% in FY 2018. This digital business accounted for about 70% of the market share of incremental active client on NSE in FY 2022 compared to 24% in FY 2018. Angel has been able to garner a fair share of this tech-led growth to its digital business in the past few years.

Our endeavor to offer our clients the best investing experience is reaping rich dividends as evidenced by our continuously improving operational performance over the past few quarters. I'm happy to share with you that Angel One commands 10-plus market share of India's total, as well as active demat accounts. Our emphasis on deploying advanced analytical capabilities based on data science, artificial intelligence and machine learning across our acquisition and engagement engines is helping us to continuously improve our market share. This focused approach has helped us sustain superior operating and financial metrics. We are clearly experiencing and expecting sustained operating leverage benefit of our digital model with a stable payback metrics.

Going forward, as we commence the journey of rolling out our super app in phases, starting this quarter, we are creating intuitive grids to offer more products and significantly improve the dimension of time and monetary value of our clients. I'm happy to share with you that the Board has an aggregate approved the distribution of over 37% of quarter's consolidated post-tax profit as a combination of interim and final dividends to shareholders. The fourth interim dividend announced early April was distributed earlier this week. Whilst a record date for the final dividend has already been communicated to shareholders via our stock exchange notification. I now request Narayan to brief you on operational aspects of the business.

[Narayan Gangadhar, executive]

Thank you, Dinesh. Thank you all for joining us today. I will now walk you through the operational performance and recent developments. Our industry continues to report healthy growth despite some macro deterrents due to ongoing political tensions, inflationary pressures, et cetera. This character only goes to demonstrate the resiliency of our industry. I'm delighted to mention that we have reported our best ever performance during the quarter. We have reported our highest gross client acquisition of nearly 1.5 million, total client base of over 9.2 million, 10.3% market share in demat accounts. NSE active client base of nearly 3.7 million, 10.1% share -- market share in NSE active clients, average daily turnover of 8.6 trillion and nearly 211 million orders.

In entire FY 2022, we added 5.3 million clients, which is 2.2x more than FY 2021 and 1.3x more than what Angel added over the last 24 years. As we keep adding more clients from all geographies, our presence remains strong, covering 98% pin codes and more importantly, with client concentration of less than 0.5% in any given pin code. We strongly believe there are tremendous opportunities in each of these pockets, and we will play a significant role in nurturing them. Our client-centric approach continues to dominate our product offerings that provide superior earnings, thus improving the overall experience. A reflection of this is also visible from the fact that our lifetime app downloads were higher by 19% sequentially to nearly 22 million and our ranking in incremental active clients on NSE during the last couple of months improved into second, outsmarting some aggressive all around competition.

On the tech front, we continue with our ruggedization efforts, applying surgical fixes, setting up monitoring, alerting for key engineering services. This gives us ability to monitor behavior and respond to incidents before the incidents impact our clients. We have improved our overall SLA to 99.8%. And with further improvements through the year, we will be hitting four nines, 99.99% within the coming year. We have embarked also on a journey to unbox a lot of systems.

For example, the back-office system, which essentially handles post-trade close. Through this, our clients will have access to a vast amount of data in real-time basis. First impression of this will be available in the initial version of the Super App. Our data science engine feed off of this data to curate insights for clients, ranging from advisory to instrument recommendations to nudges. We are in the penultimate phase of our new mobile app, the forerunner to our much awaited Super App. This app is now code complete and an advanced beta and validation case.

We will be soon ready to deliver the first look in this quarter. This app will see multiple layers being laid in a very planned and systematic manner for different product offerings to complete the journey of the Super App. During the quarter, there were 3 major releases that were made public to a close group of users to download the Super App, explore trade and also provide feedback. The last release, which was done in March, significantly exceeds the features on our current mobile application. This version will not only incorporate personalized financial journeys for the whole spectrum of our personas, but will also refurbish our back-end services to support it. The release candidate will be available across all key platforms: Android, iOS and web.

Since this is a completely new experience for an Indian FinTech consumer, we will be deliberate about the dial-up experience of all the clients. We have a migration plan in place to ensure our clients get seamless congruous experience during the impending transition. As an expansion of our tech capacity and infra, we are building a new state-of-art data center and global disaster recovery capabilities. We continue to build the tech team on principles of engineering excellence, speed, collaboration, entrepreneurship and obsession with customer metrics. We further expanded our talent pool this quarter with like of hires from top tech companies across the world like Amazon, Uber and Walmart Labs.

On the product side, our focus has been on streamlining our developments and making changes to meet future compliance norms. We have undertaken some very key improvements to our KYC journey, like allowing clients to choose between monthly and quarterly settlement of funds, providing them as an option to add a nominee during their KYC journey, smoothening the process flow to enable seamless reactivation journeys. On the trade execution front, our product team improved the process and enhanced UI for delivery trades, which led to 50% reduction in order rejection for that segment. We dynamically also worked on placement of various product banners, which led to high visibility. We integrated new live market ticker through our smart KPI, thus providing greater stability and performance in our app. As a part of our focused effort to provide our clients with wholesome suite of products, we have successfully included a much sought after direct mutual fund product on the distribution business. This went live last weekend on our Angel BEE app.

Over the last few quarters, we'll continue to emphasize on building a holistic ecosystem to empower our clients to invest via this channel. This will effectively lead to expanding the lifetime relationship with our clients. We continue to witness a jump in our Net Promoter Score by 80% in Q4 FY 2022 over Q3 FY 2022. This was the result of vital tech and product improvements carried out in various parts of our product.

Onboarding some of the best tech and digital talent over the last few quarters as well as achieve this enhancements and breakthroughs. This is a precursor to our overall plan to attain market leadership over time. Human capital has always been at the core of our strategic plans. These are the assets who create and deliver superior experience to our clients, thus making our business robust, resilient and competitive. As a part of our efforts to keep them primed, motivated and aligned -- and aligning our compensation structure with best global practices, we have increased the portion of restricted stock units under the LTI Plan 2021, maintaining the overall annual limits as per the approvals received for the plan.

Vineet will be explaining the details during his opening remarks. This upfront disclosure is in line with our efforts to follow best practices and transparency with all our stakeholders. With this, I now request Vineet Agrawal, our CFO, to brief you on the financial performance of the company. Thank you. Over to you, Vineet.

[Operator]

Mr. Vineet Agrawal, please go ahead.

[Vineet Agrawal, executive]

Thank you, Narayan. Good morning, everyone. I will take you through the financial snapshot for the quarter gone by. As mentioned by Dinesh bhai and Narayan earlier, Angel continue to deliver a remarkable performance on all operating parameters for yet another quarter, which also translated into strong financial results.

Coming straight to the financial performance. Quarter 4 of financial year 2022 has been our historic best. Our gross revenues increased by nearly 13% quarter-on-quarter to INR 6.9 billion. Key drivers of the growth of gross revenues were -- the gross broking revenue grew by approximately 15% quarter-on-quarter to INR 4.8 billion, this accounted for approximately 69% of our gross revenues. Interest income, which includes interest on our client funding book, and interest earned from deposits with exchanges grew by approximately 8% quarter-on-quarter to INR 1 billion. This accounted for 16% of our gross revenues. The ancillary transaction income, which is linked to the turnover of our clients accounted for 8% of our total gross revenues, registering a healthy growth of 63% quarter-on-quarter to INR 581 million.

Depository income, which contributed 4% to the total gross income registered a decline of 9% quarter-on-quarter. This was due to muted activity in the cash delivery segment. Income from distribution of third-party products, which accounted for 1% of our gross revenues also declined by 31% sequentially due to fewer IPOs. Our gross broking revenues further split as follows: share of F&O segment increased to 78% during quarter 4 of financial year 2022. While contribution of cash segment came down marginally to 18%, share of commodity and currency segments remained flat at 4% and 1%, respectively. The average revenue per client for the quarter was INR 513. This was primarily due to a higher share of new-to-market plans, which were at about 85% of our gross acquisitions for the quarter.

This as experience, these clients initially are low revenue accretive, but stabilize in prime and activity with time. This is a secular trend and is not something to worry about, as we expand our base and market share, keeping our margins in line. Our net broking revenue from less than 2-year old clients on our platform continued to remain robust at 76% in quarter 4 of financial year 2022. This is driven by the multifold increase in our client base over the last 2 years. The net booking revenue on the flat fee plan continued to witness very strong momentum, contributing a significant 85% of our overall net broking revenue. Share of total net income from our flat fee clients to the consolidated total net income grew nearly twofold to 83% in quarter 4 of financial year 2022 from 43% in Q4 of financial year 2020.

Our consistent efforts to refine our acquisition engines contributed to higher client addition, whilst maintaining the payback metric of our cost of acquisition within 2 quarters intact. These efforts translated to a very healthy 55% operating margin for the quarter. Keeping the pedal on the accelerator, we will continue our plans to increase our spending on acquiring more clients across all geographies, focusing on sinking cohorts as prescribed by our various data points, ramping up our brand awareness, building the momentum for our new app, building the best talent pool for scaling new levels of growth, which will also include globally competitive compensation packages, both in cash and noncash.

Narayan earlier explained the rationale behind our ESOP mix. The higher proportion of restricted stock options being offered to a larger and crucial set of employees will further create a very strong sense of ownership and as we often call the skin in the game. As per our estimates, this will lead to an incremental annual cost of approximately INR 600 million for each of the 4 years of vesting of the RSUs. While this will lead to an increase in the employee costs, however, it should result in a more than commensurate growth in all our business metrics over time.

Under the extant accounting standards, such debits to the P&L on account of grant of stock options being noncash in nature do not impact the net worth or our ability to distribute dividends. attractive stock options continue to be an important vehicle of long-term investments in the business to retain quality talent and build a sustainable, growing and competitive organization. Coupled with this, there will also be some regular salary increases in our employee cost for the next year.

Our consolidated profit after tax from continuing operations in quarter 4 of financial year 2022 grew by more than 24% quarter-on-quarter to over INR 2 billion, once again our highest ever for any quarter to date. Consolidated earnings per share grew to a robust INR 24.7 per equity share on a quarterly basis.

Coming to the full year performance, which is also our historic best, our consolidated gross revenues grew by 77.5% year-on-year to INR 23 billion. Our consolidated earnings before depreciation, amortization and tax grew by 99% year-on-year to INR 8.6 billion. This translates into about 51% margin, which is at the upper end of our guided range. Our consolidated profit after tax from continuing operations grew by nearly 110% year-on-year to about INR 6.3 billion. Our resulting annual earnings per share was INR 75.8.

During the year, we have recommended and paid over INR 2.2 billion towards dividends spread over 4 quarterly interims and the final. On the balance sheet side, the cash and cash equivalent increased to approximately INR 49 billion, largely due to increase in client funds. The period ending client funding book was about INR 17 billion, whereas borrowings stood at about INR 13 billion. Enhancements in tech capabilities led to a marginal increase in fixed assets to INR 1.6 billion as of March 22 from INR 1.2 billion as of March '21. Our net worth increased to approximately INR 16 billion as of March 2022. Robust profitability along with efficient capital utilization led to a significant improvement in average return on equity to 46%.

With this, I conclude the presentation and I'll open the floor for further discussions. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Ansuman Deb from ICC Securities.

[Ansuman Deb, analyst]

My question was regarding the nature of some of the growth that you have seen in terms of clients as well as orders. So if you could give a breakup of what percentage of contracts in options, normally are in long versus short. To give an idea that how much of people may be in the money and out of the money because that could decide kind of their persistency in terms of their trading behavior. So that is question number one.

And the question number 2 is that based on our algo or recommendations that we gave, we have had a certain kind of outperformance as you have mentioned in the past. So what percentage of trades are done based on both algo and recommendations and what percentage are without that. So these are the 2 questions.

[Dinesh Thakkar, executive]

Thank you very much. Narayan, would like to take this?

[Narayan Gangadhar, executive]

Dinesh, you can start. I can take it of afterwards.

[Dinesh Thakkar, executive]

See Ansuman, in retail, nature of the business is such that they have -- people who come to buy options or trade in, I would say, future and option, they tend to have a kind of lower ticket size. And they are very risk averse. They're not risk takers. They are not very knowledgeable people who write options. So mostly nature of their business is that they will buy options and mostly to be somewhere near the strike price. And tenure of -- like duration of this holding option is not more than a day or 2. So that is how actually this whole retail market functions. Narayan, if you want to add on this, algo and all that stuff.

[Narayan Gangadhar, executive]

Yes. So just to add to what Dinesh said now. Ansuman, basically, see, if you look at our platform, we have covered sophisticated techniques to help people to figure out what option strategies to select. And as you know, there is a wide range of options available here, ranging from better strike selection, faster entry exits, better position pricing, better orders and other breeds. So all these option underwriting strategies, we have kind of simplified them and represented them in our insta trade product. So using that product, we let customers essentially game out their risk and figure out what is the best option strategy to pursue for their risk appetite at that point in time.

Now beyond this, whether -- how many options are in the money and out of the money, those kind of details we don't really provide because that's kind of not really relevant to the product offering that we offer. But our whole business is to gain platform capabilities to help customers take the best strategy to maximize their leverage based on their risk appetite.

[Ansuman Deb, analyst]

Understood, sir. Understood. So basically, because of the -- so you are saying that there are mitigation and close to trade strategies that are being done to kind of make them more educated in that -- in their efforts.

[Narayan Gangadhar, executive]

That is correct.

[Operator]

The next question is from the line of Kartik Sahni from Myraid Asset Management.

[Kartik Sahni, analyst]

Sir, first of all, kudos on the Q4 numbers. So my question would be around your expansion of the talent pool. You said that you have hired employees from Amazon and Ola. But when I check your PPT, the employee base has actually gone down. So if you can just help me with that.

[Narayan Gangadhar, executive]

Yes. Great question. So see, what we are -- our strategy, as we have communicated in the past, is in continuing to scale our digital workforce. And as we scale our digital workforce, what's happened is that we have changed the composition, the mix of people that we are bringing in the company. See, Angel is at its core, we are a fundamentally engineering-driven shop, okay? So our entire business, when you look at our -- when you look at the products we offer, when you look at the kind of options we bring to the market, the kind of future bets we are taking, all of those are driven by the product and engineering DNA. Now this engineering is taking place in various aspects of our business.

It is taking place in technology, in finance. It's taking place in sales and marketing, and it's taking place in revenue and many, many other functions along with core engineering and product. So what you're seeing here is that the shape of the pie is changing. So we are hiring more, for example, in Jyoti's team, and that's where -- Jyoti is our CTO, he's also on the call. And we are growing there by bringing top talent to help us automate and build new systems, which will allow us to scale. Jyoti, do you want to add a few things here to give them an idea of what kind of talent we are looking at?

[Jyotiswarup Raiturkar, executive]

Yes. Kartik, we are basically looking at people, right? Who are force multipliers, right? So in our industry, there are what we call 10x engineers, right? -- basically the few engineers who can produce the 10x of the output of other normal engineers. So we actively look at and go after such engineers, right? So that is why we have got them from places like Amazon and Uber. And this -- so we can get much more with a very skillful workforce. Hope that answers the question.

[Kartik Sahni, analyst]

Yes. And just one more question that would be around your average revenue per client. So I see that it has been going down, and your market share in the active NSE client has been going up. So can I assume that these are new to market customers that have been targeted or I mean, if you can just help me with this also.

[Narayan Gangadhar, executive]

Yes. So as Dinesh bhai has addressed this question many times, so I would also just -- I'll just add on to this. This has been addressed in our earnings call also. See, what's happening is that we are attracting a lot of new people to the market. That is testament to the product we are building and the fact that we are penetrating through our marketing strategies and areas which historically have been underpenetrated. So as more and more newer people come to the market, what's happening is that because they are new, there is a gestation period where it takes some time to get to know the system, learn as such. So the overall -- if you look at the average revenue, yes, it's kind of stabilizing. I wouldn't say it's declining. It's stabilizing to the point where we believe that with further improvements to come, there is an extension in the lifetime value of our clients, because these clients we are acquiring now, they are hardly 25 to 29 years old.

So there is a much longer time horizon over which we can train and cultivate this cohort base. So that's how we look at our overall business relative to both active clients as well as our -- the net revenue realized.

[Kartik Sahni, analyst]

Got it. And with this super app, I just want to ask that your other 2 apps, will these be integrated?

[Narayan Gangadhar, executive]

Yes, that is correct. We will be integrating all the experiences and eventually retiring the other 2 applications, yes.

[Operator]

The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Congratulations for a great set of numbers. A few questions from my side. Firstly, Dinesh bhai, you spoke about the penetration levels in the country has been low. But if I look at the last 6 months data, the incremental demat accounts that are being opened every month has been declining, incremental NSE active clients that are getting added is declining. So is there anything to read out there as to are we entering a phase where will possibly take a breather and then possibly in next round of growth might come through? So first part will be there. First question will be that.

Secondly, with regards to the launch of super app and the kind of cost associated related to it, we've seen the cost-to-income ratio really come off in this quarter at around 45% odd level. Do you think that is a sustainable level? And with the kind of marketing that will be needed towards super app or in terms of technology, and you also mentioned the ESOP cost that will come in. So what kind of cost to income ratio we should think about?

And my last question will be on the -- if I look at your revenue per order, both in the F&O and the cash segment, that has been declining. And I understand it will be because of the mix between the associated person business in the flat fee model, but do you see this kind of stabilizing now and no further reduction possible, that would be my 3 questions.

[Narayan Gangadhar, executive]

Okay. So you asked 3 questions. So let me collate the answers and one by one, we'll address them, okay? So I'll also loop in Dinesh bhai where needed. So okay, let's first take the meta question that you asked, right? About what Dinesh talked about, it is opening model on right. See, we all know that the market is seriously underpenetrated. I think that's a very well understood fact. It's barely at 4% to 5%. And so clearly, as more and more and more customers come to the market, there is obviously going to be a learning curve for the whole industry, not just for any broker, it's for the whole industry is going to the collective learning phase. Now in this collective learning phase, the type of products, the type of journeys that these customers want, that is what Angel is paying attention to.

See, we are not so particularly razor focused on getting the -- on squeezing the last rupee out of the client, as much as we are interested in understanding what is the journey that they care about. Because it is ultimately that journey, which will lead to greater rewards and greater investment behavior. So if you look at our strategy, it has never been around -- it has never been -- the better we put it, it is never been focused on just the rupee optimization, if you will. It's mostly focused on build the right journey, understand what is it that this new cohort base cares about, what kind of investment patterns makes sense for them and then build the right experience on top. So obviously, in that evolution, which we have started over the last 2, 3 years, you will see that our net orders is actually going up. And it's going up across all the cohort basis.

Now if you go one step further, and look at what kind of better experiences we want to produce, even our new features, such as insta trade or option simplified, they are resonating with this new age customer. Because this new age customer wants that inherent simplicity in the product. So our strategy is going to be around discovering those experiences and building those experiences based on machine learning and AI. And that is one of the biggest differentiators for Angel from everybody else in the competition. This is one thing they are doing much better and very differently.

Now your second question. So sorry, was 3 questions, so I'll try to go step by step. So second one is about the cost-to-income ratio. I will have Vineet take this. But just to give you just a broader business sense on it, ultimately, once the super app gets live, there is going to be an investment in call to action, in getting more people to start off the app and most people to kind of onboard their journey -- their existing journeys onto it. So clearly, there is a cost, but all of this is factored into our net operating plan. So I will have Vineet just give a sense on the income numbers. So Vineet, can you cover that?

[Vineet Agrawal, executive]

Sure. Prayesh, what happens is that we've historically, as you see, we have been improving our cost-to-income ratio over the last few quarters ever since we went digital. And that trend is going to continue. Now in some quarters, there might be some higher costs for some like as I said, about the incremental salaries that we have given in the first -- from April itself. So those things will be there, but by and large, I think there'll be -- the cost-to-income ratio will be improving as we go along in our digital journey. And definitely, with the launch of the super app, this is going to improve going forward.

[Narayan Gangadhar, executive]

So hopefully, that answers your cost to income...

[Prayesh Jain, analyst]

Just one bit on the cost to income. The ESOP cost you mentioned is INR 60 crores per annum for the next 4 years?

[Vineet Agrawal, executive]

That's right. So the stock -- RSUs that we have granted yesterday, for those RSUs and the ones which we expect to grant in the next few months, for those the vesting period is 4 years and the cost is amortized over the 4-year period. So this is going to be the annual cost approximately.

[Prayesh Jain, analyst]

Vineet, if I understand this correctly, generally, this is on a declining way, where first year we have the bulk of the cost, then it reduces to the [Indiscernible] based on vesting period. And you're saying that it could be a INR 60 crore per annum. So is it INR 240 crores to be amortized over 4 years and bulk would be the frontend and reducing going ahead? Or it is INR 60 crores per annum?

[Vineet Agrawal, executive]

This is based on the Black-Scholes model. So every year, we redo the model based on assumptions. And tentatively, I've given you a INR 60 crore annual cost. That is going to be there. And as I mentioned in the call, in the earlier part of the call, this is a noncash debit to the P&L.

[Prayesh Jain, analyst]

And there is no such related ESOP cost in FY '22. This has been completely new?

[Vineet Agrawal, executive]

Yes. This covers mostly all the ESOP cost that is there.

[Prayesh Jain, analyst]

FY '22, we had nothing?

[Vineet Agrawal, executive]

FY '22, we did have about INR 16 crores, INR 15 crores or INR 16 crores.

[Prayesh Jain, analyst]

Got that. And the last question was on the revenue per order.

[Narayan Gangadhar, executive]

Yes. So we don't actually -- we don't give a macro level data like that.

[Prayesh Jain, analyst]

Just compute the revenue and the F&O segment and the number of orders that you give, that number has been on a decline. And I understand it will be because of the mix between the [AP] business and the flat fee model. But do you think this will get normalized over the next -- and we'll not see any further declines? Or how do you see that happening?

[Narayan Gangadhar, executive]

Yes. So see, the -- first of all, the -- obviously, the ratio is just a -- simple division is always misleading, right? Because it's looking at a very aggregate picture. Now I think the question that we are asking ourselves is what is the user behavior behind the -- what are the trends behind the numbers, which are leading to this transformation, right?

Now I do see the numbers stabilizing. There is no precedent for it to -- for it to go any other way except to stabilize over a period of time. But it's hard to tell whether it will take another 2 quarters or 3 quarters or a few years. But what we do know is that as the overall traction on our products improve, right? The net gains will come largely based on new journeys that we built around F&O, around options trading and also other segments. So we are looking at the next picture, because that is a better indicator of what the market -- where the customers wants are added. So that is a much bigger question for us to answer rather than looking at a micro level trend. That might be useful, but it's only useful in its own bubble, if you will.

[Operator]

[Operator Instructions] The next question is from the line of from Akshay Ashok from Prabhudas Liladher.

[Akshay Ashok, analyst]

Congratulations on a very good set of numbers. I just had a few questions. What are the steps you are taking to increase the client activation rate? And what is the activation rate now? Because I think the activation rate before was around 38%, 39% because now that you have added so many clients, the next step would be to activate them, right? Because if markets start falling or there's a downturn, the best way to continue maintaining your gross broking revenues and everything would be having a higher client activation rate. So what are the steps you guys are taking in that direction?

[Narayan Gangadhar, executive]

Yes. So we have our chief -- we have Devender Kumar who runs revenue on the line. So I'll hand it over to him, but let me just add a few sentences first. So actually, our activation numbers have been spreading strong, as you guys know, over the last almost 24 months now, especially this last year, we have seen a significant increase, right? Now what we believe is that through a combination of better referral schemes, through a combination of better first trade and the first onboarding journey, we believe there is potential to actually apply data science and ML and take this activation to the level. So I'll have Devender talk about some of the key initiatives they are leading.

[Akshay Ashok, analyst]

What is the client activation rate now? It was 37%, 38%, right?

[Narayan Gangadhar, executive]

Devender, do you want to take over?

[Devender Kumar, executive]

So we don't disclose our activation ratio as such, but you could take a number of NSE active clients upon to the base, which will be coming on the new client additions around 40%, 42%, but we don't disclose this number. On the answer that what are the steps that we are taking to increase the actual activation ratio, I think Narayan touched the cord rightly that we have taken a very data science oriented approach. We are -- which where we are creating different cohorts of clients based on the kind of profile that are coming with and customizing the journey that does take in terms of getting the first investment done or figuring the first trade done.

So that's the larger theme that we are following. And I think the imminent launch of a super app that is going to come through is going to give us a very strong step in terms of giving this journey in a very seamless way as well, where we have projects like onboarding kits, where it's the first time trading, first time investment, or first time trade experience of the clients taken care of, the first time investment instruments and so on and so forth. So what we are doing is basically looking at a mix of these 2 things, particularly where approval base approach and building new kind of instruments or -- not really instruments, journeys for the clients and exposing the products for the first timers to which we are planning to go ahead with this.

[Akshay Ashok, analyst]

So these are the things for the first timers when they join your app, how long does it take for them to do a trade?

[Devender Kumar, executive]

So I think we don't disclose the information, but I think it ranges.

[Narayan Gangadhar, executive]

So usually, I can -- I'll just give you a high level idea. Generally, we've -- as Dinesh has said this in the past, right? Within about 6 months, we kind of break even. So mostly about more than half our clients are active within the first year. Now obviously, within that, we don't -- because of competitive reasons, we don't divulge any more info than that. But based on that, you can put a good approximation on how effective our strategies are.

[Akshay Ashok, analyst]

Final, sir, this commodity market share gains have continued to be very strong. What is the reason for that? And this cash market share, why again this quarter slightly it has dipped, because of peak margin norms, I think have been implemented, right? And why is commodity market share gaining so quickly?

[Narayan Gangadhar, executive]

Commodity is clearly, clearly a testament to our substantial -- we are truly the market leader there based on our super excellent research and our excellent product. I mean if you yourselves haven't used the product, I would strongly encourage you, actually try it out because you'll see it first hand. The product is beautifully done. That's one of the main reasons, and also combined with our super excellent research team led by Amar Singh and the company. They have done a phenomenal job at exceeding our position there. And regarding the other question, see, those changes will happen as regulations keep changing. So those are -- ultimately that playing field is going to be leveled with time. And we don't see much advantage in those other things.

[Ketan Shah, executive]

Narayan, if I can add on this commodity market share.

[Narayan Gangadhar, executive]

Yes, yes, please Ketan.

[Ketan Shah, executive]

So to answer this question on the commodity market share, which is growing. So if you look at the exchange volume, somewhere the future volumes are stagnated at INR 20,000 crores, INR 25,000 crores a day. Recently, the large growth is coming in the option market. And we were kind of very early adopter and provider of options on the mobile platform to our customers. That's one of the major reasons that we see as a market share growing. Second important factor is that all our customer has a fungible limit. So when they have margins with us, across the segments, they can trade. They don't have to actually earmark their funds towards the segments. While in the industry, that is not available. So these are the 2 large factors which are driving the market share higher. So the option volume, while future is at INR 20,000 crores, INR 25,000 crores, option volume has grown to a level of roughly around INR 15,000 crores a day. And that's where our market share is very high. And at a blended level, that's how we are reporting a 40% plus market share.

[Operator]

The next question is from the line of Hitesh Gulati from Haitong Securities.

[Hitesh Gulati, analyst]

Just on your insta trade platform, I wanted to understand the number of users that we have, what is the user base of this?

[Narayan Gangadhar, executive]

Sorry? Yes. So insta trade, see, we don't give a feature-by-feature breakdown of our monthly active or daily active users, but it's a pretty substantial portion, a good portion of our active clients. That's all we can say.

[Hitesh Gulati, analyst]

Sure, sir. And sir, just another question on stock options. So if my understanding is correct, currently, if the person -- on settlement date, if the long is in the money, he has to take delivery compulsorily? Is that understanding correct?

[Narayan Gangadhar, executive]

So Bhavin, can you answer this?

[Bhavin Parekh, executive]

See, basically, in an option, if there is an in the money option that the customer is bidding, in case if the margins are sufficient from the customer, we allow the customer to take the delivery. But if the margins aren't there, there is a margin call done to the customers and accordingly actions are being taken.

[Operator]

The next question is from the line of Nilesh Jethani from BO AXA Mutual Fund.

[Nilesh Jethani, analyst]

Congratulations on the great set of numbers. My first question was, of course, on the active clients. When I see today, our active to total client number is anywhere in the range of 40%. But when you compare it to someone like Zerodha, it is north wards of 60%. So wanted to understand what is -- why the divergence? One. And second, what are we doing to drive this active because this is the number of trades which will drive the top line growth for us. So I want to understand what are we doing on these parameters.

[Narayan Gangadhar, executive]

So see, first of all, we can't comment on our competitor's activation ratio because those data -- that data is highly subjective. Your guess is as good as mine. Now -- but the bigger question really is that our activation numbers, as I said, is almost half, is almost 50%. And of course, we don't get into too many details on how it's split and everything. But the key thing here is that many times our competitors, when they run incentive schemes, which are of the types of giving somebody a free ETF while opening an account and things like that.

So when you do -- when you take existing customer acquisition strategies, such as giving out full ETFs, then by definition, if I open an account to redeem it, I have to activate. So that is never a good indication of whether the activation is inherent activation or it is just a forced function of a revenue realization, which the client wants to get, right? So what we -- however -- what we have always seen is that in our case, the activation numbers we are reporting, they are consistently going up, and they have consistently gone up -- it was in the -- just in the low 30s as early as about 2 years ago.

And now, as I told you, the number is significantly higher, right? So I see this number going further up as we continue to improve our data science and machine learning-based journeys. And this is what Devender was hinting in his -- was talking about a few minutes ago, where he talked about our approach in improving the first signing to trade experience, introducing better cohort selection and introducing better targeting for our clients to help them onboard and start their journey. I think between these 3 steps, we have a very clear and winning strategy for driving the number up over a period of time.

[Nilesh Jethani, analyst]

Got it. And in the new app, the super app, that is helping us to drive the activation rate when it comes for the broking business?

[Narayan Gangadhar, executive]

Yes. So the data is -- because the super app been -- it's been in the works, and now we are getting obviously a lot of early feedback, yes, the trend is going in that direction, but I need 1 more quarter's worth of data before I can affirmatively answer that question. But right now, it's looking like it's obviously trending up because we have run numerous studies. But as we launch it further and scale further, I'll have a more measured answer for you, right? But right now, off the cuff answer, based on what we have seen so far is yes.

[Operator]

The next question is from the line of Hiten Jain from Invesco.

[Hiten Jain, analyst]

So I have a couple of questions. So first is -- so I remember Narayan joining the company 1 year back, the first work anniversary this, I think, this month itself. And so I remember that your -- because you were quite keen on the super app investment and your work through, and it's good to see that you're seeing -- it's coming to -- it's becoming live in beta mode. So I just wanted to understand. So obviously, this year was an investment year for your super app.

And how should we look about the investments next year in this? And earlier -- in one of the earlier questions, you spoke about the costs -- the incremental costs that you will incur to get clients on super app. But just thinking about it, it's just the migration of the existing clients from your existing app to super app. And it's a normal client acquisition cost that you -- any which way have every year. I'm just wondering how is this cost different to acquire customer on super app? That's question number one. And second is, obviously, how should we think about investments next year and even the sustainable margins that you have in mind? And then I have a second question after that.

[Narayan Gangadhar, executive]

Thank you for asking the question. So see, first of all, as you know, right, once the Super App -- as the Super-App gets baked and more and more people transition to the Super-App, there is always going to be a long tail of customers who are going to take some time to migrate over. Now this journey -- this migration that we are going to be -- that we are talking about here is going to be one of the largest migrations in India and in fact, one of the largest in the globe because we are talking about a wholesale move of more than 9 million clients to the new app, right? So clearly, there is a -- there will be a cost associated with it.

Now we have actually factored in all those costs and build the right kind of tooling and infrastructure far ahead of time to ready ourselves for this upcoming switch. And this switch is going to be collectively excellent for our business and great for our clients. Great for our clients because they get a better journey and better experience. So from a cost perspective, from an engineering and product perspective, there is no much delta as you rightly indicated, because that cost is already baked in and it was baked in from the day I joined the company, right? That's what we have been doing for the last 4 quarters.

Now -- but there is another cost. The cost is -- see, if you look at our strategy, we have not really played big in our brand space. We are -- we have kept our heads hunkered down and just exclusively focused on building the right product. But now that we have built this kick a*** product, we want to now get it to the masses, which means we need to start investing more in increasing our brand visibility throughout our industry, throughout our -- with our clients. And this is something that this year is going to be a big investment for us. Big in the sense, it's going to be more than what we have done in the past, right? We want to get out there. We want to tell the message, get more clients onto the system. Then -- so that's one of the key bets this year.

And then subsequent years -- see, we firmly believe that our -- the next wave of growth will come from risk and ops. The person that -- the team that figures out a scalable way to unlock the value in automating these systems can innovate much, much faster for the customer. So I look at the next 2 years at the start of that journey, where we are going to take a look at our existing risk systems, our existing processes, our existing back-office systems and our existing customer experience journeys and automate and bring that to the next level. And that is where the next few years of spend will go, and that's largely driven by engineering and product. So hopefully, that gives you a sense of what's coming immediately and then what's coming in, let's say, a year from now.

[Hiten Jain, analyst]

I understand. Just a follow-up on that. See, one of your aspiration is to become the largest broker of the country. And today, the largest broker has not relied on marketing. He has relied on his product's word of mouth, but you seem to be taking a different journey. So why not let your products speak for itself and why spend marketing dollars?

[Narayan Gangadhar, executive]

That's a fantastic question. And the main reason for that is because now that we are -- this is the first time, if you look at our app site, we have had 2 different apps. We have had Angel BEE, we have had ABMA and then we have had some prior versions. So clearly, there is no impetus for building that organic traffic. Organic traffic builds once you have a consistent platform for sharing your message. So the reason we have not had that opportunity is because we have just not had that product so far, but that is going to change with the Super-App.

So as you -- as I play the movie out over the next 1 year, 2 years, clearly, there will be more emphasis on organic. But at the same time, our market itself -- our job is to also expand the market. And if we can spend more and get more customers on the platform, while keeping our core business metrics at a profitable level, then to me, it makes more business sense to go spend that money. There's no point in keeping that and trying to super optimize at this stage because at this stage, it's all about capturing the market.

So it's a twofold -- it's a 2-pronged answer. The reason we have not invested much in organic is, which I just answered earlier, because it's been a platter of apps, and that is changing with our Super-Apps. And once we have the Super-App, clearly, the emphasis on organic is built right into the app itself.

And then the second question is, even if we have that, I still believe that we need to continue to spend and expand this market and bring more and more clients into the system as long as we can maintain the healthy level of operational profits and excellence.

[Hiten Jain, analyst]

Sure. I get that. Now the second part of the question is while we have discussed the costs. Now let's talk about the revenue potential revenue from here. While I understand and I appreciate that your larger objective is to improve the activation rate in your core business have -- give a better experience and thereby increase of broking revenues further. But in terms of diversifying into other sources of revenue, while you've already integrated the direct mutual funds, but obviously, it's direct. So it is more of added experience to clients and not the revenue accretion.

Your second intention of getting into mutual funds, it's some time away. But again, it will be a passive focus. So again, less revenue accretive. How about other products in terms of -- do you intend to add loan against securities? While you've spoken in the past about lending products, and that is something this cohort -- that the young cohort would be quite keen to explore and not so much of the savings products given their age profile. So while you have your beta product ready, but how do you think about the diversified or different revenue sources? And what is the time frame that you have in your mind?

[Narayan Gangadhar, executive]

See, I firmly believe that there is a lot of money left on the table as far as broking itself is concerned. So I am a firm believer that we need to stay razor-focused on winning broking. And that is the only thing that matters to me for the next year. And I want to be very specific about it, right? Because when -- what we have seen is when customers -- when our -- and you have seen this with our competitors also, right? It's very easy for us to launch 10 different things and do a poor job with all of them, right? What we need to do is think about how we can get and unlock revenue opportunities in our space itself because ultimately, the next disruption is going to come from here only.

Now obviously, that includes things like considering products like loan against securities and such. And clearly, we are running those experiments on our side as well. And when that time comes, you will be seeing us launch those products and launch those capabilities. Now in terms of direct mutual funds and other auxiliary products. See, the reason we launched direct mutual funds is because is our customers who are actually looking elsewhere because they have an unmet need. So we are actually -- it's almost like our latent client base, which is forced to look outside our product because we currently don't have anything.

So that made a lot more business sense because we want to give them a wealth garden. And this is something revenue -- Devender's team is currently strategizing on. And as we look at building out this wealth garden, we look at customers today, which -- who are -- we are acquiring and they are hardly 28, 29 years old. So our lifetime value is -- you're looking at a 20-, 30-year lifetime value. So we don't want to -- we don't want these customers to self-cannibalize and kind of go elsewhere when we can give them a much superior integrated product in our own platform. So this is the main reason why we did the direct mutual fund launch. It's not because it's the thick of the movement or whatever, right? We don't do -- we don't approach new businesses that way.

Now there are other opportunities also like lending is another one, insurance is another one. But even before we get there, I believe that there is opportunities to look at fixed deposits. There's opportunity to look at aggregate fixed deposit products. There is opportunities to expand our -- and more revenue opportunities in commodities. There is obviously opportunities further out in insurance products, which we are also selling on our platform. I believe there are, as a platform company, there will be opportunities to unlock those capabilities in the -- once the Super-App platform is ready and it's rolled out. So that's how I'm thinking about the next year, 2 years and 3 years.

[Operator]

The next question is from the line of Ankit Babel from Subhkam Ventures.

[Ankit Babel, analyst]

My first question is -- now without the Super-App, you were growing at suppose x percentage. So now...

[Operator]

I'm sorry to interrupt you Mr. Ankit, but we cannot hear you clearly.

[Ankit Babel, analyst]

Am I audible now?

[Operator]

Yes, please go ahead.

[Ankit Babel, analyst]

Yes. So sir, now without this Super-App, suppose you people are growing at x percentage. Now with this app coming in, can that growth go to like 1.2x or 1.3x? If yes, how and if no, then why this app?

[Narayan Gangadhar, executive]

Yes. So great question. It's a very fundamental question. So thank you for asking. So see, what has happened now is that the -- our customers' expectations from the app and from the product has changed. So even if we sit and do nothing -- yes, it's true that our app is -- our current app is also growing at a pretty phenomenal rate, right? And we are actually -- in fact, I think we mentioned in the call that we are, right now, in a very seriously strong leading position as far as new clients are concerned for the first -- for this past quarter, right?

Now this trend line is continuing because obviously, the journeys are baked in and such. But see, what has happened is the behavior of the cohort is changing. Customers now, they are expecting a better, personalized journey and this is what Dinesh has said in his opening statement, is that this personalized journey is what our clients' future needs are. So we have to hedge against that, and we have to build that journey in the most effective way possible. And that is unfortunately not possible in our current app. This is the main reason we have -- we decided to build the Super-App because our ambitions are far bigger than what you see on our ABMA application. So to give us space to innovate, we embarked on the Super-App strategy.

Now what we see as to -- in terms of your next question on how we see the ramp-up, right? I am extremely confident that once the migration is done -- like it will take 2 to 2.5 quarters to kind of get that over with, right? Once all the customers are into the new platform and when we bake the new app, right, I'm definitely confident that the -- both the acquisition rate as well as the activation rate will go up. Now whether it goes up 2x or 3x or 0.5x, it remains to be seen because the Super-App also is built with a very fast customer closing loop in mind.

So we do know that we can iterate much faster than the competition once we have this platform. So I am very confident that you're going to see a double-digit growth once this -- once the full transition is complete and the buck starts rolling on the Super-App. So that's how we are approaching it as a company and as a management.

[Prabhakar Tiwari, executive]

Narayan, can I add something to that?

[Narayan Gangadhar, executive]

Yes, please Prabhakar, go ahead.

[Prabhakar Tiwari, executive]

That's a great question. My name is Prabhakar Tiwari, I work as the Chief Growth Officer here. So as Narayan has mentioned and has been the theme throughout that product will play a huge role. We're a tech and product company. And in terms of growth, it will impact both our acquisition funnel and our revenue funnel. Now in terms of acquisition, today, we operate in a certain channel mix. Some other question was regarding why the competition is kind of growing without marketing dollars? And Narayan answered that.

There's a blended approach. There's also aggressive competition, which is in -- another extreme. So far, we have taken a blended approach of both organic and paid. In future, that blending will change more for organic and referral kind of channels. And also one important thing I want to communicate that what you have seen last year is our rebranding, moving from Angel Broking to Angel One. And I'm very happy to share that with Angel One, we have now 84% awareness just for Angle One in 2 quarters.

Now what you will see this year with the new app being stable, the migration being complete is a new positioning and the new position is around the power of data and technology for everyday investor. We believe both the product experience and the entire positioning around it will definitely help us in the top of the funnel -- kind of opening of the top of the funnel for more growth and also will kind of make our lower funnel more efficient so that the next wave of growth, as Narayan spoke about, would come at a much, much lower cost or in a more cost-efficient manner.

[Ankit Babel, analyst]

Okay. Sir, my second question is now what I understand from your business is that you people have a very high operating leverage model. So if you continue to grow at a very high growth rate, definitely, there would be an operating leverage. And I understand that, that operating leverage would be utilized or would take care of your increased investments in, say, a client acquisition or increased employee cost and everything. So just for my understanding, is it fair to assume that what you have done in FY '22 in terms of top line growth and bottom line growth can be replicated, say, for the next 2 years or so, in spite of the increased investments in these areas?

[Narayan Gangadhar, executive]

Yes. So what you're seeing is that the parameters of the business are not going to change. We are fundamentally operating within the same envelope. Just the assumptions and just the growth rates and just our investments have changed within that, but the overall metric and the overall framework stays the same. So your answer -- so yes, I do see that over the next year, 2 years, 3 years, I foresee the same kind of traction.

[Ankit Babel, analyst]

Okay. That's helpful. And sir, last one short question. What is your client acquisition target for FY '23? You added some 5.3 million last year. Can you double it up in the coming year?

[Narayan Gangadhar, executive]

Yes. See, we don't divulge that. But yes, I mean, we are looking to -- you can say that, yes, we will be -- for a company like at our stage, which is growing the rate at which we are growing, yes, I mean, doubling that is a very aggressive and a very achievable target.

[Ankit Babel, analyst]

Okay. And any targets for client acquisition -- sorry, active client ratio, I mean, from current 42%, say, 45%, 50%, 55%? Where do you see the next...

[Narayan Gangadhar, executive]

Yes, anything that is -- we want obviously anything north of 55%, 56% is a good number to hit at. And we are very close to those numbers already. So obviously, there is no upward limit on how high it can go, but this finite math dictates how high it can go. But my -- we don't talk about those targets, but you can assume that we want to be within the range that we have already discussed, the 50%, 60% range in that.

[Operator]

[Operator Instructions] The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

[Prateek Poddar, analyst]

Sir, just 2 questions. One is you seem to suggest that the migration to Super-App is a switch rather than a phase-type migration, right? Can that be a threat in the sense like, let's say, customers take some time for adoption of new customer journeys on the new Super-App, how do you think about that? And ultimately, if, let's say, in a closed group the sample set is quite small relative to what you have as a -- total clients, right? So if the experience is not good and if you do it as a switch, how do you rectify or how do -- because that there could be a loss of momentum, right? So how should we think about that? That's question number one.

And the second question is, it's been answered in some parts but last month, if I see the last couple of months, you seem to outperform even the market leader when it comes to NSE active client adds on the existing app. So how should we think about -- like what is driving this? And lastly, just an extension. Overall, you see to suggest that the Super-App will take you into a different trajectory when it comes to revenue. So how do we think about this revenue? Is it more client adds or is it higher ARPU? Or is it more diversified or ancillary revenues? What takes you into the next league? So 3 questions.

[Narayan Gangadhar, executive]

See, first of all, the -- as with any app strategy, the minute you -- the minute a company pivots and launches a Super-App, there is always a runway period. Many times, investors, they get impatient. They want to wait only for 1 quarter before they see results. And oftentimes, it doesn't work that way because the new journey, new experiences, they take time, but they are done with a long-term perspective in mind. So we have based the Super-App and the journeys based on what the cohort behavior we want to drive on our platform going forward.

So what we have -- in terms of the switching, as you -- that's a very important question, right? See, we are launching the product in phases. And each -- there is -- there are gates for scaling up and scaling down our adoption curve based on customer feedback. So we close the loop with the customers pretty quickly, and we continue to iterate based on feedback that we are actually getting from the clients. And this innovative phase has been going on. The app has been in development, and we've had plenty -- tens of thousands of beta customers now for almost 6 to 8 months. So I will have Ankit Rastogi, who's our Chief Product Officer. He's on the line. Ankit, can you just talk a little bit about what kind of strategies we are pursuing to scale up the knob on adoption?

[Ankit Rastogi, executive]

Yes. Thanks Narayan. Fantastic question there. So as Narayan mentioned, right, over -- we have been experimenting with this CUG, closed beta group kind of cohort from last couple of quarters on our Super-App or an incumbent for a Super-App, the release candidate. And it is -- firmly we can believe that we have seen a cohort of both, existing customers migrating as well as new customers. So we will continue on that calibrated approach. In fact, it will be quite a measurable rollout, we call it stage measurable rollout, where the x percent of the user who will get it will again repeat.

We'll measure their revenue, the FYR, full year revenues, their activation and acquisition across various channels where the referral is working, right? Or whether organic is moving up. So between these needles and these matrices and these funnels, it will be calibrated approach and we have a capability to kind of quickly address in case there is -- or arrest any drop and can kind of move the needle from 5 to 10, probably x percent and eventually move to a majority number. And that's why when you hear the answer that it will be a at least a 2-quarter plus kind of an approach which we are taking on the transition.

[Prateek Poddar, analyst]

Got it. And the second question on you guys outperforming the active -- I mean client additions outperforming the market leader, any thoughts? How will you be able to do this?

[Narayan Gangadhar, executive]

Yes. So actually, I should specify that we have been -- while our current app has been kind of in low touch mode, there have been many capabilities and features which have been introduced towards the tailing part of last year before we called the code freeze. And now you're starting to see our clients take advantage of that and you're seeing more momentum build around those, okay, like obviously, Insta Trade is one option. There's a lot of others in the pipe. So we should not downplay what we have done in the past year on our existing app.

And then other thing is clearly, our investments in digital marketing has paid off. We have -- we are one of the first companies to take a very nuanced look at applying both AI and ML techniques to our client acquisition strategies and that has obviously resulted in better cohort selection and better realization of leads, which have come in through the funnel because we have also invested heavily in optimizing that funnel, right from the time the lead comes to the door to the time we actually open an account. So there's been a combination of both better product improvements, better tech capabilities, better system uptime and obviously, digital improvements in the entire acquisition funnel.

[Ankit Rastogi, executive]

Narayan, can I add?

[Narayan Gangadhar, executive]

Yes. Go ahead.

[Ankit Rastogi, executive]

Right. So Prateek, just to address, right, so on our current app, right, as Narayan mentioned, we have come to close to 4.2 Play Store rating, and we continue to see a healthy improvement there. So the answer to that is a lot of our strategy has been fixing the back-end services, which apply by the way to both the platforms. So anything which we do for Super-App is kind of also helping the existing platform inevitably. So the robustness of that, the stability of that is also getting the benefits. So you will see a -- so as a result customers continue to enjoy a healthy experience on the current app as well, while we have making inroads for the Super-App.

[Prateek Poddar, analyst]

And the last part of my question on the Super-App, when you get that higher revenue, what drives it? Is it client acquisitions or higher revenue per client or ancillary revenues or it's a mix of all the 3? Maybe just...

[Narayan Gangadhar, executive]

It's a mix of all the 3 driven by the user's journey. What ultimately drives greater revenue in any digital business is the customer experience and the fact that our journeys are in line with what customers' needs and expectations are. So in the Super-App, the entire journey is built around a -- it's tuned very much to what our clients' capabilities are, their risk profiles are. And ultimately helping them onboard with the system in a much more simpler way, which obviously doesn't exist in our current app. So it's a combination of 2 or 3 things there.

[Prateek Poddar, analyst]

And lastly, any update on AMC?

[Narayan Gangadhar, executive]

Yes. So as we mentioned, we are already -- the process is underway. And Vineet, do you want to just share some updates, the latest update on the AMC side?

[Vineet Agrawal, executive]

Sure, Narayan. So Prateek on the AMC, as you are aware, in September last year, we made the application for the in-principle approval. The process is on. SEBI is doing that due diligence and hopefully, the next few months, we should have the in-principle approval in place.

[Operator]

The next question is from the line of Kajal from ISec.

[Kajal Gandhi, analyst]

Congratulations on good set of numbers, sir. I just wanted to once understand the we had initially started as a transformation journey, and now that we have seen that the brokerage in the total revenue is 78% around that only, but the mix has changed significantly towards the F&O versus cash. So do you think like almost 78% is now F&O and cash is just less than 20%. So do you think cash going ahead is going to be very, very insignificant portion of the total revenue? And how do you see your revenue mix evolving?

[Narayan Gangadhar, executive]

Yes. See, the cash segment is -- first of all, and I should say that it's obviously an important segment like all the other segments that we have, right? But clearly, there is an industry trend, which is buckling the whole mix, as you have rightly pointed out. And honestly, when we look at the business, right, it's very hard for us to say whether it will stabilize at this number or what the overall mix would look like? But we do know that the -- in terms of total number of orders. And the total number of orders has gone up dramatically in this past year, as we have seen, right?

We are focused on driving that aggregate volume up because that is a macro level trend, which we can control. It's not controlled, but we can create and devise strategies to drive that versus cherry-picking on which one of these individual approaches will work. So -- and there's also future innovations planned on the product side, which will -- which you'll see us -- which will drive up value on both of -- on all of these segments actually also going forward. So it's hard to predict where the puck will land, but we can say that it's still -- the mix will remain healthy and the overall aggregate number will be the one that we are focused on.

[Kajal Gandhi, analyst]

And what will be the share of algo trading in our overall volume?

[Narayan Gangadhar, executive]

So right now, it's very nonsignificant in -- it's not even material also because we don't have any particular algo products, if you will. We have our system-generated product, which is called ARQ. And that is something that we have built in-house. And -- but that's also not -- that doesn't technically qualify as a algo product. So to answer your question, it's a very -- it's close to 0 at this point the 2 algo trading.

[Kajal Gandhi, analyst]

ARQ forms significant portion? Is ARQ giving you...

[Narayan Gangadhar, executive]

ARQ is a meaningful chunk of our -- of people who come and onboard onto our systems and try out. Yes. But it's not -- it's still a product in alpha, if you will. So it's still not fully baked into our mainline offering. So it's something as we continue to break that journey into the Super-App, we are expecting that as a service subscription. There will be more action coming on that side. But at this point, it's kind of in a different bucket.

[Kajal Gandhi, analyst]

And the last question is on the employee side. So you have said, as always, that the mix has been changing. The incremental -- are you seeing that pressure on the cost side for getting those employees because market is good for the IT side or the engineering candidate. So how do see that cost going up for you?

[Narayan Gangadhar, executive]

So we started this transformation journey 3 years back. And in these past 3 years, we have hired the -- we have had the advantage of honing our strategy every year. So now we have hit a point, we have hit that sweet spot where our -- where the unit economics of hiring and the whole cost curve, it's perfectly settled into our system. So there is no surprises anymore. So I don't see any of these cost fluctuations affecting us dramatically because we already have the playbook on what it takes to attract top talent in the market, what kind of structures, compensations we need to put in place and what kind of reward structure makes most sense for our business. So we have had almost now 12 months' worth of bake time to kind of eliminate that uncertainty at this point. So there's no uncertainty on that side from our side.

[Operator]

The next question is from the line of Sahej Mittal from HDFC Securities.

[Sahej Mittal, analyst]

Congratulations on a great set. Sir, so most of my questions have been answered, just 2 questions from my side. What are the new investors doing? And how is their trading intensity -- given that now we have people moving back to offices, could we expect these kind of trends in the derivative segment to continue for the industry?

[Narayan Gangadhar, executive]

Yes. So see, I mean, now people have been going back to work almost 6 months now, right? I mean, everybody is -- those dark days of COVID are behind us, touch wood. But -- and what we have seen is that in these 2 or 3 quarters, which have preceded us, especially the last 2 quarters, which we all agree that they have kind of been in the post era, if you will, right? While the behavior has changed, there's been no ascertainable impact on our volumes or anything like that because -- as you yourself have seen from our results, there's no -- the stability and the naturalization has already occurred. So our business is already growing at a healthy metric, and I don't anticipate any further changes in there.

And in terms of changes in investment behavior, see obviously, because many clients are young and new, their ticket size is still the same, interestingly. So they're still having the same ticket size. But obviously, the approach with which they enter the market is very different, right? It is driven by many social-based investing teams and things like that, which is not true for folks that are in their mid-30s or a little bit later in life. So there is an explicit change in behavior. And this is why I was telling you that we need to -- what I was telling the others, right? We need to build this Super-App journey now because there is clearly -- there is a tailwind in the market that the expectation has changed. And that is what we need to get ahead of.

[Operator]

We will move to the next question, which is from the line of Pranav Gupta from ASK Investment Managers.

[Pranav Gupta, analyst]

Congratulations on good set of numbers. I have 2 questions. One is for Narayan sir. So sir, when you talk about the Super-App and how it will be the key driver for taking the revenue trajectory to the next level. Just wanted to understand that initially when they are migrating our existing base to the Super-App, typically our -- given that our revenue -- large part of the contributor is F&O, which is a flat fee base, how do we engage with customers more and how do we see the same set of customers do a larger amount of trades, which will then eventually drive revenue? I understand that when you acquire new customers new traders will added, but how do you engage more through the Super-App and increase the current trading volumes or the current customer base? That's the first question.

[Narayan Gangadhar, executive]

Correct. See, the easiest way to drive up these numbers is by addressing customers' pain points. Now if you look at our existing app, our existing app is super excellent in many dimensions, but an area that we are not -- that we really need to do a better job is our reporting systems. So anytime if you introduce a constraint or if you kind of dampen that journey, obviously, the user is discouraged from spending more on your platform. Why would they come and agree for a substandard journey? And this is what will change in the Super-App because in the Super-App, we have taken a holistic approach. Like on the main page itself on the Super-App, you can see your overall portfolio. You can see our asset mix.

You can see what's the composition of stocks, bonds. You can see your risk profile. Everything is one clean, neat package. Then there are videos and structures towards the end with cue cards that let you figure out what kind of capabilities, features you want. And I'll let Ankit add a few more to the -- Ankit just -- why don't you add a few sentences on how the Super-App journeys are different. And then I'll take over the remainder of the question and answer about the impact of revenue. So go ahead.

[Ankit Rastogi, executive]

Yes. So Pranav, just to follow up on that. So the fundamentals of Super-App are pretty much like the simplicity which we are adding, which is bounded by our personalization capability, starting from the homepage, which Narayan mentioned. Even if you're an F&O trader, probably Insta Trade will pop up for you earlier, right? Or based on your history, the recommendations will come in. Similarly, the Super-App is not just on this feature in UI and UX experience.

We are building inherent improvement in our availability and reliability of our product, which is much more crucial, right, any app has to be much more predictable. So this app will bring in a very predictable experience to a fashion trader as well as to say, a new guy where we are stuck in where to activate this guy, right? What should be my first trade. This is also a reflection of the entire post trade experience, which we are significantly revamping in our Super-App. The transparency level, which is one of the tenets of our Super-App will be, I think, industry first.

So -- and one more point to add, it's also the speed of the platform, which will be -- which is, I think, a very key driver for an option trader, which will be significantly better. We are improving in our streaming services, we are improving in our cashing for chartings. So those are a couple of initiatives, which will be visible.

[Narayan Gangadhar, executive]

Right. So the main -- the meta point here is that generally people -- the question to ask is why -- are people spending the most that they can on our platform? Are we realizing 100% or 150% of the revenue potential from every client? And the answer to that question is, on our current platform, the answer is no, we are not. Because the fact -- and why are we not realizing that revenue potential? Because in our current app, there are many journeys which are not as fully baked or as fully mature as we want them to be.

So naturally, when we move to the Super-App, obviously, the volume will go up because the revenues have been -- the journeys have been fully baked. Now whether you'll -- it's hard for me to predict whether you're going to see it all in just 1 quarter or will it take us 3 quarters or so till the whole flow becomes normalized. And I think that kind of variance is to be expected from any tech business. So we are giving ourselves also that time so that we can avoid any false start and not shoot ourselves in the foot before doing any big migration like this, right? This has to be done in a very thoughtful way.

[Ankit Rastogi, executive]

Narayan, can I add something?

[Narayan Gangadhar, executive]

Yes, please. Go ahead.

[Ankit Rastogi, executive]

Yes. So just to answer this in more wholesome way. What happens is there are different types of clients. They are first timers coming in, there are traders coming in. And also when a client comes in, they have a life cycle. It starts slow, they will switch different products over a period of time. Now what has happened in -- obviously, we have been delivering the same services through multiple platforms like WhatsApp, through notification, through the system itself. But when they're building the Super-App, what we are making sure is that platform itself, in a real-time basis, morphs to give that services on a real time basis types to our clients -- to the different set of clients like the first timers, the traders and also the -- based on the life cycle, which stage of the lives they are.

And also Super-App allows us to build multiple services like we are trying to go live with mutual fund, eventually insurance and other subsidy services, which are a seamless experience for a client. And we believe that in today's platform, this is done in a much more communication-oriented way. This will move seamless into a real-time process with Super-App, where you can make -- use this mix at the right time at the right place, which will allow customers to have a great experience and actually show the confidence of using and experience services to the optimum level with the bouquet of services that we are coming up with as well.

[Sahej Mittal, analyst]

Right. I understand this. I understand when you say that the customer's journey when it improves and it becomes more seamless a customer win engage, they'll probably engage more. I just wanted to understand how do you even monitor this? Just as an example, if you -- the example that you said where -- that there is a reporting system -- or the reporting system is sort of lacking in the current app, and it will be much better than the Super-App. Just want to understand how do we monitor that a customer has more their business or part of their business elsewhere? [indiscernible] through Super-App. Just wanted to understand that.

[Narayan Gangadhar, executive]

Correct. So see, I mean -- right. See, obviously, we are not -- we don't see -- we have not seen clients who have departed from our systems. Our bounce rate is very low. It's not even -- it's less than 5% or something. It's not even meaningful, right, which means that once people come to our platform, they're staying on the platform. But that is not the same as somebody who's staying on our platform and spending the most that they can. So our problem is that they are not spending the most that they can because we ourselves are seeing drops in those journeys.

So our product flows have detailed metrics behind them, and we have studied this behavior over a period of time. So we know that these are the frustrating points for the clients, and this is customer feedback that we have gotten from surveys and stuff. So we have 360-degree view and our own insights to actually improving the journey. And that's what gives us the confidence that this database approach -- this data science-based approach will actually lead us to the right end state.

[Sahej Mittal, analyst]

So if I understand this correctly and just to close the loop on this, what you are saying is that when a customer is -- when we see a customer drop off in the middle of a journey, that is how we understand that the customer does not -- is spending as much as they could have on the app because the journey is lacking somewhere? That is -- is that the right [indiscernible]?

[Narayan Gangadhar, executive]

Absolutely. Very much like if you go to Amazon.com and if you're, let's say -- if you get stuck updating your profile page, odds are you're not going to go back there again. It's going to frustrate you, right? [indiscernible]

[Sahej Mittal, analyst]

[indiscernible] will not be able to quantify this, but this is a qualitative way of understanding that the customer is not spending as much as they could?

[Narayan Gangadhar, executive]

Exactly. Exactly. And this is what we have spent a lot of time studying. Ankit and his product team has lots and lots of data about each and every journey we know where the customer is frustrated, what has gone wrong, what can we do better. And the synthesis of whatever we have understood is there in the Super-App. That is really what -- how we have built it.

[Sahej Mittal, analyst]

Very clear. Just a second question and a more broader question. If you look at overall industry ADTOs, obviously, largely driven by the F&O or derivative segment. And if you look at it over the last 2 years, it is almost more than quadrupled. Like one of the participants also asked earlier, how do we understand the sustainability of this trading volume or trading that is happening currently? And how should we look at it over a more medium to long term? Maybe right now, we are seeing elevated volumes because of various reasons, but how do we extrapolate this to the medium and the long term?

[Narayan Gangadhar, executive]

Yes. So actually, this question -- Dinesh has written a beautiful slide on this. So I would actually allow for him to answer this because he's the best person -- Dinesh, are you on the line?

[Dinesh Thakkar, executive]

Yes. So my line dropped. Can you just repeat that question, please?

[Sahej Mittal, analyst]

The question is that over the last couple of years, we have seen ADTOs for the industry grow significantly and especially driven by the F&O segment. Now this has been driven because of multiple reasons over the past 2 years, how should we look at the sustainability of this? And how should we extrapolate this for the industry, as a whole, over the medium to long term because in the short term, maybe this will sustain. But how should we look at it over the long term?

[Dinesh Thakkar, executive]

See, what I believe is that we haven't even like scratched the surface. We are just -- right now just capturing, land grabbing and getting customers in our fold. But if you look at optimal kind of like investment, what a person has to do in equity market, I don't think we have reached there. Currently, we have -- like most of the customers are in the age group of 25 to 28. So they have just started their vocation. They have started their earning phase. So right now, there is nibbling in equity. But I think serious phase of investment will start -- is yet to come.

So I don't believe what we saw is really a peak. I would say what we saw is just the beginning. If we talk about market penetration that Angel is able to cover 9% of pin codes, but if I look at wallet share that we are able to get in our market is very minimum. So that's the reason we are actually looking forward to Super-App building -- content building journeys so that we're able to increase lifetime value of customers that are onboarded. So my answer would be that we haven't seen the best in this industry in terms of wallet share getting into our market.

Looking at [indiscernible] like macro picture where inflation rate is so low, there's no other option for youth to get into our market. So overall, I feel that still that we are yet to see an increase in wallet share. Clearly, we are just talking about market penetration of remit account that we are able to open.

[Sahej Mittal, analyst]

Sir, just one small follow-up and that will be my last question. I wanted to understand from you that, again, over this last couple of years, a lot of the market has also been -- a lot of the new investors that you spoke about have also made a lot of money because of runup that we have seen. Do we believe that these -- the customers will remain sticky or will continue to do the volume that they are doing currently, if you see a slump -- or a elongated slump not a short-term slump, say for a month or 2, but it's an elongated slump, do you believe that these customers will still remain in the fold and continue to trade at the levels that they are today?

[Dinesh Thakkar, executive]

See, we shared a slide of this on like impact of market volatility on a number of trades. Now that we are into flat fee broking model, so if you look at the number of trades, even in times of like Lehman Brother crisis or when India was facing big [indiscernible] like challenges because of high inflation, we never saw a drop in number of trade. So that is very like true for -- in traditional broker where a ticket size of an order goes smaller. But for a player like us, customers who are active, they remain active.

What they do in bad market is that they reduce their ticket size instead of like trading INR 1 lakh per order. They may trade maybe INR 50,000 per order. So overall, I don't see any kind of like trend going down in terms of number of orders, even though the market has been cyclical. Worst case was Lehman Brother crisis. We will not see a decline in number of trade on anything.

So overall, I believe, as I said, that we are right now acquiring a new set of customers who have no other option but to put serious money in equity. Right now, they're just nimbling. I think this ADTO and participation from per investor is going to increase from here.

[Operator]

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Dinesh Thakkar for closing comments.

[Dinesh Thakkar, executive]

Thank you, everyone, for joining us today on this earning call. India is on the path of achieving long-term sustainable growth, and this growth will become a reality in an inclusive and proliferated capital market characterized by significant penetration of equity. As highlighted earlier, new age India is gradually understanding the benefit of arbitrage in returns between low-risk assets and equities. According to a study done by Deloitte, excess of smartphone will increase significantly over the next 5 years. Growth of smartphone in rural India will be 2.4x that of urban India.

These are the realities of future growth of fintech companies like us. And the extent to which we prepare for the presentation of the comprehensive financial product suite for the potential clients will position us ahead of the competition by catering to an evolving need of this untapped market. We will spare no effort in helping investors achieve their goal while also improving their overall investment journey. We have successfully demonstrated the implementation of our digital strategy over the past 3 years and plan to augment the same as we move forward to achieve our goal of attaining a leadership position in retail broking industry in India.

I'm certain this goal is not too far away, and I wish to thank you all for your continued support and confidence in Angel One. For further queries, please do reach out to Hitul Gutka, our Head IR; or SGA, our Investor Relations advisers. I wish you all a good day, stay safe and stay strong. Thank you.

[Operator]

Thank you. On behalf of Angel One Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.