NVS Brokerage Pvt. Ltd. Investment Banking | Debt | Research Ltd IPO Note Reco: Subscribe Price Band: 305- 306/- ​₹​ ​₹​ Issue Open: September 22, 2020 Issue Close: September 24, 2020

Introduction

■ Angel Broking Ltd (ABL), incorporated in 1996, one of 's oldest stockbroking houses ​ providing broking, margin funding, advisory,and through brands "Angel Broking" and "Angel Bee" powered by "ARQ".

■ ABL has a strong market presence with a Market Share of around 6.3% and 2.15 Million ​ ​ Operational Broking Accounts as of June 2020.

■ As on June 30, 2020, ABL ranks as the No 1 broking house in terms of authorized persons (partners) registered with NSE.

■ ABL has more than 43,90,000 downloads of its mobile app and nearly 10,00,000 downloads of its app Angel BEE. From Q1 FY20 to Q1 FY21, its Average Daily Turnover has Increased from Rs. ​ ​ ​ 2,53,176 Million to Rs. 6,18,945 Million.

ABL operates in 2 Business Verticals, focusing on-

■ Broking and Advisory- ABL provides broking services across Equity (Cash-Delivery, Intra-Day, Futures and Options), and Currency Segments, along with Debt Products. It also facilitates participation of its clients in initial public offerings undertaken by various companies. As a part of the broking and advisory services offered by the Company, ABL also facilitates opening of demat accounts for their clients. The Company is a member of BSE, NSE, MSEI, MCX and NCDEX. ​ ​ To complement its broking and advisory services, ABL also provides the following additional services to its clients:

○ Research Services: As of June 30, 2020, the Company has a dedicated research team of 54 ​ members which cater to quantitative and qualitative research requirements relating to the stock market such as equity fundamentals, technical, derivatives, currencies and mutual funds.

○ Investment Advisory: ABL provides investment advisory services to their clients with customized investment recommendations aided by their rule based investment engine “ARQ”, which assists the clients in achieving their investment goals across various investment avenues such as Equities, Debt, Currency, Commodities, Derivatives, Mutual Funds and Products.

○ Investor Education regularly undertake sessions through various digital mediums, to ​ enhance their retail clients’ knowledge regarding their products, research and market trends. ○ ■ Other Financial Services: ABL also provide the following services ​ ○ Margin Trading Facility: ABL provides margin trading facilities to its clients for leveraging ​ their eligible collaterals by funding their requirements on the cash delivery segments. ○ Distribution: The Company undertakes distribution of third-party financial products such as ​ mutual funds, and health and products, according to their clients’ requirements. Such distribution is undertaken through both their offline channels and digital platforms, “Angel Broking” and “Angel BEE”. ○ Loans against shares: Through Subsidiary Angel Fincap Private Limited (AFPL), which is ​ registered as an NBFC, they provide loans against shares to their retail clients.

Key Strengths

■ One of the Largest Broking Houses with Diversified Digital Platforms - ABL is one of the largest ​ retail broking houses in India, in terms of Active Clients on NSE as of June 30, 2020 (Source: CRISIL ​ Report). There has been an Increase of 20.72% of their Average Gross Monthly Client Addition in ​ Q1 FY21. ​ ■ The Company has strong capabilities to acquire customers through various diversified digital platforms - From Q2 FY20 to Q4 FY20, 79.76% of their clients have been acquired digitally. Of ​ which, 50.76% are acquired through performance marketing, 22.24% through referrals from existing clients and 6.77% through digital influencers.

■ Diversified Product Offerings - ABL’s Online Platforms, “Angel Broking”, ​ ​ “trade.angelbroking.com”, “Angel SpeedPro” and “Angel BEE”, powered by ARQ, allow them to ​ provide their clients with the ability to manage their wealth and investments in an efficient and organized manner. The broking, distribution and advisory service are backed by robust infrastructure and has processed at peak usage, being, approximately 3.46 million trades in a day. An Increase of 18.71% from 1.82 Million Clients in FY20 to 2.15 Million Clients as of June 30, 2020.

■ Leadership position in the investment advisory space - The Company provides investment ​ advisory services through various applications and their website, which are supplemented by “ARQ”, a rule based investment engine. The company is currently providing their clients with customized solutions to assist them achieving their investment goals across various investment asset classes such as equities, derivatives, currency and commodities, mutual funds, fixed deposits and bonds, and life insurance products.

■ Leveraging technology to build seamless experiences for it’s users across platforms - ABL’s electronic broking platform is used by its retail clients across multiple devices. ABL has invested in

the latest technology to develop its mobile platform to provide secure, reliable data and enhanced user experiences.

Objects of the Issue

The company aims to raise ₹ 600 Crs. (At the higher range of the price band) via a Public Issue and proposes to utilize the proceeds towards:

■ Meeting working capital requirements

■ General corporate purposes

Peer Comparison

Monthly incremental active clients across various time frames ​ Major players Monthly incremental active Rank based on monthly incremental clients ('000) active clients Apr-18 to Apr-19 to Feb-20 to Apr-20 to Apr-18 to Apr-19 to Feb-20 to Apr-20 to Mar-19 Jan-20 Mar-20 June-20 Mar-19 Jan-20 Mar-20 Jun-20 Broking Ltd 30.7 24.8 103.7 175.6 1 2 1 1 Angel Broking Ltd 4.1 6.5 42.7 63.5 6 6 4 2 RKSV Securities India Private Ltd 4.6 33.4 59.2 52.8 5 1 2 3 5Paisa Capital Ltd 5.9 20.4 41.5 43.9 2 3 5 4 Kotak Securities Ltd 5.8 7 24.9 22.3 4 5 7 5 ICICI Securities Ltd 3.8 12 44 14.3 7 4 3 6 Motilal Oswal Securities Ltd 1 2.2 15.6 11.7 10 7 8 7 Axis Securities Ltd 1.2 -11.4 -5.8 10.6 9 15 15 8 HDFC Securities Ltd 5.8 -0.8 28.6 9.5 3 13 6 9

SBICAP Securities Ltd -0.4 1 14 6.5 13 8 9 10 Ltd -0.9 -0.9 7.9 5.3 15 14 10 11 Edelweiss Broking Ltd 1.3 0 5.1 1.7 8 10 11 12 Aditya Birla Money Ltd -0.9 0 -0.3 1 14 11 14 13 JM Financial -0.2 0.2 0.9 0.9 12 9 13 14 Ltd -0.2 -0.6 3.2 -0.2 11 12 12 15

■ Online broking companies have seen a spurt in the trading volumes and active clients amid the nationwide lockdown. Many brokerage companies witnessed unprecedented increase in demand for new account openings.

■ On the basis of monthly incremental active client additions on NSE, ABL has been the ​ Second Highest in Terms of Client Additions in the Last Three Months (April to June 2020), after Zerodha Broking Limited. ​

Below is the Comparison of Key 15 players that cover more than 65% of the Total Active Users.

Active clients on NSE for FY15 FY16 FY17 FY18 FY19 FY20 June Share as Share as CAGR CAGR major brokerages (‘000) 2020 on FY20 on June FY19- (FY15- 20) 2020 FY20 Zerodha Broking Ltd 30 62 166 541 909 1414 1,941 13.10% 15.92% 55.56% 116% ICICI Securities Ltd 595 560 618 798 844 1076 1119 9.97% 9.17% 27.49% 13%

RKSV Securities India 7 11 17 44 100 619 778 5.73% 6.38% 519% 145% Private Ltd Angel Broking Ltd 160 171 230 364 413 576 767 5.34% 6.29% 39.47% 29% HDFC Securities Ltd 348 408 483 602 672 720 749 6.67% 6.14% 7.14% 16% Kotak Securities Ltd 268 247 274 369 438 572 639 5.30% 5.24% 30.59% 16% 5Paisa Capital Ltd 0 NA 4 36 106 434 566 4.02% 4.64% 309% 237% Motilal Oswal Financial 153 166 207 308 319 377 412 3.49% 3.38% 18.18% 20% Services Ltd Axis Securities Ltd 120 184 259 405 419 270 302 2.50% 2.48% -35.56% 18% SBICAP Securities Ltd 114 126 169 214 209 250 269 2.32% 2.21% 19.62% 17%

India Infoline Ltd 286 263 198 225 214 219 235 2.03% 1.93% 2.34% -5%

Edelweiss Broking Ltd 47 77 75 105 120 130 135 1.20% 1.11% 8.33% 23% Reliance Securities Ltd 114 97 83 123 120 119 119 1.10% 0.97% -0.83% 1% Aditya Birla Money Ltd 43 39 40 55 44 43 46 0.40% 0.38% -2.27% 0% JM Financial 27 28 32 39 36 40 43 0.37% 0.35% 11.11% 8%

Total 5,092 5,170 5,951 8,290 8,782 10,796 12,196 100.% 100.% 22.93% 16%

● On the basis of active clients on the NSE as of June 2020, Zerodha Broking Ltd has the largest share of ~16% followed by ICICI Securities Ltd (~9.2%) and RKSV Securities (~6.4%). ABL is the Fourth Largest in Terms of Active Clients on NSE with a Market Share of ​ ​ 6.3% as of June 2020.

Active client acquisition in Q1 FY21

Brokers Active client addition from Apr-Jun 2020 as a proportion of Jun 2020 active customer base

Zerodha Broking Limited 27% Angel Broking Limited 25% 5Paisa Capital Limited 23% RKSV Securities India Private Limited 20% Kotak Securities Ltd. 10% Axis Securities Limited 10% Motilal Oswal Financial Services Ltd 8% SBICap Securities Limited 7% India Infoline Ltd. 7% Aditya Birla Money limited 6% JM Financial Services Ltd. 6% Edelweiss Broking Limited 4% ICICI Securities Limited 4% HDFC Securities Ltd. 4% Reliance Securities Limited 0% Total 11%

● On the basis of monthly incremental active client additions on NSE, ABL has been the Second Highest in terms of Client Additions in the last three months (April to June 2020), after Zerodha Broking Limited.

Comparison of Accounting Ratios with Listed Industry Peers-

Name of Company Face Closing price Total income, Diluted EPS NAV P/E RONW Value on August 31, for the FY20( ₹ from total (₹ per FY20

2020 (₹) million) operations (₹) Share) Angel Broking Limited 10 NA 780 11.44 82.15 NA 13.92

Peer Group ICICI Securities Limited 5 477 1,722 16.8 37.5 28.4 44.32

Geojit Financial Services Limited 1 38.2 306 2 23.8 19.4 8.91

IIFL Securities Limited 2 41.9 789 7.3 27.5 5.7 26.39

Motilal Financial Services Limited 1 683.4 2,365 12.2 210.9 56 4.15

JM Financial Limited 1 81.3 3,453 6.5 96.7 12.6 9.69

Financials

Rs. (In Crs.) FY18 FY19 FY20 Q1FY21

Top Line 780 784 755 247 EBITDA 274 215 189 78 PAT 110 83 87 48 EPS 15.29 11.58 12.05 6.7

Equity Share Capital 71.99 71.99 71.99 71.99 Networth 474 531 591 669 Ratios EBITDA Margins 35% 27% 25% 32%

PAT Margins 14% 11% 12% 19% Book value per share 65.84 73.76 82.09 92.93 ROE 23% 15% 14% 7%

Financial parameters from fiscal 2017 to 2020

Amounts in Crs. FY20 3-Year Broking Income as % of Total FY20 3-Year PAT margin Total CAGR Revenue PAT CAGR Income FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 Angel Broking Ltd 780 11% 56% 64% 71% 75% 87 38% 6% 14% 10% 11% Aditya Birla Money Ltd 173 12% 72% 68% 56% 54% 12 25% 5% 4% 6% 7% HDFC Securities Ltd 862 16% 76% 89% 85% 80% 384 21% 39% 43% 42% 45% ICICI Securities Ltd 1,722 7% 55% 55% 54% 55% 536 17% 24% 30% 28% 31% India Infoline Ltd 643 8% 87% 68% 70% 67% 142 23% 15% 21% 21% 22% Kotak Securities Ltd 1,690 11% 60% 53% 55% NA 555 15% 29% 29% 24% 33% Reliance Securities Ltd 208 0% 69% 66% 62% 66% -38 NA 0% 3% 8% -19%

SBICAP Securities Ltd 495 26% 45% 43% 40% NA 84 48% 10% 21% 14% 17% 5Paisa Capital Ltd 108 144% 21% 77% 89% 67% -7 NA -157% -129% -31% -7%

Critical Analysis and Valuation

■ In terms of Income Proportion of Broking Income of Total Revenue as of Fiscal 2020. ABL posted a high Broking Income of 75%. ■ In terms of three year CAGR of (fiscals 2017 to 2020) Brokerage Income, ABL stands at 22% whereas India Infoline and Reliance Securities, in contrast, reported negative three-year CAGR

■ In terms of PAT, SBI Capital Securities reported the highest growth (3-year CAGR of 48%), followed by Angel Broking Ltd (38%), Aditya Birla Money (25%) and India Infoline (23%).

Impact of Covid-19 on the Operations of the Business-

■ ABL, being a part of the capital market operations, did not experience any disruption in its ​ business activities due to the lockdowns. ■ ABL’s extensive use of technology and complete focus on digitalisation enabled them to operate ​ efficiently even through the global pandemic caused by COVID-19. ■ The average monthly client additions in Q1 FY21 was 115,565 against an average monthly ​ addition of 46,676 in FY20, registering a Growth of 147.59%. ​ ​ ​ ■ The robustness and scalability of ABL’s digital ecosystem was also tested during Q1 FY 21 and the company experienced an increase of 2.48 times, 2.21 times and 1.96 times in their average ​ daily logins on their mobile application, average daily traded clients and average fund transfer during this period respectively. ■ To ensure safety of clients data while maintaining productivity of human capital, the Company has created a secure VPN tunnel to provide them access to their servers.

Shareholding Pattern

Shareholding pattern Pre-Issue Post-Issue Promoter Group 55.20% 47.67% Public 44.80% 52.33%

Details

IPO Date Sep 22, 2020 - Sep 24, 2020 Issue Type Book Built Issue IPO

Issue Size 19,607,844 Equity Shares of ₹10 (Aggregating up to 600 Crs) Fresh Issue 9,803,922 Equity Shares of ₹10 (Aggregating up to ₹300 Crs.) Offer for Sale 9,803,822 Equity Shares of ₹10 (Aggregating up to ₹300 Crs.) Face Value ₹10 per Equity Share IPO Price ₹305 to ₹306 per Equity Share Market Lot 49 Shares Min Order Quantity 49 Shares ICICI Securities, Edelweiss Financial Services Limited, SBI Capital Lead Managers Markets Limited, Link Intime India Private Limited.

■ The Fresh Issue includes upto 9,803,922 Equity Shares aggregating to Rs. 300 Crs. The Offer for ​ ​ Sale includes upto 599,183 Equity Shares sold by Mr. Ashok D Thakkar (Promoter selling ​ ​ shareholder), upto 147,059 Equity Shares sold by Mrs. Sunita Magnani (Promoter selling ​ ​ shareholder), upto 3,921,634 Equity Shares sold by IFC (Individual selling shareholder),a member ​ ​ of the Worldbank group and upto 5,136,046 Equity Shares by other Individual selling ​ ​ shareholders. ​ ■ 50% of the total IPO shares reserved for QIB, 15% for NII/NIB’s and 35% for retail investors. The ​ ​ company may allocate up to 60% shares of the QIB portion to anchor investors. ​ ​ ​ ■ Bids for the IPO can be made for a minimum of 49 Equity Shares and in multiples of 49 Equity ​ ​ Shares thereafter.

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