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Weekly Insights #1- Angel Broking’s Improved Business Resilience and are Valuations Too Cheap?

Angel Broking is one of the leading discount brokers in India. Broking as a business historically has been volatile due to fluctuations in the market.

The business model was based on a % fee of the value of transactions and thus fluctuations in the market prices lead to volatile business performance for the broking firms. However, discount broking has changed the business dynamics totally.

The reduction in pricing and thus the overall profit pool for the brokers is well discussed; but the most important change which is less talked about is that the driver of broking business (under the discount broking model) has changed from value to volume. Revenues are no longer linked to the value of transactions, instead they are linked to the volumes as the fee is charged on per order basis.

This change is what has improved the resilience of overall business model for companies like Angel Broking wherein fluctuations in stock prices have a much lower impact now vs the earlier value-based model.

And this reflects well in the below table from Angle Broking’s presentation-

During the down years of 2008, 2012, 2015 and 2020, though the overall traded value fell due to price corrections, the number of orders (the new driver of revenues) were higher.

In the earlier % of value business model, a broking business would have seen de-growth in revenues & profits; however, under the new no. of orders model, the business would have grown during these down years.

I did seek Angel Broking’s management’s thought on this improved resilience of the business model back in Q1FY22 and though they did agree on this perspective, they did not have any data point to substantiate the same at that time. But from Q3FY22 onwards, Angle Broking started sharing the above volume data table.

Snippets from Angel Broking’s Q1FY22 Concall-

But even though the business model has become more resilient, there is one major risk factor that investors need to consider here, which is that the underlying order volumes have grown multifold over last few years and the same has been on the back of massive increase in the speculative FNO activity.

Discount brokers like Angel don’t charge for Cash orders, they only charge for FNO orders which makes the business one that relies on increasing speculation for its growth.

Last few years have seen phenomenal growth in Futures & Options trading, every other person is doing options and so many people think selling options is a risk free strategy.

Any market event that causes major losses for these FNO traders might result in a significant reduction in order volumes here. And this concern that such high speculative volumes will not continue in the future probably explains the reason why market gives a very low valuation multiple of ~12x to Angel Broking. Market clearly looks to be factoring de-growth or no-growth future here.

In summary, the business model has become more resilient from a longer term perspective. However in the near term, a challenge exists from the perspective of sustainability of current speculative activity. Discount brokers charging for Cash orders or increasing the flat fee is an optionality that does exists (Zerodha did hint at considering the same due to increase cost of running a broking business).

That’s it for this week, new insight coming up next week. So stayed tuned!


Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

“The securities quoted are for illustration only and are not recommendatory”

Stock specific investment disclosure:

Angel One- No Investments. Not Traded in last 30 days. Not an active recommendation in Research Service.


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Rajat Banerjee
Feb 04, 2023

Ankush will you kindly suggest some listed ( NSE and BSE) wealth management companies? Looking forward to hearing from you.

Surge Capital
Surge Capital
Feb 06, 2023
Replying to

Hello Rajat, purely from the wealth management perspective I think there are only two listed players- IIFL Wealth and Anand Rathi.

Prudent is another one but primarily on retail distribution of mutual funds.

But my understanding is that all these companies including AMCs are largely driven by a larger fundamental trend of financialization of savings and thus the bet has to be on this trend itself. Don't see much of a product differentiation among them.

IIFL wealth is doing something different with their IIFL One product which is a fee based structure and not commission based. So differentiation is there, but nothing much.

But structurally I think, take rates will continue to reduce across products and that will impact everyone…


Rajat Banerjee
Feb 04, 2023

Very nice starting article Ankush and Thank you Mr. Jalan for your valuable inputs.


Saurav Jalan
Feb 04, 2023

Nice write up Ankush. The reason why I stayed away from this company although on the surface the risk-reward equation looked attractive was the doubt that such option volumes will continue in the long-run and what percentage of F&O traders are actually making money in this increased volume scenario. Latest SEBI report on F&O segment confirms this doubt that 89% of F&O traders are losing money in the market. Infact, in one the interaction with the students Rakesh Jhunjhunwala ji said this on option trading " Kharidnewale ki jeb khali aur Bechnewale ki Tijori Khali "😑. Anybody who is living under the illusion that selling options is a risk-free strategy have not experienced that Tijori khali moment. Like lottery many…

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