Indian Brokerage Industry Insights: Shift to Flat Fee Models and Rising Client Addition

Indian
Indian Brokerage Industry
March 17, 2021
Buoyant capital markets aid industry players to flourish Updates on…

Indian brokerage industry has been undergoing structural shift from
percentage led business model to flat brokerage & subscription based
Company Update
model. Market share of top two discount brokers in terms of number of Motilal Oswal – Buy – TP | 800 –
clients, namely Zerodha and Upstox, has increased from 17% to 30% in past SOTP based
one year, which reflects clients’ attraction towards flat brokerage plans.
(Diversified business model with
Overall market ADTO has increased over ~2x from | 14.4 lakh crore in presence across capital market
Q3FY20 to | 31.1 lakh crore in Q3FY21, and has shown increasing trends domain, expect to be beneficiary
sequentially. Client addition also has been on similar lines with active clients of stricter SEBI norms and
increasing 67% YoY to ~1.63 crore; with substantial participation from New consolidation in industry)
to Market customers from tier-2 and below cities. Reasons attributable to
such robust accretion could be awareness & acceptance of equities as
investment class by millennials, relative underperformance of large number 5 Paisa – Buy – TP | 350 – valuing
of mutual fund schemes and low yields in fixed income asset. at 21xFY23E EPS
Discount brokers continued to gain majority of incremental clientele as well (Start-up discount broker with
as ADTO. Consequently, traditional brokers have started offering aggressive client acquisition,
competitive fixed brokerage plans thereby blurring earlier lines of difference consistent revenue growth to drive
between peers. Bank led brokers including Kotak Securities, Axis Securities valuation)
etc have started offering low brokerage plans while traditional non-bank led
brokers like Angel Broking and Sharekhan have also joined the bandwagon.
IIFL Sec – Buy – TP |65 – valuing at
ICICI Securities – Retail Equity Research

In the wake of changes experienced in the domestic stock market and
7.7xFY23E EPS
broking industry, evolution in terms of business model was imminent. In our
view, Indian broking industry though has a transaction fee model but its (Pure broker with distribution
structurally moving for a clear distinction between charges for transaction strength, relatively cheap on
and fee based model for services like wealth management and investment valuation)
advisory. While a shift towards a fee based model was already in the works
with brokers focusing on building advisory model (wealth AUM), pandemic
has added boost to pace of change. Apart from advisory services, focus on Geojit Fin – Hold – TP | 62 – valued
fund based activities, including margin funding and loan against shares, is at 10xFY23E EPS
on the rise, enabling brokers to build sustainable earnings.
(Marginal player in aggressive
Recent SEBI norms regarding peak margin is likely impact volumes in the competitive space, high
near term as upfront margin requirement will gradually rise to 100% from
proportion of cash ADTO remains
September 2021 onwards. However, we believe this impact may not last
strength)
longer and in general is structurally positive.
Brokers in a sweet spot on the way of business model transition Research Analyst
Pandemic has provided a boost to this process with strong accretion in Kajal Gandhi
clientele as well as volumes. We believe the industry is moving towards fee kajal.gandhi@icicisecurities.com
for service model wherein a customer is charged fee as per services availed Vishal Narnolia
instead of a standard or fixed charge. With financial savings rising and lower vishal.narnolia@icicisecurities.com
interest rates, equity as an asset class will continue to remain attractive,
Capital market businesses are currently in a sweet spot in the journey or Sameer Sawant
Sameer.sawant@icicisecurities.com
transition of business model. While we expect discount brokers to continue
with growth ahead, however revenue growth is largely dependent on client
additions as scope for higher pricing remains difficult. Hence, earnings
growth from pure brokerage income to remain limited. We remain positive
on the industry players and recommend Buy on MoFSL, IIFLsec and 5 Paisa.
Exhibit 1: Valuation summary
Co Name CMP TP Rating Mcap PAT RoE NW P/BV
FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E
Motilal Oswal 660 800 Buy 9737 1099 1297 1434 9.1 7.5 21.6 4167 5400 6632 2.3 1.8 1.5
IIFL Sec 55 65 Buy 1634 195 240 269 19.9 20.1 18.6 1075 1315 1584 1.5 1.2 1.0
Geojit 57 62 Hold 1328 118 132 148 18.9 17.5 16.6 686 817 965 1.9 1.6 1.4
5 paisa 280 350 Buy 726 15 22 43 10.1 13.2 21.8 153 175 218 4.7 4.2 3.3
Source: Company, ICICI Direct Research
Company Update | Indian Broking Industry ICICI Direct Research
Industry Trend
Client addition robust; broking structure shift towards flat brokerage
Broking industry has seen lot of changes and evolvement in past decade,
led by disruptions from discount brokers, buoyancy in equity markets,
digitalization and increased interest among various investor groups. Client
addition in past one year has remained robust, except for the march quarter
blip, quarterly addition in past 3 quarters has been strong and has shown
increasing trend since March 2020 in general. In terms of active clients,
addition in December 2020 quarter was similar to that in the previous
quarter, this can be partly attributed to new SEBI rules regarding peak
margin funding that came in, but we believe this was just a knee jerk reaction
and things would normalize very quickly. Active clients for the industry as
on January 2021 stand at 1.63 crore which is up by 67% YoY
Exhibit 2: Strong client addition in 9MFY21
Month Active clients (Nos. Lakh) QoQ rise (Nos. Lakh)
Jan-21 163.9 9.8
Dec-20 154.1 19.3
Sep-20 134.8 21.9
Jun-20 113.0 11.3
Mar-20 101.7 5.9
Dec-19 95.8
Source: SEBI
Discount brokers like Zerodha, Upstox, 5Paisa and newly joined: Angel
broking have been major beneficiaries’ especially over past one year in
terms of incremental client acquisition. Market share for Zerodha has
increased from ~13% a year ago to ~19% as on January 2021. Similarly,
RKSV Sec (Upstox) has increased its market share from ~5% a year ago to
11.3%. Early mover advantage in this segment has certainly benefitted
discount brokers. We also believe digitalization, user friendly apps and
interface, service oriented nature of business has attracted more clients
especially New to Market customers. This has led many traditional
brokerages like Sharekhan, Kotak Sec etc to come up with their own
discount plans.
Exhibit 3: Market share players in terms of active client base
Broker Active clients (Nos. Lakh) Market share %
Zerodha 31.4 19.2
RKSV Sec 18.5 11.3
Angel Broking 13.2 8.1
HDFC Sec 9.2 5.6
5Paisa Capital 8.2 5.0
Kotak Sec 7.0 4.2
Sharekhan 6.6 4.0
Motilal 5.1 3.1
Others 64.6 39.4
Total 163.9 100.0
Source: SEBI
Amongst the traditional brokers turned discount broker, Angel Broking has
seen increasing trend of market share since past 3 to 4 quarters as it shifted
its focus from traditional business to discount broking model.
ICICI Securities | Retail Research 2

Exhibit 4: Angel broking sees rise in market share in terms of active clients
9.0 8.1
7.9
8.0 7.5
6.8
7.0
5.7
6.0
4.9
5.0
%
4.0
3.0
2.0
1.0
0.0
Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Jan-21
Angel Broking Market share of active clients %
Source: SEBI
Industry ADTO on a surge

ADTO (Average Daily Turnover) has shown increasing trend since past
months especially during the lockdown period, which was a result of
buoyancy in equity markets and increasing retail participation. However, it
would be key to watch how the trend behaves in coming months as margin
requirement rises in step wise manner as per SEBI’s new regulation. ADTO
in Feb 2020 has reached |45.9 lakh crore, which has doubled in last 6
months. Robust client addition and market volatility are key factors for
surging volumes largely led by options.
Exhibit 5: Increasing industry ADTO trajectory
50.0 1.0
45.0 0.9
0.9
40.0 0.8
0.8
0.7
35.0 0.7
0.7
0.7
0.7
0.6
| lakh crore
| lakh crore
30.0 0.6
0.6
0.6
0.6
0.5
0.5
25.0 0.5
20.0 0.4
15.0 0.3
10.0 0.2
11.8
11.6
13.1
16.7
19.4
19.7
22.8
27.9
30.6
32.8
38.4
45.9
5.0 0.1
0.0 0.0
Oct-20
Mar-20
May-20
Nov-20
Sep-20
Jun-20
Jul-20
Aug-20
Dec-20
Jan-21
Apr-20
Feb-21
F&O ADTO Cash ADTO
Source: NSE, ICICI Direct research

Exhibit 6: Player wise ADTO market share

ADTO Clients (Market Share)
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21
Traditional brokers
Kotak Securities 1.7% 1.6% 1.6% 1.8% 1.6% 1.4% 1.6%
MOSL 1.5% 1.4% 1.7% 1.5% 2.0% 1.8% 2.3%
IIFL Securities 1.4% 1.3% 1.6% 1.3% 1.2% 1.1% 1.6%
Geojit 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.2%
Discount brokers
Angel Broking 2.0% 2.5% 3.1% 3.7% 4.2% 6.0% 10.7%
5 Paisa 2.0% 1.9% 2.0% 2.2% 1.9% 1.7% 2.1%
Source: SEBI
Exhibit 7: Player wise ADTO absolute numbers

ADTO (Rs crore)
Traditional brokers
Kotak Securities 21207 23800 23686 28096 23554 30091 33793
MOSL 18900 20600 25139 23500 28500 38000 49700
IIFL Securities 16934 19161 22640 21090 17140 23950 32970
Geojit 2131 2255 2194 2173 2156 2529 3234
Discount brokers
Angel Broking 25318 35827 45007 58202 61895 128100 226100
5 Paisa 24619 27638 29388 34320 27407 35549 44756
Industry 1254300 1454607 1440590 1580433 1456420 2122642 3113193
Source: SEBI
New Peak margin rules could hurt volumes

As per new margin rules, brokers will have to shift from earlier regime of
day end position to calculate margin requirement. As per recent changes,
the exchange will randomly select 4 times in the day to record margins
requirement and highest of them will become peak margin which is
applicable for Cash and F&O segment. As most of the trading done is
intraday these regulations could impact trading volumes at least in the initial
phase of implementation.
Peak margin will be implemented in a phased manner:
 25% of the upfront margin to be available before the trade is being
executed from December 1, 2020, to February 28, 2021
executed from March 1, 2021 to May 31, 2021
executed from June 1, 2021 to August 31, 2021
executed from September 1, 2021

Exhibit 8: Product impact of margin regulation

Type of trade Impact
Intraday Cash Higher margin + High impact
CNC Cash Lesser impact
Options Writers Higher margin + High impact
Option Buyers No Impact
Futures Higher margin + High impact
Source: ICICI Direct research
Exhibit 9: Margin funding book of various players

Company MFT Book (| crore) Comment
Angel 542 MTF
Kotak Sec 454 MTF
5Paisa 192 Client Funding Book
Geojit 13.4 MTF
MOSL 680 MTF + LAS
Source: Company reports, ICICI Direct research
Few more important regulatory changes…..

Under the new rules there are few more changes which are important from
trader’s perspective. Earlier client would have to pay an upfront cash margin
or pledge shares to cover the margin. A client would give a power of
attorney to the broker to use the client’s existing holding to access margin
for derivative trades. This led to some brokers pooling securities across
clients, using one client’s asset. The new margin rules are an extension of
those changes that take away the need for separate accounts with the broker
and mandates that the client’s trade be carried out directly with the Clearing
Corporation from individual’s own demat account. In addition, notional
intraday profit is not being accounted while providing margins to clients
henceforth.
Digitization has led to geographical diversification of customers

India’s stock market penetration, in terms of investors, is substantially lower
at ~1-2% of the population as compared to ~20% in developed market,
leaving lot of room for growth. With entry of new age brokers using
technology, client addition has seen strong 67% YoY jump including
substantial proportion of new to market customers from tier-2 and below
regions and also new investors looking for supplementary income in
lockdown. Further, digitalization, mobile trading apps and relative
underperformance of mutual funds has indirectly attracted interest in direct
investment in capital markets. Recent data based on city wise distribution of
turnover in cash segment in BSE and NSE suggest increasing pie of Tier-2
and below cities in past two years. In BSE, contribution of Tier-2 and below
cities in cash turnover has increased from ~30% in FY18 to ~40% in FY20
while in NSE it has risen from ~14% to ~17%.

Exhibit 10: Increasing contribution of trading from Tier-2 and below cities
BSE NSE
FY20 Dec-20 FY20 Dec-20
Tier-1 59.5 59.8 83.3 76.2
Tier-2 & Below 40.5 40.2 16.7 23.8
BSE NSE
Tier-1 65.3 54.5 85.9 83.2
Tier-2 and Below 34.7 45.5 14.1 16.8
BSE NSE
Tier-1 70 58.6 85.9 85.5
Tier-2 and Below 30 41.4 14.1 14.5
Source: SEBI, ICICI Direct Research
Though there is no direct aggregate data available on number of customers’

region wise, but management commentary of various brokerage houses
suggests that investors interest among other regions in India has been
increasing; specially among young population with broad age group in 25-
35 years. Also a majority of new client addition has been coming from Tier-
2 and Tier-3 cities.
Exhibit 11: Tier-2 client addition brokerage wise

Brokerage House % consumer from Tier 2 Cities
Upstox 80%
5 Paisa 88%
Angel ~50%
Source: Company report, management talks in media

Change in brokerage plans in recent times

With recent trends clearly suggesting consumer preference shifting towards
service oriented product offering i.e discount brokerage plans, traditional
brokers have now started launching their own discount plans in order to
attract clients. Brokers like Zerodha, Upstox etc have gained market share
over the past few years. We believe this is because of focused service
offerings wherein traders need not bear cost burden of other services like
advisory, research etc which is offered as a whole bunch by traditional
brokers. Top traditional brokers like Sharekhan, Kotak Securities, Angel
Broking have started to offer discount plans. For example, Kotak Securities
has launched trade free plan in November 2020 wherein it offers zero
brokerage on intraday trades and | 20 per order for all other F&O trades.
Exhibit 12: Kotak Zero brokerage plan
Particular Charge
Intraday Nil
All F&O, MIS, CO |20/Order
Equity and Commodity delivery 0.0025
Account opening fee Nil
STT 0.1-0.05%
Source: Company
Recently Sharekhan has come up with a discount broking plan called

Espresso, with its own unique offering of zero brokerage plan in case of loss
on a particular order.
Exhibit 13: Sharekhan Espresso discount brokerage plan

Particular Charge
Equity Delivery & Intraday 0.1% or |20 for every margin order (whichever is lower)
Equity Future 0.01% or | 20 for every executed order (whichever is lower)
Equity Options |20/Order
Currency Future 0.01 % or | 20/executed order (whichever is lower)
Currency Options |20/executed order
Commodity Future 0.01% or | 20/executed order (whichever is lower)
Commodity Options |20/executed order
Loss making trades No brokerage
Source: Company
Exhibit 14: Angel discount brokerage plan

Particular Charge
Equity Delivery Nil
Equity Intraday |20/Order or 0.25% (Whichever is lower)
Equity Futures |20 / Order Or 0.25% (Whichever Is Lower)
Equity Options |20 / Order Or 0.25% (Whichever Is Lower)
STT 0.05%-0.1%
Source: Company

Motilal Oswal Financial (MOTOSW)
CMP: | 660 Target: | 800 (21%) Target Period: 12 BUY
months months March 17, 2021
Broking business gaining traction

Motilal Oswal (MOSL) reported a decent Q3FY21 performance wherein
broking revenue was healthy but asset & wealth management business saw
Company Update
mixed performance. The top-line jumped by 45% YoY and 7% QoQ to |
1008 crore, while PAT was up by 13% QoQ and 102% YoY to | 334 crore.
Particulars
Broking business seeing improving trends
ess
Amount
MOSL amongst leading broker in India ranked on active client base of ~5 Market Capitalisation | 9792 crore
lakh. With average daily turnover (ADTO) of | 49700 crore, it enjoys 2.8% Networth | 3930 crore
market share, up 20 bps YoY, as on December 2020. ADTO growth was 52 week H/L 742 /426
supported by rise in high-yielding cash market share. Healthy ADTO growth
Face Value |1
at 98% YoY in Q3FY21 to | 49700 crore, coupled with rise in active clients
to ~5 lakh led to robust topline at | 430 crore, up 40% YoY and 2% QoQ. Promoter (%) 70.5
Online business formed 60% of the total retail volumes. Broking revenue DII Holding (%) 4.4
was up by 52% YoY to | 294 crore and distribution income was down 16% FII Holding (%) 9.4
YoY, but QoQ it was up 9%. Strong operational efficiency supported PAT at Others (%) 15.7
| 76.9 crore; up 59% YoY. Branch count now stands at 92, comprising of 72
exclusive branches and 20 branches in synergy with AMC, HFC. Key Highlights
AUM growth to remain steady in AMC business  Healthy traction in broking business
led by strong ADTO growth
Led by upscale in equity markets, closing AUM increased by 14% QoQ to |  Healthy sequential growth of 14% in
43900 crore in Q3FY21 while average AUM was up by 9% QoQ to | 40900 AUM

crore. Market share of equity AUM stayed broadly stable at 1.8%. The  Maintain BUY rating with revised
company added 2.1 lakh SIPs in 9MFY21 and has resulted into new SIP target price of | 800
count market share rise by 80 bps to 2.1%. Buoyancy in equity markets are
expected to keep overall AUM growth steady
Risk to our call
Home finance business, PAT impacted by rise in stress ess
 Extended impact of pandemic can

NII for the home finance division increased by 20% YoY and 13% QoQ to | dent business growth
63 crore lead by strong expansion in NIMs. Net interest margin increased by  Regulatory changes in near term
120 bps YoY and QoQ to 6.4%, helped by lower cost of funds while yields could impact business volumes and
thereby earnings
remained flattish sequentially. Provisions jumped 48% QoQ to | 28.6 crore
due to accretion of Covid provisioning. As a result, PAT was down 71% YoY
to | 4.7 crore. Stage 3 assets increased from 1.64% to 2.93% QoQ.
Disbursements for the quarter was down 17% YoY to 49.5 crore, however,
Research Analyst
this is expected to gather pace going ahead.
Kajal Gandhi
Valuation & Outlook kajal.gandhi@icicisecurities.com
Presence in diversified businesses gives MOFSL an edge. Wealth, AMC Vishal Narnolia
business are seen curtailing cyclicality of business cycles. However, we vishal.narnolia@icicisecurities.com
expect Covid related stress in home finance business needs to be
Sameer Sawant
monitored. Broking volumes should stay steady. Diversified business
coupled with prudent management are expected to be key drivers for the
stock. We value MOSL on SOTP basis, implying value of 8.1x FY23E EPS,
with a TP of | 800. Maintain BUY.
sseses
Key Financial Summary
FY19 FY20 FY21E FY22E FY23E CAGR (FY21E-23E)
ADTO (| crore) 17,400 23,500 37,600 39,480 43,428 4.9%
Market Share calculated (%) 1.8 1.6 3.1 2.9 3.1
Total Revenue (| crore) 2,677 2,613 3,514 4,279 4,608 9.5%
Net Profit (| crore) 294 183 1,099 1,297 1,434 9.3%
EPS (|) 20 13 75 89 98
Book Value (|) 212 214 286 371 455
P/E (x) 33 52 9 7 7
RoE (%) 9.6 5.7 9.1 7.5 21.6
s

Company Update | Motilal Oswal Financial ICICI Direct Research
Snapshot of company
Exhibit 16: Diversified revenue mix

100% 6 2 4 3 3 3
10 9
24 23 23 23 22
80% 20 30 23
60% 24 30 30 32 32 32
27
26
40%
20% 45 38 42 44 43 42 41 41
0%
FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Capital Market Asset & wealth Management Housing finance Fund Based
Exhibit 17: EBITDA margin, PAT margin trend

80.0 73.2
70.0 75.6 74.4
60.0
50.6 51.2
50.0
50.6
40.0
41.5
30.0
20.0
10.0
13.8
0.0
FY20 FY21E FY22E FY23E
OPM Trend PAT Margin
Exhibit 18: RoE to improve, going ahead

25.0
20.0 21.6
15.0
10.0
9.1
5.0 7.5
5.7
0.0
FY20 FY21E FY22E FY23E

Exhibit 19: Price Chart
1400 18000
1200 16000
14000
1000 12000
800 10000
600 8000
400 6000
4000
200 2000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Sep-18
Sep-19
Sep-20
Motilal Nifty Index
Valuation
Presence in diversified businesses gives MOFSL an edge. Wealth, AMC
business are seen curtailing cyclicality of business cycles. However, we
expect Covid related stress in home finance business needs to be
monitored. Broking volumes should stay steady. Diversified business
coupled with prudent management are expected to be key drivers for the
stock. We estimate FY22E PAT at | 523 crore. We value MOSL on SOTP
basis, implying value of 6.8x FY23E PAT, with a TP of | 800. Maintain BUY.
Exhibit 20: SOTP valuation

Business Segment Value (| crore) |/share
AMC 3,542 243
Broking & IB 3,772 259
PE & other business 4,729 325
Home Finance 1,680 115
Holding company discount 15% 15%

Value per share 11,664.1 800.0

Financial Summary
Exhibit 21: Profit & Loss (| crore) Exhibit 22: Balance Sheet (| crore)
FY19 FY20 FY21E FY22E FY23E FY19 FY20 FY21E FY22E FY23E
Total Revenue 2,677 2,613 3,514 4,279 4,608 Sources of Funds
Operating Cost 1,543 1,327 1,455 1,772 1,928

Equity
EBITDA 937 1,084 1,778 2,165 2,357
Net-worth 3050 3123 4167 5400 6632
Interest Expense 517 486 406 331 277
Borrowings 5160 4627 4190 3443 2919
PBT 396 244 1,428 1,730 1,912 Minority Interest 40 30 30 30 30
Tax 10 6 33 43 48 Total Liabilities 8250 10111 8357 8843 9551
PAT 294 183 1,099 1,297 1,434
Source: Company, ICICI Direct Research Application of Funds
Fixed assets 300 273 273 273 273
Investment 2690 3089 2720 2720 2856

Loans and Advances 4880 4079 4720 5158 5673
Working Capital (net) 360 404 519 567 624
Deferred tax assets (net) 20 124 124 124 124
Total Assets 8250 10111 8357 8843 9551
Exhibit 23: Key Ratios (| crore) Exhibit 24: Growth ratios (%)
FY19 FY20 FY21E FY22E FY23E FY19 FY20 FY21E FY22E FY23E
No of Eq Shares (Crore) 14.57 14.57 14.57 14.57 14.57 Total Asset -20.8 22.6 -17.3 5.8 8.0
EPS (|) 20.2 12.6 75.5 89.0 98.4 Total Income -8.8 -2.4 34.5 21.8 7.7
Book Value(|) 212 214 286 371 455
ADTO 27.0 35.1 60.0 5.0 10.0
BVPS (|) 209 214 286 371 455
Expences 13.7 -14.0 9.6 21.8 8.9
P/E (x) 32.7 52.5 8.7 7.4 6.7
Net Profit -0.5 -37.7 499.8 18.0 10.5
P/B (x) 3.2 3.1 2.3 1.8 1.4
Book Value 4.0 2.4 33.4 29.6 22.8
RoE (%) 9.6 5.7 9.1 7.5 21.6
EPS -52.7 -37.7 499.8 18.0 10.5
ADTO (| crore) 17400 23500 37600 39480 43428
Market Share (%) 1.8 1.6 3.1 2.9 3.1
Yield (%) 0.014 0.014 0.013 0.020 0.020

IIFL Securities (IIFSEC)
CMP: | 55 Target: | 65(18%) Period: 12 months BUY
March 17, 2021
Soft Q3, but business growth to pick-up

IIFL Securities reported subdued performance in Q3FY21, sequentially
ADTO increased but client addition declined while bottom-line growth
Company Update
remaining flat. Revenue increased by 6.1% YoY to | 201 crore, while
sequentially it was flattish which is attributable to weak performance in
brokerage segment. Retail brokerage which forms around 50% of total Particulars
revenue saw a de-growth of 0.4% YoY while institutional equities segment Amount
saw revenue downfall of 29% YoY and 10% QoQ. Decline in broking Market Capitalisation 1647
segment sequentially can be attributed to new norms announced by Networth 1020
regulator, including peak margin norms and regulations on pledging of
52 week H/L 65/26
shares with depositories. On the other hand, distribution and investment
Face Value |2
banking income registered growth of 25% and 92% YoY respectively.
DII Holding (%) 1
Gradual improvement seen in client addition and volume
FII Holding (%) 23.5
Client acquisition was healthy at 1 lakh, however, it was down 9% from
Promoter Holding (%) 29.4
previous quarter. Overall ADTO increased by 45.6% YoY and 37.7% QoQ to
Others (%) 45.9
| 32970 crore. ADTO in cash segment was down 11.8% QoQ while in
derivative segment was up by 42% QoQ. Overall market share has been on
a decline since past few quarters and this should be addressed going ahead. Key Highlights
Recently the company has emerged as successful bidder for demat  Investment banking division posted
accounts of Karvy Stock Broking with NSDL and CDSL. Through this, IIFL robust revenue growth of 21.4%
Securities will get access to ~11.06 lakh accounts from Karvy Stock Broking. QoQ


The custody value of these accounts as of 31 January 2021 is ~| 3 lakh ~1 lakh client added in Q3FY21
crore. This we believe will help the company to boost business momentum
and thus financial performance.  Maintain BUY with revised target
price of | 65/share
Investment banking and distribution division does well
For the investment banking division Q3FY21 was a strong quarter as this Risk to our call
division completed 13 transactions consisting of 3 IPOs, 4 QIPs, 1 OFS and
5 private equity deals. As per the management, the deal activity has shown
pick-up and pipeline in this segment remains robust. Revenues in this
 Regulatory changes to impact near
term volume and thus business
segment was up by 21.4% QoQ to | 22.7 crores. Distribution income for the
 Slower growth of client addition to
quarter was up by 25% YoY to | 37 crore, but sequential growth was modest impact revenue
at 2%. Insurance premium stood at | 35.9 crore in Q3FY21 and were up by
29% YoY. Mutual fund AUM grew by 19% QoQ to | 4500 crore in Q3FY21.
Valuation & Outlook Research Analyst
Client acquisition and building AUM led model remains focus leading to a Kajal Gandhi
gradual shift towards stability in a cyclical business. PAT is expected to kajal.gandhi@icicisecurities.com
increase at ~17% CAGR in FY21E-22E. Focus on client addition and increase
Vishal Narnolia
business volumes remains positive, though impact of recent regulatory vishal.narnolia@icicisecurities.com
changes including higher margin requirement needs to be seen. Buyback
announcement and bid for Karvy clients have infused some positivity in the Sameer Sawant
stock. Anticipated exit from real estate investment could lighten balance Sameer.sawant@icicisecurities.com
sheet and act as near term catalyst. We maintain BUY rating with TP at | 65,
valuing the stock at ~7.7x FY23E EPS.

ADTO (| crore) 17710 21090 28367 31704 33421 8.5%
Market Share (%) 1.8 1.5 1.0 1.2 1.2
Revenue from operation (| crore) 835.1 717.5 767.9 856.8 918.8 9.4%
Net Profit (| crore) 172.1 232.1 194.8 240.0 269.1 17.5%
EPS (|) 5.4 7.3 6.1 7.5 8.4
P/E (x) 10.2 7.6 9.0 7.3 6.5
RoE (%) 25.4 28.8 19.9 20.1 18.6
Company Update | IIFL Securities ICICI Direct Research
Snapshot of company
Exhibit 26: Revenue streams Exhibit 27: Brokerage income (retail & institutional)
282.9
P ro p o rtio 300
|cro re F Y17 F Y18 F Y19 F Y20 240.3
n (F Y20) 250
236.3
214.4
B roking 200 159.3
| crore
138.5 130.8
R etail 236.3 282.9 240.3 214.4 27% 150 123.6
Institutional 123.6 138.5 130.8 159.3 20% 100
D istribution 102.7 154.4 180.4 154.7 20% 50
IB 36.1 82 33.4 33.4 4% 0

FY17 FY18 FY19 FY20
O thers 289.3 290.6 228.15 29%
Retail Institutional
T o tal 947.1 875.5 789.95 100%
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research
Exhibit 28: ADTO & market share (cash segment) Exhibit 29: ADTO & market share (overall)
4 3.4 3.6 3.3 2000 2 1.3 1.6 1.4 35000
2.9 30000
3 2.6 1500 1.5 1.2 1.1 25000
2.4 1.1
20000
| crore
(%)
1
| crore
15000
(%)
2 1000
0.5 10000
1 500 19161 22640 21090 17140 23950 32970 5000
1140 1330 1270 1540 1780 1570 0 0
Q1FY21
Q2FY20
Q3FY20
Q4FY20
Q2FY21
Q3FY21
0 0
Q2FY20Q3FY20Q4FY20Q1FY21Q2FY21Q3FY21
Cash ADTO Market Share (%) Total ADTO Market Share (%)
70 18000
60 16000
14000
50 12000
40 10000
30 8000
20 6000
4000
10 2000
0 0
Mar-20
Mar-21
Sep-19
Sep-20
Dec-19
Jun-20
Dec-20
IIFL Securities Nifty Index

Company Update | IIFL Securities ICICI Direct Research
Financial Summary
Exhibit 31: Profit & Loss (| crore) Exhibit 32: Balance sheet (| crore)
Particulars FY18 FY19 FY20 FY21E FY22E FY23E Particulars FY18 FY19 FY20 FY21E FY22E FY23E
Revenue from operation 834.7 835.1 717.5 767.9 856.8 918.8 Source of Funds
Other Income 112.40 40.40 72.50 58.00 69.60 83.52 Equity Capital 63.7 63.8 63.9 63.9 63.9 63.9
Total Income 947.1 875.5 790.0 825.9 926.4 1002.3 Reserve& Surplus 559.5 667.1 815.9 1010.7 1250.6 1519.7
Employee expense 210.9 256.6 221.1 199.0 209.0 219.4 Networth 623.2 730.9 879.8 1074.6 1314.5 1583.6
Borrowings 1012.8 660.5 405.6 405.6 425.9 447.2
Finance cost 144.5 114.5 102.1 46.0 50.5 55.6
Other Liability 1225.8 1658.5 1148.2 1182.7 1241.8 1303.9
Depreciation 36.5 41.9 55.3 47.0 47.5 48.0
Total 2861.8 3049.9 2433.6 2662.9 2982.2 3334.7
Other expenses 275.9 204.5 211.5 270.7 295.1 315.8
Total Expense 667.8 617.5 590.1 562.7 602.1 638.7
Application of Funds
Profit Before Tax 279.3 258.0 199.9 263.2 324.3 363.6
Fixed Asset 583.9 469.8 497.2 472.3 425.1 382.6
Tax 92.9 86.6 53.0 68.4 84.3 94.5
Investment 159.5 139.6 230.9 254.0 279.4 307.4
Profit After Tax 180.6 172.1 232.1 194.8 240.0 269.1
Advances 81.6 433.2 24.3 29.2 43.8 65.7
Exceptional Item 0.0 0.0 0.0 0.0 0.0 0.0
Cash 855.3 1065.0 1027.2 924.5 832.0 748.8
PAT post excp item 180.6 172.1 232.1 194.8 240.0 269.1
Other Asset 1181.6 942.3 654.0 982.9 1401.9 1830.3
EPS 5.67 5.39 7.26 6.09 7.51 8.42 Total 2861.8 3049.9 2433.6 2662.9 2982.2 3334.7
Exhibit 33: Key Ratios Exhibit 34: Growth Ratios (%)

Particulars FY18 FY19 FY20 FY21E FY22E FY23E Growth (%) FY19 FY20 FY21E FY22E FY23E
ADTO (| crore) 13990 17710 21090 28367 31704 33421 Total Asset 7 -20 9 12 12
Market Share (%) 2.0 1.8 1.5 1.0 1.2 1.2 Advances 431 -94 20 50 50
Yield (%) 0.015 0.012 0.007 0.007 0.007 0.007 Borrowing -35 -39 0 5 5
ROE (%) 29.0 25.4 28.8 19.9 20.1 18.6 Total Income -8 -10 5 12 8
No of Shares (crore) 31.9 31.9 32.0 32.0 32.0 32.0 Operating expense -8 -4 -5 7 6
EPS (|) 5.7 5.4 7.3 6.1 7.5 8.4 Net profit -5 35 -16 23 12
PE (x) 9.7 10.2 7.6 9.0 7.3 6.5 Book Value 17 20 22 22 20
Book Value (|) 19.6 22.9 27.5 33.6 41.1 49.5 EPS -5 35 -16 23 12
P/BV (x) 2.8 2.4 2.0 1.6 1.3 1.1
Pat margin (%) 19.1 19.7 29.4 23.6 25.9 26.8
CI Ratio (%) 70.5 70.5 74.7 68.1 65.0 63.7
Mcap/Sales (x) 1.1 1.2 1.3 1.3 1.1 1.0

Geojit Financial Services(GEOBNP)
CMP: | 57 Target: |62 (9%) Period: 12 months HOLD
March 17, 2021
Modest overall performance

Geojit Financial Services is an investment service company in India with
presence in middle east via subsidiaries, JVs and partnerships and has total
Company Update
of 464 offices throughout India and Middle East.
Particulars
Good set of numbers but lacks the vigour on few parameters Amount
For Q3FY21, the company posted healthy operating performance on yearly Market Capitalisation | 1259 crore
basis but lacked momentum on sequential basis. Total revenues increased Networth | 567 crore
by 36.4% YoY to | 98.5 crore, led by 56.4% YoY rise in brokerage income.
52 week H/L 63/15
Expenses were kept under control and they increased 10% YoY and as a
result PAT showed YoY uptick of ~95% to | 27.7 crore, however, on QoQ Face Value |1
basis it reported a 7.2% decline owing to 4% QoQ decline in revenues. DII Holding (%) 0.0
Overall ADTO increased by 27.9% QoQ to | 3234 crore, primarily due to FII Holding (%) 1.6
37% QoQ rise in derivative ADTO while in cash segment growth was muted Promoter Holding (%) 62.2
at 2.3% sequentially. Relatively slower accretion in ADTO has led to
Others (%) 36.2
sequential decline in market share (calc) from 0.16% to 0.10%.
The company added 12,700 new customers in Q3FY21 which was lesser as
compared to 13300 in Q2FY21. Total customer count now stands at 10.8
Key Highlights
lakh. As a result of slower growth in cash segment ADTO, overall yields
declined from 0.043% to 0.033% QoQ. Equity and related income which  Overall ADTO growth healthy at
forms 74% of total income was up 45% YoY but down 8% QoQ. While 27.9% QoQ
financial product income, mainly through mutual fund distribution, was up  New customer addition steady at

12700 in Q3FY21
by 9% QoQ. Mutual fund AUM increased by 15.6% YoY to | 7983 crore, in
which equity schemes saw uptick of 20.9% YoY to | 5312 crore.  Maintain Hold with revised target
price of | 62 per share
Geographical focus, customer stickiness remain strength
Geojit has been focused in terms of target customers and geography.
Geography wise, ~60% of business is driven by South India with focus on
Kerala and Tamil Nadu. Middle & upper middle class remain target customer Risk to our call
base. Focus on client relationship through branches leads to higher
customer stickiness. Continued focus on targeted customer acquisition,
 Downside- Decline in equity yields
could impact profitability
personalised service through branches, cash business would enable
customer stickiness and thereby revenue.
 Upside – Better than expected pick
up in client addition could boost
performance.
Valuation & Outlook
Geojit remains a small player in terms of clientele with acquisition pace
lagging behind larger peers. Continued focus on targeting middle, upper
middle-class customers and engaging in personalised service would enable
better stickiness. However, fierce competition from discount broker acts as Research Analyst
a deterrent in incremental client addition as well as business volume. Kajal Gandhi
Harnessing client relationship, distribution of financial products remains one kajal.gandhi@icicisecurities.com
of the focus areas seen to garner fee income. We expect earnings to grow
Vishal Narnolia
at ~12% CAGR in FY21-23E to | 148 crore. Given uptick in business volume, vishal.narnolia@icicisecurities.com
we revise our target price to | 62 (earlier |46), valuing the company at 10x
FY23E EPS and maintain our Hold rating on the stock. Sameer sawant

ADTO (| crore) 1936 2173 2837 3091 3352 8.7%
Market Share (%) 0.19 0.15 0.10 0.12 0.12
Revenue (| crore) 265 305 398 430 468 8.4%
Net Profit (| crore) 29.2 50.9 118.5 131.5 147.9 11.7%
EPS (|) 1.2 2.0 5.0 5.5 6.2
P/E (x) 46.6 28.9 11.5 10.3 9.2
P/BV (x) 3.3 2.4 2.0 1.7 1.4
RoE (%) 6.9 10.4 18.9 17.5 16.6
ssesessssss
s

Company Update |Geojit Financial Services ICICI Direct Research
Snapshot of company
Exhibit 36: ADTO growth trend over the years

4000 32% 35%
28%
23% 21% 25% 24% 23% 30%
3000 22% 23% 22%
18% 25%
(| crore)
20%
2000
15%
1000 10%
5%
0 448 449 397 475 489 690 704 720 704 739 776 0%
Cash Derivative
Exhibit 37: Market ADTO increased at higher pace relatively

0.25
0.19
0.20 0.17
0.16 0.15 0.15 0.15
0.15 0.12 0.12 0.12
(%) 0.10 0.10
0.10
0.05
0.00
Exhibit 38: Revenue breakup

FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Brokerage Income 185 224 186 236 339 361 383
Distribution Income 24 45 43 38 41 47 59
Others 35 35 36 31 18 21 25
120 18000
16000
100
14000
80 12000
10000
60
8000
40 6000
4000
20
2000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Sep-18
Sep-19
Sep-20
Geojit Nifty Index
ICICI Securities |Retail Research 16

Company Update |Geojit Financial Services ICICI Direct Research
Financial Summary
Exhibit 40: Profit & Loss (| crore) Exhibit 41: Balance sheet (| crore)
Particulars FY19 FY20 FY21E FY22E FY23E Particulars FY19 FY20 FY21E FY22E FY23E
Revenue from operation 264.9 305.3 397.6 429.9 467.5 Source of Funds
Equity Capital 23.8 23.8 23.8 23.8 23.8
Other Income 20.2 1.0 10.0 11.5 13.2
Reserve& Surplus 385.0 543.6 662.1 793.6 941.4
Finance cost 0.7 2.9 2.9 3.5 4.2
Networth 408.9 567.4 685.9 817.4 965.3
Depreciation 13.7 25.0 26.0 28.6 31.4
Borrowings 2.4 18.2 25.5 33.2 43.2
Other expenses 113.9 94.6 108.8 116.4 124.5 Other Liability 292.2 323.0 339.2 356.1 373.9
Total Expense 229.6 232.3 249.6 266.0 283.6 Total 703.6 908.7 1050.6 1206.7 1382.4
Profit Before Tax 55.5 74.1 158.0 175.4 197.1

Tax 18.8 18.7 39.5 43.8 49.3 Application of Funds
Fixed Asset 66.4 72.3 79.5 87.5 96.2
Profit After Tax 29.2 50.9 118.5 131.5 147.9
Investment 45.0 104.6 115.1 126.6 139.2
EPS 1.2 2.0 5.0 5.5 6.2
Advances 172.5 21.7 22.8 25.1 27.6
Cash 204.9 136.0 149.6 164.6 181.0
Other Asset 214.8 574.0 683.6 803.0 938.3
Total 703.6 908.7 1050.6 1206.7 1382.4
Exhibit 42: Key Ratios Exhibit 43: Growth Ratios (%)

Particulars FY19 FY20 FY21E FY22E FY23E Growth (%) FY19 FY20 FY21E FY22E FY23E
ADTO (| crore) 1936 2173 2837 3091 3352 Total Asset 5 29 16 15 15
Derivative (| crore) 1488 1684 2133 2352 2576 Advances 11 -87 5 10 10
Cash (| crore) 448 489 704 739 776 Borrowing -47 645 40 30 30
Market Share (%) 0.2 0.2 0.1 0.1 0.1 Total Income -15 7 33 8 9
Yield (%) 0.040 0.045 0.048 0.047 0.046 Operating expense -1 1 7 7 7
ROE (%) 6.9 10.4 18.9 17.5 16.6 Net profit 57 74 133 11 12
No of Shares (crore) 23.8 23.8 23.8 23.8 23.8 Book Value -6 39 21 19 18
EPS (|) 1.2 2.0 5.0 5.5 6.2 EPS -57 61 152 11 12
PE (x) 46.6 28.9 11.5 10.3 9.2 Source: Company, ICICI Direct Research
Book Value (|) 17.2 23.8 28.8 34.3 40.5

P/BV (x) 3.3 2.4 2.0 1.7 1.4
Pat margin (%) 10.2 16.6 29.1 29.8 30.8
CI Ratio (%) 80.5 75.8 61.2 60.3 59.0
Mcap/Sales (x) 4.9 4.6 3.4 3.2 2.9
ICICI Securities |Retail Research 17

5paisa Capital (5PACAP)
CMP: | 280 Target: | 350 (25%) Target Period: 12 months BUY
March 17, 2021
Mixed bag performance

5Paisa reported a mixed bag performance with profitability remaining intact
but pace of customer addition was slightly slower sequentially. Revenue
Company Update
growth came in strong at 84% YoY to | 49 crore in Q3FY21, largely led by
Particulars
improving brokerage and cross sale income. Customer addition on yearly
Amount
basis was robust as total customers increased by 171% YoY and 20% QoQ,
however, this pace was slightly lower as compared to previous quarter. Market Capilatisation | 716 crore
ADTO increased 43% YoY and 27% QoQ to | 44756 crore, ADTO rise in Networth | 144 crore
commodity and FNO segment was healthy at 22.7% QoQ and 28.1% QoQ 52 week H/L 467 /93
respectively. Regulatory changes, effective from October 2020, impacted
Face Value | 10
business volumes in the month, affecting quarterly trajectory. Opex during
the quarter increased 49% YoY but declined 4.7% QoQ and as a result of DII Holding (%) 0
operating leverage the company posted a profit of | 3.7 crore versus a loss FII Holding (%) 17.5
of | 2.2 crore YoY. Promoter Holding (%) 34.6
Others (%) 47.9
Business outlook improving es
Covid-19 led lockdown with lower fixed brokerage and user-friendly mobile Key Highlights
apps supported the ongoing pace of aggressive client acquisition. In  Customer addition during the
Q3FY21, customer addition surged to 1.90 lakh taking total customer base quarter was at 1.9 lakh and total
to 11.4 lakh compared to ~5.4 lakh as of March 2020. Led by lower customer base increased 20%
QoQ
brokerage, active client to total client at 69% is better compared to traditional
brokers. While client acquisition remained robust, ADTO also has picked up  ADTO declined 27% QoQ to |

44756
since past two quarters. Going ahead, increasing pace of customer
acquisition & improving market share is seen improving ADTO to | 68692  Upgrade from Hold to Buy with
revised target price of | 350
crore by FY23E.
Robust client addition to aid business growth ahead Risk to our call
The company witnessed robust revenue growth of 84% YoY largely led by  Regulatory changes could
improving ADTO & increasing client base. The company is 6th largest broker impact volumes and thereby
as on December 2020 with around 7.9 lakh active clients. Retail cash ADTO earnings in near term
market share is at 5.6%. Going ahead, technology and new marketing  Moderation in client accretion or
strategies is expected to keep the pace of customer acquisition robust with high leakage remains a risk for
earnings growth
substantial proportion of first time customers (84% of incremental clients)
from tier II and beyond cities (currently forms 88% of clients).
Valuation & Outlook Research Analyst
Robust client addition and increasing volume have been aiding business in Kajal Gandhi
the past few years. Healthy run up in equities have propelled business kajal.gandhi@icicisecurities.com
momentum further. Rise in revenue may outpace growth of higher customer
acquisition cost, thus keeping earnings momentum healthy. With operating Vishal Narnolia
vishal.narnolia@icicisecurities.com
leverage kicking in, we expect PAT to grow at 72% CAGR from FY21E-FY23E
to | 43.8 crore in FY23E. Accordingly, RoE is seen to rise at ~22% in FY23E. Sameer Sawant
while pick up in newly introduced products including P2P lending and Sameer.sawant@icicisecurities.com
subscription based services remains positive, impact of regulatory changes
including increase in margin requirements and customer burnout ratio
and/or leakage remains under watch. Given robust growth prospects and
increasing profitability, we value the business at 21x FY23E EPS at | 350.
Consequently, upgrade rating from Hold to Buy.
sseses

ADTO (| crore) 14025 30150 47278 52840 65945 18.1%
Market Share (%) 1.4 2.1 1.7 2.0 2.4
Revenue from operation (| crore) 62.6 108.1 190.0 243.3 327.4 31.3%
Net Profit (| crore) -16.6 -7.2 14.8 21.7 42.8 70.3%
EPS (|) -13.0 -3.4 5.8 8.5 16.8
P/E (x) -21.5 -82.6 48.3 32.9 16.7
RoE (%) -30.3 -7.8 10.1 13.2 21.8
s

Company Update | 5paisa Capital ICICI Direct Research
Story in Charts
Exhibit 45: Quarterly ADTO trend
50000 44756
45000
40000 35267
34129
35000 31373
28497 27644
30000 26405
| crore
25000
20000
15000
10000
5000
0
ADTO
Exhibit 46: Robust growth in client acquisitions

1400000
1147000
1200000
956000
1000000
800000 710000
Nos.
600000 542000
424000
400000 324000
248000
200000
0
Total customers

Exhibit 47: Stable revenue growth Exhibit 48: Improved cost to income ratio
1400000 350 319
1147000
1200000 300 269
956000
1000000 250
800000 710000 200

Nos.
(%)
542000 136
600000 150
424000 109
90 88 82
400000 324000 100
248000
200000 50
0 0
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 FY17 FY18 FY19 FY20 FY21E FY22E FY23E
Total customers Cost To Income Ratio
Exhibit 49: Healthy client acquisition aiding ADTO growth

65945
70000
60000 52840
47278
50000
| crore
40000 30150
30000
20000 14025
7040
10000
0
FY18 FY19 FY20 FY21E FY22E FY23E
ADTO
500 18000
450 16000
400 14000
350 12000
300 10000
250
200 8000
150 6000
100 4000
50 2000
0 0
Mar-18
Mar-19
Mar-20
Mar-21
Sep-18
Sep-19
Sep-20
5PAISA Nifty Index

Financial Summary
Exhibit 51: Profit & Loss (| crore) Exhibit 52: Balance Sheet (| crore)
Particulars FY19 FY20 FY21E FY22E FY23E Particulars FY19 FY20 FY21E FY22E FY23E
Total Income 62.6 108.1 190.0 243.4 327.4 Source of Funds
Employee expense 25.8 29.1 36.4 43.7 52.5 Equity Capital 12.7 25.5 25.5 25.5 25.5
Finance cost 6.8 15.2 21.4 25.0 28.7 Reserve& Surplus 33.6 112.8 127.6 149.2 192.0
Networth 46.4 138.3 153.0 174.7 217.5
Depreciation 1.4 3.8 4.4 5.3 6.4
Borrowings 92.0 219.2 252.1 277.3 318.9
Other expenses 51.0 69.6 107.9 140.3 182.4
Other Liability 143.2 270.0 297.0 326.7 424.7
Total Expense 85.1 117.8 170.2 214.3 269.9
Total 281.5 627.5 702.1 778.7 961.1
Profit Before Tax -22.5 -9.6 19.8 29.1 57.5
Tax -5.9 -2.4 5.1 7.4 14.7
Application of Funds
Profit After Tax -16.6 -7.2 14.8 21.7 42.8
Fixed Asset 2.3 1.7 1.7 1.8 1.9
EPS (-13.0) (-3.4) 5.80 8.50 16.81 Investment 2.1 10.9 12.0 13.2 14.6
Advances 36.8 67.1 201.2 301.8 452.7
Cash 113.0 270.5 351.6 457.1 479.9
Other Asset 127.3 277.3 135.5 4.7 12.0
Total 281.5 627.5 702.1 778.7 961.1
Exhibit 53: Key Ratios (| crore) Exhibit 54: Growth (%)

Particulars FY19 FY20 FY21E FY22E FY23E Growth (%) FY19 FY20 FY21E FY22E FY23E
ADTO (| crore) 14025 30150 47278 52840 65945 Total Asset 115 123 12 11 23
Market Share (%) 1.4 2.1 1.7 2.0 2.4 Advances 1 82 200 50 50
Yield (%) 0.002 0.001 0.001 0.001 0.001 Borrowing 470 138 15 10 15
ROE (%) -30.3 -7.8 10.1 13.2 21.8 Total Income 219 73 76 28 35
No of Shares (crore) 1.3 2.5 2.5 2.5 2.5
Operating expense 61 38 45 26 26
EPS (|) -13.0 -3.4 5.8 8.5 16.8
Net profit NA NA NA 47 98
PE (x) -21.5 -82.6 48.3 32.9 16.7
Book Value -26 49 11 14 25
Book Value (|) 36.4 54.3 60.1 68.6 85.4
EPS NA NA NA 47 98
P/BV (x) 7.7 5.2 4.7 4.1 3.3
Pat margin (%) -26.5 -6.7 7.8 8.9 13.1 Source: Company, ICICI Direct Research
CI Ratio (%) 135.9 108.9 89.6 88.1 82.4

Mcap/Sales (x) 11.7 6.8 3.8 3.0 2.2

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks
according to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and
Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts'
valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com
ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
ICICI Securities | Retail Research

ANALYST CERTIFICATION
I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA and Sameer Sawant, MBA Research Analysts Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is
also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of
the companies mentioned in the report.
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ICICI Securities | Retail Research

Indian Brokerage Industry Insights: Shift to Flat Fee Models and Rising Client Addition

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Indian Brokerage Industry Insights: Shift to Flat Fee Models and Rising Client Addition

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Indian Brokerage Industry

March 17, 2021

Buoyant capital markets aid industry players to flourish Updates on…

ICICI Securities – Retail Equity Research

ICICI Securities | Retail Research 2

Angel Broking Market share of active clients %

Industry ADTO on a surge

Exhibit 5: Increasing industry ADTO trajectory

F&O ADTO Cash ADTO

Source: NSE, ICICI Direct research

ICICI Securities | Retail Research 3

Exhibit 6: Player wise ADTO market share

Exhibit 7: Player wise ADTO absolute numbers

Industry 1254300 1454607 1440590 1580433 1456420 2122642 3113193

New Peak margin rules could hurt volumes

ICICI Securities | Retail Research 4

Exhibit 8: Product impact of margin regulation

Exhibit 9: Margin funding book of various players

Few more important regulatory changes…..

Digitization has led to geographical diversification of customers

ICICI Securities | Retail Research 5

Though there is no direct aggregate data available on number of customers’

Exhibit 11: Tier-2 client addition brokerage wise

ICICI Securities | Retail Research 6

Change in brokerage plans in recent times

Recently Sharekhan has come up with a discount broking plan called

Exhibit 13: Sharekhan Espresso discount brokerage plan

Exhibit 14: Angel discount brokerage plan

ICICI Securities | Retail Research 7

Broking business gaining traction

ICICI Securities – Retail Equity Research

 Extended impact of pandemic can

Source: Company, ICICI Direct Research

Exhibit 16: Diversified revenue mix

Source: Company, ICICI Direct Research

Exhibit 17: EBITDA margin, PAT margin trend

Exhibit 18: RoE to improve, going ahead

ICICI Securities | Retail Research 9

Exhibit 19: Price Chart

Source: Company, ICICI Direct Research

Exhibit 20: SOTP valuation

Holding company discount 15% 15%

ICICI Securities | Retail Research 10

Total Revenue 2,677 2,613 3,514 4,279 4,608 Sources of Funds

Operating Cost 1,543 1,327 1,455 1,772 1,928

Fixed assets 300 273 273 273 273

Investment 2690 3089 2720 2720 2856

ICICI Securities | Retail Research 11

Soft Q3, but business growth to pick-up

ICICI Securities – Retail Equity Research

Key Financial Summary

Institutional 123.6 138.5 130.8 159.3 20% 100

D istribution 102.7 154.4 180.4 154.7 20% 50

IB 36.1 82 33.4 33.4 4% 0

Exhibit 30: Price Chart

IIFL Securities Nifty Index

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 13

Exhibit 33: Key Ratios Exhibit 34: Growth Ratios (%)

ICICI Securities | Retail Research 14

Modest overall performance

ICICI Securities – Retail Equity Research