Angel Broking IPO opens for subscription: Should you subscribe? Check valuation, price, other details

The IPO frenzy on Dalal Street is set to continue with Angel Broking’s public offering set to open for subscription today. The Rs 600- crore IPO, which includes a fresh issue of Rs 300 crore and an Offer For Sale (OFS) of Rs 300 crore from existing shareholders, enters the market when two IPOs from different sectors are already witnessing a positive response from the street. Angel Broking, one of the biggest retail broking houses in India, Yesterday, ahead of the IPO, the firm managed to raise Rs 179.99 crore from 26 anchor investors, allocating 58,82,352 equity shares.

IPO details

Angel Broking’s IPO will open today and investors can subscribe to the issue for the next three day, at a price of Rs 305-306 per equity share of face value Rs 10 each. The OFS will include sale of equity shares worth Rs 120 crore from International Finance Corporation (IFC). Pre issue the promoter & promoter group holds 55.20% stake in the company, this will come down to 47.67% post issue. Promoters Ashok D. Thakkar and Sunita A. Magnani will be selling part of their stake in the company. Angel Broking will receive Rs 300 crore from the issue of fresh shares, which the broking house said it would use for working capital management and general corporate purposes. Investors can purchase shares in a bid lot of 49 equity shares. 

The broking business

Indian households still have one of the lowest exposure to equity markets when compared to global peers. India’s contribution to the world share market capitalization is also very low, analysts say this means Angel Broking, which is already a major player in the broking business has enough market to add to its large customer base. Angel Broking has over 9 lakh NSE active clients at the end of August this year which places it fourth,  behind only Zerodha, ICICI Securities, and RKSV Securities. Brokerage income, in the first quarter of this fiscal year, contributed 74.69% to Angel Broking’s total revenue from operations. 

Financials

The company has seen dipping operating revenue. In financial year 2018, operating revenue stood at Rs 764 crore, in the next year it was down Rs 757 crore, and in the previous fiscal year it was Rs 726 crore. However, net profit moved upwards between the last two financial years. Angel Broking has cash balance and bank balance at Rs 613 crore at the end of financial year 2020. The company’s client base has increased by 36.81% CAGR from 1.06 million in FY18 to 2.15 million at the end of the first quarter of this fiscal year. 

What do experts say?

“We believe ABL to keep posting strong customer acquisition numbers going forward, however its strategy to keep brokerage low to compete with discount brokerages could keep profitability under pressure,” said Choice Broking in a note. The company’s IPO is priced at ~26.84x FY20 earnings at the upper price band of Rs 306 per share, said brokerage firm Anand Rathi. Analysts at Choice Broking recommend subscribing to the issue. Analysts at Anand Rathi too recommend subscribing. “Angel Broking is valued at a price to earnings multiple of 26.6 times which is slightly higher than expected. The company is well placed when compared to its peers and hence we recommend market participants to subscribe to this IPO too for listing gains only,” said Nirali Shah, Senior Research Analyst, Samco Securities.