The tighter index derivatives trading norms will likely lead to an adverse impact of 13-14% on net income from clients, Angel One said in its post-earnings call on Tuesday. However, the brokerage is hopeful of offsetting the impact in a couple of quarters with its current customer acquisition run rate.
SEBI has introduced stricter norms for trading in index options. Changes include a three-time increase in minimum contract size, reduction in number of weekly derivative expiry to one per exchange and upfront collection of option premium.
“We estimate that the impact will roughly be in the region of around 13-14% of net income that we get from customers,” said Dinesh Thakkar, chairman and MD of Angel One.
“Our data science team has worked out a bit complex kind of metrics, (through) which we are able to extrapolate…” Angel One said.
Earlier, Zerodha had said it anticipates a 30-50% hit to its top line due to the new F&O norms. However, it did not specify the impact on its net income.
The growth rate in the customer base, which continues to be in the region of 50-60% for digital players, including us, will continue, Thakkar said, adding that this will help the company offset the impact of new norms in a couple of quarters.
Angel One acquired 3 million new customers in July-September, taking its total client base to 27.5 million. It reported total revenues of Rs 1,510 crore and a net profit of Rs 420 crore. The strong Q2 performance pushed its stock to eight-month high of Rs 3,250.90 on Tuesday. It closed 18.4% higher to Rs 3,222.
The company said SEBI’s new measures could “fortify the market in the long run”. “What is important is that the intent of SEBI is to reduce losses of retail audience… If they’re able to achieve that, lifetime value of a customer is going to increase. There can be impact on revenue from a customer in a week or a month or two. But, if we work on a business metrics of cost to acquisition to lifetime value, that is not going to change,” Thakkar said.
The company also spoke about prospects of cross-selling as it introduces multiple products on its platform in a bid to transform the broking app to a super app. “As we are introducing multiple products… we will be able to sell more products to the same customer. So, overall, we are expecting that we will be able to get more wallet share from the same customer.”
The MD said the wealth management business will likely break even within three years.