Despite a strong IPO season, the stock of Angel Broking Ltd, one of the largest retail brokers in India, listed with a discount of about 10 per cent to the issue price on Monday. The stock made its debut at Rs 275 versus its issue price of Rs 306 a share on the National Stock Exchange. The company’s share marked an intraday high of Rs 296.7 and an intraday low of Rs 257. At 14:30 hrs on Monday, the company was trading around the listing price of Rs 275.

While the stock seemed quite expensive at the issue price, with the then price-earnings multiple of 30 (post-issue) its FY20 earnings, the valuation has dropped to about 27 considering the listing price.

Even at the current price levels, the stock seems unattractive as its other listed peers such as ICICI Securities that are is comparatively cheap or with better financial metrics.

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The IPO of Angel Broking is open for subscription from September 22- 24. At the price band of ₹305-₹306, Angel Broking discounts its FY20 pre-issue earnings by about 26 times (30 times post-issue). The company is valued at nearly ₹2,500 crore at this price.

Angel Broking, which was a traditional full-service broking house has moved towards online-based broking by introducing zero brokerage in equity delivery and low flat charges in derivatives segment. Though the prospects seem sanguine considering the company’s healthy client additions, focus on online client acquisition and growing Internet penetration in India, profitability can come under pressure because of very low brokerage fee and stiff competition from existing players as well as new entrants.

Even before the launch of ultra low brokerage structure, the company has been witnessing a decline in profitability. Operating profit margin declined from 21 per cent in FY18 to 16 per cent in FY20.

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