Business Profile of the Anand Rathi Share and Stock Brokers Limited
Having more than thirty years of expertise, Anand Rathi is a full-service brokerage business in India providing broking services, MTF facility, and financial product distribution under its brand name. The company serves a wide range of customers in retail, HNI, ultra-HNI, and institutions. The clientele ranges in age, with 84.86% of active clients as of Sep 30, 2024 being above 30 years of age.
Through its relationship with clients and presence on digital platforms, the company also offers third party financial products including schemes of mutual funds, alternative investment funds, structured products, corporate fixed deposits, non-convertible debenturies and bonds, and portfolio management services. Of peer sets, Anand Rathi had the highest average revenue per client (ARPC) in Fiscal 2024.
Anand Rathi Share and Stock Brokers Limited IPO Objective
As per the draft red hearing prospects, the IPO issue consists only of fresh issue.
- Anand Rathi Share and Stock Brokers IPO offer only has fresh issue of Rs. 745 crores. As per draft, the company majorly aims to utilize IPO proceedings towards funding working capital.
| Particulars | Amount to be funded from the Net Proceeds |
| Funding long-term working capital requirements of company | 5500 |
| General corporate purposes | XXXX |
(₹ Million)
IPO Details of Anand Rathi Share and Stock Brokers Limited:
| IPO Open Date | N.A. |
| IPO Close Date | N.A. |
| Basis of Allotment | N.A. |
| Listing Date | N.A. |
| Face Value | ₹5 per share |
| Price | N.A. |
| Lot Size | N.A. |
| Total Issue Size | XXXX equity shares |
| (aggregating up to ₹7, 450.00 Million) | |
| Fresh Issue | XXXX equity shares |
| (aggregating up to ₹7, 450.00 Million) | |
| Offer For Sale | NIL |
| NIL | |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE & NSE |
| QIB Shares Offered | Not more than 50% of the Net Issue |
| Retail Shares Offered | Not less than 35% of the Net Issue |
| NII (HNI) Shares Offered | Not less than 15% of the Net Issue |
Issue Price & Size: Anand Rathi Share and Stock Brokers Limited IPO
The issue price of Anand Rathi Share And Stock Brokers Limited hasn’t been released yet. Upon releasing the dates, the investors can bid between those price ranges. The company only has fresh issue of Rs. 745 crores.
Launch Date of Anand Rathi Share and Stock Brokers Limited IPO
Only the Draft prospectus of Anand Rathi Share and Stock Brokers has been published, therefore opening date of Anand Rathi IPO hasn’t been officially announced. Upon the declaration of opening date investor can bid for IPO.
Anand Rathi Share and Stock Brokers Limited Financial Statements
| Particulars | 6 months ended September 30, 2024 | FY24 | FY23 | FY22 |
| Revenue from Operations | ||||
| Interest Income | 1498.21 | 2150.82 | 1312.05 | 929.6 |
| Fees and Commission Income | 2916.44 | 4666.87 | 3360.52 | 3303.4 |
| Net gain on fair value changes | 2.53 | 0.19 | 5.69 | 0.65 |
| Total Revenue from Operations | 4417.18 | 6817.88 | 4678.26 | 4233.65 |
| Other income | 6.78 | 14.68 | 8.77 | 4.17 |
| Total Income | 4423.94 | 6832.56 | 4687.03 | 4237.82 |
| Expenses | ||||
| Finance Costs | 649.54 | 965.4 | 494.6 | 373.01 |
| Fees and commission expense | 763.55 | 1260.43 | 945.24 | 833.69 |
| Impairment on financial instruments | 17.63 | 1080 | - | 82.15 |
| Employee Benefits Expense | 1379.68 | 2148.21 | 1690.96 | 1444.74 |
| Depreciation and Amortisation Expenses | 111.42 | 201.13 | 154.93 | 131.34 |
| Other Expenses | 641.35 | 1092.6 | 891.39 | 737.01 |
| Total Expenses | 3563.17 | 5678.57 | 4177.12 | 3601.93 |
| Profit before tax | 860.77 | 1153.99 | 509.91 | 635.89 |
| Profit for the Year | 636.56 | 772.9 | 377.45 | 507.99 |
| Particulars | 6 months ended September 30, 2024 | FY24 | FY23 | FY22 |
| Operating metrics: | ||||
| Total number of clients | 852085 | 758214 | 669602 | 604711 |
| Active Clients | 172091 | 175699 | 154470 | 154109 |
| Growth in Active Clients (%) | - | 13.74% | 0.23% | 9.03% |
| Active clients as a % of Total clients | 20.20% | 23.17% | 23.07% | 25.48% |
| Average tenor of client relationship | ||||
| Up to 1 year | 38048 | 32538 | 23782 | 27119 |
| 1 to 3 years | 30685 | 35255 | 33899 | 28397 |
| 3 to 5 years | 20350 | 20337 | 18174 | 25247 |
| More than 5 Years | 83008 | 87569 | 78615 | 73346 |
| Age-Wise Mix of Active Clients | ||||
| <30 Years | 19590 | 19281 | 17055 | 17450 |
| 30 - 44 years | 57861 | 37058 | 31789 | 30939 |
| 45 - 60 years | 52029 | 60071 | 54265 | 54598 |
| > 60 years | 36139 | 53120 | 46004 | 45853 |
| Other than Individual | 6472 | 6169 | 5357 | 5269 |
| ARPC (in ₹) | 20727 | 30922 | 26012 | 26386 |
| Margin Trading Facility Book | 7714.66 | 6172.93 | 3766.38 | 3046.62 |
| Growth in Margin Trading Facility Book | 24.98% | 63.90% | 23.62% | 190.33% |
| Total Assets Under Distribution | ||||
| Mutual Funds | 53805.7 | 39614.56 | 26575.49 | 24440.41 |
| Portfolio management services and Alternative Investment Funds | 13957.61 | 9431.34 | 4996.51 | 3282.61 |
| Number of fundamental research reports | 539 | 915 | 801 | 838 |
| Number technical research calls | 1079 | 2113 | 1812 | 2900 |
| Strength of research team | 60 | 47 | 37 | 38 |
| Financial metrics: | ||||
| Revenue from Operations | 4417.18 | 6817.88 | 4678.26 | 4233.65 |
| Growth in Revenue from Operations | N.A. | 45.74% | 10.50% | 39.90% |
| EBITDA | 1614.97 | 2305.84 | 1150.67 | 1136.07 |
| EBITDA Margins | 36.56% | 33.82% | 24.60% | 26.83% |
| PAT | 636.56 | 772.9 | 377.45 | 507.99 |
| PAT Margins | 14.39% | 11.31% | 8.05% | 11.99% |
| ROE | 14.92% | 23.50% | 15.32% | 28.66% |
| ROCE | 10.75% | 21.48% | 16.72% | 24.60% |
| Revenue Mix (Segment Wise) | ||||
| Broking and related services | 2904.82 | 4578.12 | 3172.67 | 3061.01 |
| Interest on Margin Trading Facility | 554.63 | 759.25 | 542.16 | 328.66 |
| Distribution | 338.62 | 563.94 | 507.73 | 391.62 |
| Other Income from Operations | 619.11 | 916.57 | 455.7 | 452.36 |
| Revenue from Operations Mix | ||||
| Revenue from own branches | 2617.18 | 4016.26 | 2837.06 | 2605.64 |
| Revenue from Authorised Persons | 1180.89 | 1885.05 | 1385.5 | 1175.65 |
Anand Rathi Share and Stock Brokers Limited Promoters & Shareholding
As of date, there are four promoters of the company, i.e. Anand Nandkishore Rathi, Pradeep Navratan Gupta, Priti Pradeep Gupta, and Anand Rathi Financial Services Limited. The promoter in aggregate holds 100% of the paid-up share capital of company.
| Name of the Promoter | No. of Equity Shares | % of the pre- Issue Equity capital |
| Anand Rathi Financial Services Limited | 4,43,55,408 | 100 |
Should You Subscribe to Anand Rathi Share and Stock Brokers Limited IPO or Not
While investing or subscribing to any IPO, consider the investment rationales related to the company. Hence, here you can find out the strength of the company that will be its growth factors. And also check the risk factors that can affect the growth and operational efficiency of the company.
Competitive Strengths of Anand Rathi Share and Stock Brokers Limited:
Highest ARPC amongst peer set
During FY24, company had the highest ARPC amongst its peers. This high ARPC is attributed to client vintage, average age profile of clients, and personalized client management approach. As of Sep 30, 2024, 60.06% of our Active Clients had a vintage of more than 3 years, while 48.23% had a vintage of more than 5 years. Their demographic profile includes clients aged 30-59 years and above, who typically have a higher investible corpus and require multiple product offerings and advise. As of Sep 30, 2024, 146,029 of Active Clients were above 30 years of age, with 84.86% of them being above 30 years of age.
| Avg. tenor of relationship with Active Clients | No. of Active Clients as at | |||
| 6-Mon Sep 30, 2024 | FY24 | FY23 | FY22 | |
| Up to 1 year | 22.11% | 18.52% | 15.40% | 17.60% |
| 1 year to 3 years | 17.83% | 20.07% | 21.95% | 18.43% |
| 3 year to 5 years | 11.83% | 11.57% | 11.77% | 16.38% |
| More than 5 years | 48.23% | 49.84% | 50.88% | 47.59% |
| Age Category | % Active Clients | % Age wise AUC |
| Individuals | ||
| < 30 years | 11.38% | 2.07% |
| 30 - 44 years | 33.62% | 9.95% |
| 45 - 59 years | 30.24% | 23.53% |
| > 60 years | 21.00% | 31.72% |
| Other than individuals | 3.76% | 32.73% |
Full service brokerage house
The company's revenue from operations consists of broking and related services (Broking Segment) and non-broking services (margin trading facility and distribution of investment products). The company has been diversifying its offerings by increasing income from distribution of financial products, such as mutual funds. With people risings standards, more people enrolling for formal sector jobs, the mutual fund industry will continue to expand will rising investors base. The Non-Broking Segment's revenue has outperformed the Broking Segment's growth over the last three years, with a CAGR of 35.54%. AUM in the Non-Broking Segment has grown from Rs. 27,723.02 million to Rs. 49,045.90 million, representing a CAGR of 33.01%.
| Particulars | 6 months ended September 30, 2024 | FY24 | FY23 | FY22 |
| % of revenue from operations | ||||
| Broking Segment | 65.76% | 67.15% | 67.82% | 72.30% |
| Non-Broking Segment | 20.22% | 19.41% | 22.44% | 17.01% |
| Other income from operations | 14.02% | 13.44% | 9.76% | 10.68% |
Pan India presence
As of September 30, 2024, the company offers broking and financial services through 90 branches, 1,123 authorized persons, and online and digital platforms to retail, high net worth individuals, ultra-high net worth individuals, and institutional clients. These platforms automate processes like on-boarding, report generation, and trade execution, allowing relationship managers to acquire and serve more clients. As can be seen table below, the company generate majority of their brokerage income from clients coming from offline channel like through dealers and authorised persons.
| Particulars | 6-Mon ended September 30, 2024 | FY24 | FY23 | FY22 |
| As a % of Brokerage Income | ||||
| On Digital Platform | 37.24% | 36.66% | 30.56% | 28.04% |
| Through dealers and Authorise d Persons | 62.76% | 63.34% | 69.44% | 71.96% |
Future strategies
- Strengthen market position by retaining clients and acquiring new clients with high disposable income, investible surplus, and savings.
- Increase client wallet share through cross-selling varied investment solutions.
- Substantially increase MTF Business to improve client stickiness, consolidate client investments..
- Diversify investment solutions include broking and related services, margin funding facility, and distribution of investment products.
Risk Factors of Anand Rathi Share and Stock Brokers Limited:
Segment contribution
As per the draft prospectus, Anand Rathi largest business vertical is broking Segment, contributing significantly to the revenue. The company also offers clients margin trading facilities to enable them to leverage their collaterals. The income from broking and related services is directly proportionate to trading volume and order size. With rising investors participation, comes stricter regulation. As per SEBI analysis, retail participants lost big chunk of their saving by trading in future and options. If the trend rises, the regulator may introduce stricter framework which might, directly affect brokers business. A decline in investor participation in equity markets, inability to maintain and grow the client base, or service levels not meeting client expectations could adversely affect the Broking and Margin Funding businesses.
| Particulars | 6 Mon ended Sep 30, 2024 | FY24 | FY23 | FY22 |
| % of revenue from operations | ||||
| Broking and related services | 65.76% | 67.15% | 67.82% | 72.30% |
| Interest on Margin Trading Facility Book | 12.56% | 11.14% | 11.59% | 7.76% |
Rapidly evolving market conditions
Anand Rathi operates in an industry that is significantly dependant on the securities market, which in turn is significantly influenced by global macroeconomic factors. Since the aftermath of Covid, benchmark indices have risen significantly, a downturn in the markets could adversely impact trading and investment patterns. The decline could result in decline in trading volumes and clients activity in market.
Charges and summons
Anand Rathi Commodities Limited (ARCL) and several of its directors have been charged under various provisions of law. The company faces a complaint from an investor regarding a payment default of ₹ 56,000 million by National Spot Exchange Limited (NSEL). The EOW registered a first information report in 2013 and filed a fourth supplementary charge sheet against NSEL, its officials, defaulting borrowers, and certain brokers, including ARCL. The Special MPID Court issued summons to ARCL, and the company has challenged the summons in a Criminal Writ Petition. The company has also filed two separate Miscellaneous Application/s, which have been rejected by the MPID Court. The company has filed separate appeals, and the Bombay High Court has stayed the impugned order. Any adverse outcome in these proceedings could have a material adverse effect on the Anand Rathi group's reputation and business, potentially leading to penal action against the company's Corporate Promoter and other directors.
Statutory and regulatory requirements
The company is subject to extensive statutory and regulatory requirements and supervision. Number of exchanges and the regulatory requirement a broker has to full fill includes SEBI, MSEI, MCX, AMFI, NSDL, CDSL, IIBX, India INX, and the Stock Exchanges. Failure to comply with these regulations could result in heavy penalties and action being initiated against the company. The company is also subject to various laws relating to the prevention of insider trading, front running, and other conflicts of interest. Failure to not comply with prescribed regulation brings a broker under regulator sights which damages Brand value and clients trust.
Reliance on Authorised persons
The company's Broking and Margin Funding businesses have been a significant source of revenue, with 1,123 Authorised Persons as of Sep 30, 2024. If these authorised persons are unable to retain their services, the business could be adversely affected. The revenue generated from Authorised person over the past 3 years has been maintained around 27%. The growth in the authorised persons network has contributed to the business's growth, but the company cannot guarantee consistent growth. The company is responsible for the acts of omission and commission of Authorised Persons and their employees, including failures, errors, fraud, operational failure, and non-compliance with laws.
| Particulars | 6 Mon ended Sep 30, 2024 | FY24 | FY23 | FY22 |
| % of revenue from operations | ||||
| Aggregate revenue from Broking Segment and MTF Business | 78.32% | 78.29% | 79.41% | 80.06% |
| Revenue generated from Authorised Persons | 26.73% | 27.65% | 29.62% | 27.77% |
| Brokerage sharing expense | 16.71% | 17.90% | 19.39% | 18.28% |
Liquidity and credit risk
The company faces potential losses due to credit exposures from clients and counterparties, especially in the Broking Segment. This risk arises from receivables from exchange clearing houses and securities sales. The company uses a trading system to settle client positions and adheres to risk management policies. However, difficulties in assessing credit risks may lead to increased non-performing assets. Maintaining adequate liquidity is crucial for operations, particularly in transaction settlement and margin funding. Factors that may adversely affect liquidity include abrupt increases in brokerage services, volatile markets, and large transaction settlements.
Research
As of Sep 30, 2024, their research team consists of 60 employees, covers 318 companies across sectors. They provide recommendations on various securities markets, including equity fundamentals, derivatives, commodities, and mutual funds. The research is subject to the SEBI framework and is based on information from third-party sources and public domain. Inaccurate research reports or recommendations may expose the company to client complaints, adversely affect its brokerage and distribution businesses, and potentially lead to regulatory action.
Anand Rathi Share and Stock Brokers Limited Grey Market premium
Grey market premium is the premium quoted over the IPO issue price. GMP shows that investors are ready to pay above the upper band of the IPO issue price. GMP is determined in the grey market as per the demand and supply of the shares in the primary market. A grey market is that unofficial ecosystem of unlisted companies' stocks that start trading even before the launch of the IPO to the date of its listing.
Also Read: What is Grey Market Premium in IPO: How is GMP Calculated & Reliable
However, GMP is not a reliable factor, as it keeps fluctuating as per the demand and supply of shares in the primary market. There are numerous factors that affect the stock market in India and individual stock prices of different companies that are already listed and trading in the secondary market. However, for an IPO-bounded company, you can consider the GMP as the speculative listing price of the share
According to various online sources, the Grey Market Premium or GMP of the Anand Rathi Share And Stock Brokers Limited is trading around Rs XX in the grey market. It means shares are trading at the upper band issue price of Rs XX with a premium in the grey market and may list around the same price.
