Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 5paisa Capital Ltd (BOM:540776, Financial) achieved its lifetime highest revenue in Q4 2024 of INR112.9 crores, marking a 13% growth quarter on quarter and 24% growth year on year.
- The company acquired 2.66 lakh customers in Q4 FY24, reflecting a 15% quarter-on-quarter growth and a 96% growth year on year, bringing the total customer base to 42.3 lakhs.
- Total average daily turnover grew to INR3.82 trillion, a 58% year-on-year growth.
- Mutual fund AUM reached INR941 crore, an 18% quarter-on-quarter growth.
- 5paisa Capital Ltd (BOM:540776) introduced new features in its core mobile app and launched Trade Station 2.0, enhancing user experience for high-end traders.
Negative Points
- Q4 profitability was down mainly due to RSU and ESOP costs for talent acquisition.
- Employee costs increased by 51% year on year, primarily due to onboarding new talent.
- Finance costs rose by 39% year on year, mainly due to changes in exchange-related loss.
- The company plans to reinvest profits to scale growth, which will impact short-term profitability.
- The amortization of RSU and ESOP costs will continue to impact financials over the next two years.
Q & A Highlights
Q: Our orders have grown 39% year on year, but revenue growth has been lower at around 16%-17%. Why is there a difference between order growth and revenue growth?
A: There is no one-to-one correlation between the number of orders and revenue because orders are of various types and often lumped into higher-level units like lots. Orders from our API system have different cost curves and modalities than those from our mobile app.
Q: Do we have an internal goal for achieving around 20% ROE? By which year do you expect to achieve this?
A: Our primary focus is on growth rather than ROE. We need to scale our business and acquire more customers. We have strong unit economics, breaking even within the first nine months. Over time, as we scale, our ROE will align with industry standards.
Q: What is the quantum of ESOPs and RSUs factored in this quarter?
A: The ESOPs and RSUs account for 5.27% of our overall outstanding stock pool, with an impact of INR9.86 crores in Q4. This cost will be amortized over FY25 and FY26.
Q: What growth are you targeting over the next two to three years?
A: Historically, we grew at 14%-15%. Moving forward, we aim for 35%-40% growth within the next two years. This will be achieved by scaling our acquisition pipeline and investing in new products.
Q: How do you plan to achieve higher ROEs similar to industry peers?
A: We need to scale our acquisition pipeline systematically. Our current customer base is low, and we need to increase it responsibly. Over the next year, as we build baseline efforts, our ROE will start improving.
Q: How do you see regulatory changes impacting your business?
A: Regulatory pressures are positive for the industry. While there may be some extra costs and penalties as brokers adjust, these will be absorbed over time. We are investing in technology to meet regulatory requirements.
Q: What is your current cash and derivatives market share?
A: Our cash and derivatives market share stands between 2% and 3%. The revenue split between the two is a healthy mix, reflective of market trends.
Q: What is your strategy for customer acquisition to increase market share?
A: We aim to increase our acquisition rate from 70,000 to 1.5 lakhs to 2 lakhs per month. This will be done systematically, focusing on acquiring quality customers. Market share will reflect this growth over time.
Q: What cohorts are you targeting for customer acquisition?
A: Our acquisition strategy reflects the industry, with 60% from Tier 1 and 30%-40% from Tier 2 and 3. We focus on traders rather than acquiring numbers for the sake of numbers. If the RPC is low, we will scale back acquisitions.
Q: How do you ensure the lifetime value of customers remains high?
A: We monitor early trading behavior and have a good sense of customer performance within the first month. Our historical data shows that our LTV is in line with industry standards, and we continue to acquire high-quality customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
