Angel One dips 7% as NSE bars onboarding of new authorised persons

Angel One said NSE's order does not affect the existing business or the activities of the APs affiliated with the company.

Shares of Angel One dipped 7 per cent to Rs 1,593.45 on the National Stock Exchange (NSE) in Monday’s intra-day trade after the Exchange passed an order against stockbroker in respect of an alleged failure to monitor the operations of its Authorised Persons (APs), which resulted in alleged violation of capital market regulations and Futures and Options (F&O) Segment Regulations of the Exchange.

The exchange, in an order dated July 14, has slapped a monetary penalty of Rs 1.67 crore and prohibited the brokerage from onboarding new APs for a period of six months. NSE has directed Angel One to conduct inspection of all its APs and submit a report within six months.

Angel One has said NSE’s order does not affect the existing business or the activities of the APs affiliated with the company.  Further, the brokerage has said it is evaluating various options available including filing an appeal against the order. CLICK HERE FOR RELEASE

In past two months, the stock price of Angel One has zoomed nearly 40 per cent. It had hit a record high of Rs 1,804.45 on July 13, 2023. At 09:38 AM; the stock quoted 5 per cent lower at Rs 1,622, as compared to 0.15 per cent rise in the S&P BSE Sensex.

APs account for 21 per cent of Angel One’s net broking revenue, while contributing around 25 per cent to the new customer acquisitions. Angle One has been regularly overseeing the APs and it has a five-step process wherein: 1) audit is conducted, 2) if lapses are found, notices are sent, 3) a penalty is levied, 4) payouts are blocked and 5) finally termination of the license, Motilal Oswal Financial Services said.

In case of major lapses such as mismanagement of client funds, the AP is terminated immediately. The company has a strong tech-based fraud detection unit and has been regularly filing suspicious transaction reports with the regulator.

In the 1QFY24 management call, the company had highlighted its strategy to increase focus on AP network for scaling the business. As per the management, while APs will not be empaneled for broking, Angel One can still empanel new APs for distribution of products. Incremental growth could be a challenge, especially customer acquisition. However, its existing battery of 21,000+ APs will continue to generate revenue and contribute to customer additions, the brokerage firm said in June quarter result update.

MOFSL reiterate its ‘Buy’ rating on Angel One with a revised target price of Rs 2,050, as the brokerage firm have cut its FY24/FY25 earnings estimates by 5.5 per cent/3.8 per cent to factor in some reduction in the number of F&O orders, leading to lower broking income from the derivative segment.

“Angle One is a perfect play on the financialization of savings and digitization. 1QFY24 performance was weaker than our estimates. However, since then the traction in volumes and overall activity has picked up momentum. The management continues to invest in technology to strengthen its position,” the brokerage firm said.