5paisa Capital Limited (5PAISA.BO) Q2 FY2026 Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm [ Felicia ] moderator for the conference call. Welcome to 5paisa Capital Limited Q2 FY '26 Earnings Conference Call. We have with us today Mr. Gaurav Seth, MD and CEO; and Mr. Gourav Munjal, Whole-Time Director and CFO; and Mr. Ameya Agnihotri, Whole-Time Director and CTO from 5paisa Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to Mr. Gaurav Seth. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Welcome to the quarter 2 FY '26 earnings call. Let me start off by giving a little bit of background on what happened in the last quarter. So during Q2 FY '26, equity markets remained volatile amid tariff-related uncertainties, persistent FII outflows and rising geopolitical tensions that weighed on investor sentiment. While sustained FII selling kept market sentiment subdued, domestic institutional investors continue to act as a strong counterbalancing force. In the last quarter, foreign institutional investors recorded net outflows exceeding USD 100 billion. whereas domestic -- sorry, exceeded $10 billion in outflows, whereas domestic institutional investors inflows crossed $20 billion. These trends impacted overall market participation with cash market ADTO declining 16.7% quarter-on-quarter to INR 39,770 crores and F&O ADTO on a premium basis, falling 13.6% quarter-on-quarter to INR 55,570 crores at the industry level. Despite this moderation, the industry MTF book surpassed INR 1 lakh crores, reflecting resilient investor leverage appetite even in a volatile environment. Despite these challenging external backdrop, our focus remains on delivering best-in-class solutions, high-quality customer acquisition and ensuring a strong lifetime value from each acquired customer. During this quarter, we executed several initiatives to drive relevant and cost-efficient acquisition, including a major SEO or search engine optimization turnaround, enhanced brand awareness campaigns across social and offline channels and focused engagement events. These efforts led to a 20% quarter-on-quarter increase in new customer acquisition to over 95,000 customers, while our customer acquisition costs reduced by 15% and the first year revenue FYR improved by 25%, resulting in a more efficient payback profile. Our total customer base has now crossed 5 million, which is 50 lakh overall customers milestone. Our average daily turnover rose 19% quarter-on-quarter to INR 2.67 trillion, underscoring robust trading activity. We also accelerated growth in our MTF business through introducing competitive interest rates starting as low as 0.026% per day and expanded universe of eligible securities from 700 to over 1,200 and targeted marketing initiatives. These measures yielded encouraging results. MTF income grew by 22% quarter-on-quarter, and the average client funding book expanded 17% quarter-on-quarter to INR 364 crores. Our mutual fund AUM increased to INR 1,647 crores, which is up 4.7% sequentially over the previous quarter. Despite market headwinds, total income for Q2 FY '26 remained steady at INR 77.3 crores, broadly in line with the previous quarter. Marginal rise in expenses was mainly driven by higher marketing and branding investments to strengthen acquisition quality and by higher finance costs linked to MTF income growth. PAT for the quarter stood at INR 9.48 crores, which is down 18% quarter-on-quarter. During the quarter, we also raised funds through commercial paper to support the MTF book expansion, ensuring adequate liquidity for future scaling. As of September 30, 2025, our net worth stood at INR 626 crores. Now on the product and technology front, we continue to enhance trading efficiency, user experience and platform depth. Several key upgrades were implemented during the quarter to improve speed, analytics, onboarding and payments, further reinforcing our position as a next-generation trading ecosystem for both active traders and long-term investors. We upgraded our digital onboarding journey with the introduction of a real-time bank verification, PAN Fetch via mobile and a PIN-less DigiLocker integration for effortless KYC. Additionally, we launched a dedicated in-app ETF dashboard one-stop interface for smart ETF investing and enhanced our payment gateways to ensure faster and smoother SIP payment processing for mutual fund investors. We also revamped an MTF journey by introducing a Pay Later option, enabling an unlimited holding period and offering a seamless convert to delivery feature for enhanced flexibility. For traders, we introduced the Scalper platform on the web. a unified interface built for speed, precision and smarter trading decisions. The platform features a 3-in-1 charting interface with predefined templates, enabling ultrafast order execution and convenient keyboard shortcuts for enhanced trading efficiency. We also launched a strategy analyzer on an FnO360 platform, enabling traders to view payoff charts, combine open interests and breakeven insights, along with the Alpha Scan, which is offering 50 prebuilt scanners for faster strategy discovery and enhanced decision-making. Lastly, we have successfully implemented SEBI's’ standardized validated UPI handles, enabling faster, safer and fully compliant transactions for our users. We remain committed to continuous innovation, strengthening our product and technology stack while leveraging AI to further enhance customer experience and engagement. With that, I conclude my opening remarks and now invite floor for any questions. Thank you.

[Operator Instructions] The first question comes from [indiscernible] Modi from RV Investments.

Sir, any specific reason for degrowth in your revenue from like last September 2025?

So the overall, if you look at the income or the revenues 1% down compared to the last quarter. So it's not a significant degrowth. Overall volumes for the industry have also fallen in the last quarter, as I mentioned in my speech by 16% for cash and about 14% for F&O. So our growth -- I mean, our reduction in revenue is in line with those numbers.

Sir, my next question is sir, if we see demat account base in Q2, so it's 207 million. But if we see active clients, it's only 46%, it's very low, no? If there is any specific reason for it?

You're talking about our active base? Industry level?

As compared to demat account base. There are 207 million demat accounts, but active clients are only 46 million.

Sir, he's asking at industry level. The total percentage is not 46%. It is coming 25%. So overall, 20 crore demat account is there and only 5 crore is active. The portion is around the same.

Exactly.

Okay. So I see that as an -- so I can answer it both not so much at an industry level. I can give you that perspective that are specific to 5paisa. But in general, there are people with -- who are coming into the market who are not -- either they came into the market for making quick gains during the entire frenzy and some of them also came into the market and opened F&O accounts as well as investment accounts. And when there is volatility and there is no easy way out or easy money to be made, they basically -- what happens is that start to fall off. I mean this is typically -- even if you ignore the numbers, this is a typical behavior. So while a lot of platforms, including us, end up opening these accounts, a lot of them actually then start to fall off or become inactive or either they become completely inactive or their activity overall starts to reduce. And it is only natural, right? I mean the -- this investing and including trading is a long-term journey. So you have to be in the market for some time. You have to continuously upgrade yourself and you have to have effective risk management. And that is something that we have through all of the sessions that we do, both online, in fact, a lot of investment that we are doing in offline sessions imparting that philosophy, how to become a better trader, how to become a better investor. So that is really the reason. In our case, I think our number is closer to either 392,000 or between 395,000 to 4,00,000 active base. If we compare the number of active clients who are trading even -- so we take a lot of multiple metrics. So one, we take how many people are active on a single day who are passing orders and who are doing on a monthly basis. It is actually almost in line with what was there in Q1. So Q1 and Q2, it's almost in line, and there is a reduction of about 10 lakh orders on a quarterly basis. Over a 3-month period, there's a reduction of 10 lakh orders from these clients, right? So definitely, some part of macro and some part of market has taken a toll on the activity.

Sure, sir. Sir, any growth guidance for FY '26?

Any, sorry?

Growth guidance, revenue...

No, I'd not like to make any forward-looking statements because a lot of what that we do is based on no matter how well we do on the product side and marketing side, it's also dependent on the markets. So yes, but we are heads down into execution on improving our product. That is our primary focus. So we'll continue to do that.

This H2 will be same as H1 or it will be better?

We expect it to be better, but like the markets have to contribute equally, right? So that is something I can't predict it. I'm hoping that H2 will be better.

The next question comes from Sonal Minhas from Prescient Capital.

This is Sonal Minhas. I hope I'm audible. I have 2 questions. Sir, first, I wanted to understand since you've been relentlessly focusing on optimizing your client acquisition cost. So what is like an LTV, which is a baseline that you're okay with? And how would you compare that to, let's say, market leaders? If you could just aggressively share something around what is the time horizon of breakeven of a particular client that you're okay with as per your funnels? If you could just share some.

Sure, sure. So our latest tracks in the range of INR 700 to INR 750, which is the client acquisition cost. And our first year revenue is kind of in the range between INR 1,000 to INR 1,200. Typically, our sweet spot, we would want to answer your question, a 6- to 7-month payback period for our clients -- for the clients that require. Obviously, it varies sometimes less, sometimes more, but this is what we would like it to be. And that is best-in-class if you look at the industry as well.

Great. And this revenue that you speak about, this stays over a time slice of 1 year, 2 year, 3 year or there is a tapering of revenue of these clients as they mature with you?

Yes. So typically, what ends up happening is that there is -- so what I'm giving you is an FYR, which is the first year revenue number. But over a period of time, on an average, there is decay, right? Now it varies sometimes it is for certain clients, it could be as high as like 40% in year 2 and then 15% after that and so on and so forth. So when we do our projections and our numbers, we typically account that decay into the mix that if I'm INR 100 from someone, then it probably would become INR 70 after year 1 or INR 60 after year 1 and so on and so forth. Yes. Yes -- but to answer your question, yes, there is a decay in FYR over a period of time from new clients.

Understand that. Another thing speaking about your product rollout, you've explained the features in the app. Is there an NPS score because you have an app rating the CSAT given in the slide deck. Is there an NPS score which you track, I'm sure you would, but which you can share for us to understand how good is the app, how good is the platform? How good is the satisfaction of the customers basically on the platform?

Yes. I'll give you my personal opinion on NPS. So we do track NPS from time to time. But usually, it is more -- what I have seen is that like the NPS ratings do come up randomly for -- like I'm not talking about 5paisa but I am talking about the industry right? And it is really on the mood of the customer. So if you're in a good mode, everything is going right, you push -- I'm talking about how this is done, an NPS score is shown to the customer and they might do anything from 1 to 10, right? And if 9 comes you're very happy and 5 comes, you are very, very -- not that happy, right? So the right metrics to be used, which we think of it is CSAT scores, et cetera, which are very more focused on a function, right? So let's say, in our case, if you are -- if you have a problem, if you're closing a ticket with customer service or how you are doing a particular transaction on the app, whether it is a derivative transaction or a cash transaction or how you are, let's say, doing a pain like trying to move funds. So all of those specific transactions. I mean my view is that like those are more indicative of actual customer satisfaction than NPS scores in general. But we typically refer to app ratings as a guiding line because that is something which is public, which is something which people -- typically, if they are taking time to go and write them, we take them very, very seriously. And we -- our endeavor is also to continuously keep scaling the app ratings, both on Android and on the App Store.

[Operator Instructions] We have a follow-up question from Sonal Minhas from Prescient Capital.

Given the fact that I wanted to understand more the zoomed out market dynamics, the way I think things are playing out in the whole discount brokerage, brokerage space. Just wanted to understand like from a positioning perspective, I think you focused on product specifications, you focused on client customer satisfaction. How does, let's say, a customer who is coming in, he or she distinguish you from, let's say, the top 5 other players in the market? And are the product features good enough retention matrices for them to stay put with you? Anything which you can share in regard to retention of customers apart from product or around the product, that will be helpful. Just to figure out how you plan to go given the space is fairly cluttered to my understanding.

Yes. No, I mean that goes without saying. So yes, completely agree with your statement and observation. space is cluttered, it's hypercompetitive. So I'll give you a little bit of a background. So I think we've been in the space for a very long time. I mean the fact is that this space was longer than most players who -- the most common names that you see now would really come up after post-COVID when there was this whole market expansion and the demat account closing on then 10x, whatever, right, around 20 crore demat accounts and so on and so forth. So we are -- we have a legacy. We know this space very well. There is definitely -- so there are 2 aspects to this business as I see it. One is obviously awareness, right? So unless you are aware, you won't go and download 5paisa or for that matter, any other app. So that is something that we definitely have to raise our profile on from an awareness perspective, which is a combination of brand, marketing and so on and so forth. And we're making a lot of -- we're making a lot of changes in investments in that area. So people start to identify not that they don't, but the newer and newer people start to identify with the brand, et cetera. Now on top of that, I think the major thing is even if you get a customer to the app or to the platform, in this space, I believe, it is very, very important to have a great product. And once you experience and when you have 10 other options or 5 other options, the retention is a direct is a direct function of 2 things in my mind. One is pricing where you would -- it's already discounted. So a lot of players out there and even discount brokers or zero brokers and so on and so forth, right? So there's not much to do there. So the second thing becomes product. So when you are -- especially if you're a power user, and our focus has been on power users, right? So people who are in the market for -- who are serious traders and serious investors, they know 5paisa or at least once who experienced the product, they know that this is a place you can stay. In terms of the feature set itself is concerned, it is very, very -- it's complete from a product standpoint. And we continually build that because it is always work in progress. In this space, it's never -- you can never say that, look, you are completely done. And we've done a lot of work over the last 3 years, and it continues in terms of completely upgrading our tech stack, changing our user experience and so on and so forth. And you will see a lot of changes coming in next year as well. So our strategy definitely is to raise awareness, but it's also more so that when people try us, they want to stick with us. Some of the features which are available are definitely best-in-class on -- definitely on the brokerage side, which only very few of our peers are offering. So if you're a serious trader, 5paisa does offer you the entire set, which a novice trader might say, okay, I can go get it somewhere else. But if you're a seasoned guy, you would get it in 5paisa.

Understand that. And where would that show up in terms of matrices that are available to public market investors like us, like if I were to just triangulate that with data. So just trying to figure it out.

That would -- I mean, that doesn't show up separately in terms of numbers that we publish, unfortunately, because we would publish our customer numbers, and we'll publish our revenue and the financials and what we've acquired. But typically, the metric, I can't share with you, but it typically shows up in the ARPU or the average revenue per user, right? So even though you might have fewer customers, but the average ARPUs or the average revenue per user is higher, which is true for us. So we look at that and then we see. So what is the level of activity of a user on your platform? And the level of activity of the user of platform directly translates to one is to activity and their comfort and their trust in the platform and second, directly to revenue. Because you could onboard...

Go head.

No. I said that you could onboard and then somebody else had a question, you could onboard and then they go dormant. So that doesn't mean anything, and that will show up in your average revenue per user.

Sure. So your broking and allied revenue divided by active users is a good like top of the funnel number that somebody can track basically just to triangulate the others because not many people share ARPU in this industry, publicly.

Calculation is actually very easy. Also, you need to add other income because other income includes -- I understand it includes float income, but ultimately, it's a part of income. I mean, [indiscernible] broker is getting. So if you divide -- I'm just doing the simple math, we have active customer base of INR 3.8 lakh crores, you just divide with INR 77 crores, you will get the number, which comes around, I mean, INR 8,000, INR 9,000 per year. So this is...

This is a number, okay. So another question around this. Given that you have excelled in terms of your features for power users, directionally, if not now, let's say, maybe like a 3-, 4-year kind of an outlook, does it make a natural sense for you to become like a platform like AlphaGraph where you're also giving algos to people? I'm just -- that's just an example, but it's an extension where you have algos and people come and trade on platform, just trying to build it up there.

No, I can take that. I can take that. So in any case, today, we have an algo offering, right? So there are APIs or open APIs that we expose and there are a lot of our customers, both on retail side and basically, it's all retail, either it's retail to partners or it's direct retail. They use our APIs to run algo strategies on our platform. So our platform supports algos in the first place, and we've been doing this for a long time. And we're also building something which is -- which own algos and so on and so forth, which is in the pipeline, which you would see coming through. I think you were alluding to AlphaGraph. So yes, that is definitely something that we do.

Otherwise, it's very difficult to differentiate in this space given how things are everybody is pricing down. So that is the natural direction for somebody to take. I'm just trying to think a lot and then trying to take your feedback on it basically. That's why.

No, it's a great suggestion. Thank you.

The next question comes from [ Prince Akash ] an individual investor.

I just have a one single question that just in case the industry trends and the trading and everything keeps like this, it stays a bit suppressed. Do you see yourself or maybe an industry-wide phenomenon where you think that the charges on the delivery investment side, they might increase going forward. If not industry-wide, maybe do you see yourself doing that?

So great question. Should be already -- I mean, we've always taken the view that like the services that we provided have to stand on their own. So we anyway charge INR 20 for equity delivery. And of course, F&O is charged in any case. But to your larger point, I think my personal view, okay, this is me as an individual. I think, yes, you could see a rise in -- or people will start to charge for things that are completely free because the cross-subsidization of services is going to end, right? So whether it is acquiring via mutual funds and going to F&O trading or whether it is not charging for equity delivery and so on and so forth. That is why you've seen the market people building MTF books, people talking about starting to charge for -- or starting to charge something, whatever that might be INR 5, INR 10, INR 15, INR 30, INR 20 could be anything. But yes, it is likely to go that way because if the volumes are going to be further impacted, then some of these decisions will have to be taken. That's my personal view.

Sir, just a follow-up thing. Do you see -- do you have any plans for doing this like by yourself or in your forward coming? Or would you like to jump in as the industry does widespread?

Sorry, if you don't mind, I did not follow the question.

I was asking that do you have any plans like that already set in that you would increase the delivery trade prices and everything? Or would you jump in as the industry applies this industry-wide?

No, we don't have any specific plans at the moment, but these are things that we have to assess from time to time. As I said, we are not free on equity delivery. We've already charged INR 20. So for us, it's less of an issue.

[Operator Instructions] The next question comes from Chinmay Nema from Prescient Capital.

Sir, I just wanted to follow up on the previous question about the dormant users. So behaviorally, are these people who you expect to start trading again once broadly the environment recovers and trading activity starts? Or are these people who could have also moved to new apps or who could have stopped using the platform and then you'll have to -- I mean, they'll bear new customer acquisition cost before you even expect revenue from them?

So it depends on the -- there is nothing like plain vanilla broad brush answer to this. Typically, why people go dormant, there are a couple of reasons. One reason of dormancy is that it is very genuine. For example, you have some kind of a financial constraint and you're not making returns in the market and you have to deploy capital. And we've heard this client feedback ourselves where they have no problem with the platform, they are just kind of constraining their trades for a while. And as the markets recover or their financial situation or liquidity situation improves, they come back with full force. And that quarter is a great user, and we get that feedback all the time. So there is a certain -- I don't know, I can't say what is the percentage of that, but there are people who are there. These are the people who eventually recover, right? So they go dormant, but the dormancy is not permanent. So they come back. Then there is a second category of users who don't know what they are doing. And as I said, like they are -- they entered in a frenzy, especially in trading and maybe they didn't make some losses. So they want to just kind of step back from the market. reassess situation and learn and come back again. So those are the ones who are likely to go permanently dormant for a while. And then there is a third category of people who also who would go for other apps because the pricing is better or they like the product better. It is equally possible. So from our perspective, we continuously pull clients whenever we see sort of unusual dormancy beyond certain norms. And then we try to incorporate like if that -- if it is a pricing suggestion, then we see if it makes sense or not. But if it is a product suggestion, typically, we almost 9 out of 10 times act on it. And we put it in the road map, if it is -- if that feedback has been received from multiple customers, even if it's a great feedback from one customer, we act on it because we don't want people to leave and go for other platforms. For situations where I have no issues and my liquidity situation doesn't permit me to invest in the market. So that's why I'm dormant. And that happens also in mutual funds because people pause their SIPs for a while and so on and so forth, which is a natural behavior. It's nothing to be concerned about.

[Operator Instructions] The next question comes from [ Vidur Dayal ] an individual investor.

So I've been watching the company for a while and the product upgrade cycle happened with your predecessors. I think it's almost 2 years now. So the question I had was that are we trying to catch up with people who are ahead of us? Or are we trying to exceed them? So there are at least 4 companies that I see, Angel, Groww, Zerodha and Dhan, which are, I think, at least 20x our size. So you have an ambition to be a top 3 or a top 5 player. So how do we expect to catch up?

Okay. So yes, you're right that some of these upgrades have been happening even with -- it's not that we started this year. So I think there are 2 parts to it. One part is the core tech transformation because we have had also in some cases, certain technologies which are proprietary like our OMS, RMS and certain things on the front end like a flutter upgrade and so on and so forth. Those had to be done. This is hard work. It's not easy that you can do it in a day. So those are things that have been completed. I think last year, we completed -- completely moved to Flutter. And right now, we are in the midst of kind of replatforming our core system, which we expect to conclude and finally do the transition sometime in next quarter. Yes, it is -- it is tough because the standards are high and with the new people coming in, they have a blank slate to start with the product, whereas in existing structure, we have to work through some of the pieces that need to be transformed first and some decisions to be taken, which takes a little bit of a time. So the -- I don't know if that answers your question, but to catch up is we -- after a certain point in time, we don't want to put a benchmark of someone else to our situation. We know what we are strong at. And going forward, all of the product improvements are -- obviously, we look at competition, we look at the names that you're talking about. But we are setting our own independent product road map to either be better than them or at par with them, whatever you want to call it, because we get direct feedback from our customers, loyal 5paisa customers. We want more of it. And I think if you start to always be in a situation where you're just trying to catch up and say that here are the 3 top guys in the market, let me be like them. By the time you reach there, they move somewhere else. So you have to chart your own course, and that's exactly what we are doing.

So that's a great answer on the product side. I just meant on the market share side and the revenue and the scale side, how do we sort of get to a top 3 position?

So I mean that is work in progress. I mean I can't share with you like the entire strategy of a public company, but...

But what I'm trying to ask is, is that even likely in the next 3 years?

Unlikely.

Most of the companies are not public, but the numbers that grow and have just thrown out are just surprising.

Yes. And we also know the reasons why those numbers are where they are. So -- and those are things that we also understand. I think it's a matter of execution. I think it is likely, if not 3 years and 5 years, yes.

Okay. And one final question. There was a lot of qualitative improvement. We had a bigger MTF book. We increased our customer acquisition. Everything was good. And I understand the cost side. But why is the revenue on a Q-on-Q basis not inch up at all?

Because the -- if you see the -- at the exchange level, both the cash volumes as well as on an ADTO basis and F&O on a premium basis and notional both have come down; one by 16%, one by 13%. Now that is not justification. We have also fallen. We have fallen a little more than...

No, no. On a Q-on-Q basis, we have increased further.

So what you are saying that on the income side, our brokerage income is almost same. In spite of cash and F&O turnover is down, although in spite of number of -- our number of products is almost same but we've grown up in the networking. On the other side, other income, we -- I mean there is a down of INR 2 crores and INR 2.5 crores because of the repo rate because ultimately, you are enjoying the interest rate -- FD interest rate of the client funds as well as your own funds, but repo rate has been down. And hence, there is a slight effect of that income. And hence, our overall income is almost same for the last quarter.

[Operator Instructions] There are no further questions. Now I hand over the floor to management for closing comments.

Thank you, everyone. Good bunch of questions got us thinking. Thank you again for joining the call. And if you have any additional questions, there is an e-mail ID, enclose that you can reach us, and we can converse. Thank you.

Thank you, everyone. Wish you a very happy Diwali and happy...

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.