5paisa Capital Limited (5PAISA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Felicia, moderator for the conference call. Welcome to 5paisa Capital Limited Q4 FY '25 Earnings Conference Call. We have with us today, Mr. Gaurav Seth, MD and CEO, Mr. Gourav Munjal, Whole-Time Director and CFO; 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. Thank you all. Good afternoon. Welcome to quarter 4 FY '25 earnings call. Capital markets have undergone significant transformation last quarter, influenced by multiple factors, most notably the implementation of SEBI F&O regulations aimed at curbing speculation and derivative volumes. The changes have notably impacted trading volumes and overall income and across the board in the booking industry. As a result, the industry has seen substantial reduction in ADTO, additionally, a sharp reduction in market indices driven by global uncertainties and increased volatility, further affected cash segment volumes and new customer participation. Industry overall added 71.3 lakhs new customers in Q4 FY '25 compared to 98.7 lakhs in Q3 FY '25, which is a 28% Q-on-Q, quarter-on-quarter decline. So while these changes may have a short-term impact, we believe they empower investors and will contribute to the long-term sustainable growth, both for the capital markets in general and our business specifically. We've continued to invest in technology to improve customer experience and remain focused on giving the best product to the customers and acquiring high-quality customers to ensure a healthy LTV and sustainable payback period. Now I'll come to business and financial performance. This quarter, which is Q4 FY '25, marked the full first quarter following the implementation of SEBI's new directives on F&O reforms. Our broking revenue declined 23% quarter-on-quarter, primarily due to industry-wide drop in derivative volumes. In an effort to remain competitive, we reduced our MTF interest rates effective November 1, leading to about an 11% decline in the MTF income for the quarter. Allied income and other operating income dropped by 8% and 11%, respectively, reflecting impact after an increase in market volatility and index correction. We've aligned our variable expenses with income trend and with further optimized costs resulting in a 9% reduction in total expense to INR 58 crore for this quarter. For the full fiscal year FY '25, which is closing '24-'25, we recorded revenue of INR 360 crores, which is a 9% decline from last year on a year-on-year basis and a profit of INR 68 crores, which is a 25% increase on a year-on-year basis, with our margins improving from 14% to 19%. Our net worth crossed INR 600 crore on March 31, 2025, and we believe that the markets and our business will normalize over the next few quarters, allowing us to return to historical profitability levels. Further, for Q4 FY '25, we acquired 91,000 new customers, which is a 19% quarter-on-quarter decline, reflecting the broader industry trend of reduced retail participation. Our total customer base stands at 48.3 lakhs and our ADTO declined by 36% Q-on-Q to INR 1.93 trillion, again, primarily due to the impact of regulatory changes. Our client funding book remained stable at INR 260 crores, which is a very minor 2% Q-on-Q drop, where our mutual fund AUM crossed INR 1,392 crores. Now spend a few minutes on what we are doing on the product and tech side. Continue to enhance our digital platforms to deliver superior trading experience and speeder trading and investing experience. Some of the key product rollouts have been an FnO 360 upgrade, which is a completely enhanced upgraded F&O trading platform, ordering advanced Option strategies, expert research calls and the launch of QTV, which is a live expert-led streaming and trading module. We also introduced something known as IntraEdge, which is an AI-powered intraday stock basket recommendation with built-in risk management and Quick Pledge through the app. Charting upgrades in which users can view multiple charts alongside orders and market depth and trade visualization adding to trading view on Trader Terminal, enabling a lot of users to see trades mapped on charts. We've also launched SIP via UPI Autopay, streamlining the whole SIP setup through automated technique mandates in mutual funds and most importantly, achieved a 50-millisecond reduction in order placement latency. This significantly boosts execution speed and platform reliability, particularly beneficial for high-frequency intraday traders. Lastly, our core objective remains to build the fastest, most reliable and intuitive tech platform. We continue to enhance our product features, the user experience and leverage cutting-edge tech, including APIs and AI tools to help investors make better decisions. And we are confident these efforts will attract -- continue to attract high-quality customers and with stronger LTVs, while we continue to provide them an outstanding experience. So that's it from our end. Happy to answer any questions.

[Operator Instructions]

Moderator, if there are no questions, then -- I think if there are any questions later on people have, they can reach out to us at [email protected]. Again, it's [email protected].

I'm sorry to interrupt. We have one question, sir. The first question comes from [ Pratik Mahure from Sahara India ].

Sir, what's the reason behind that the quarterly brokerage has been fallen by 22%?

You're right, yes. Quarterly brokerage has been reduced by 22%.

Yes. And what's the reason behind that?

It's -- primarily the biggest reason behind this is the implementation of -- I would say 2 reasons in general, specifically look at last quarter. One is the -- last quarter was the first quarter in which you had the complete impact of the SEBI F&O regulation, which started in last -- in Q3. And also the muted market to a large extent in parts of Q4. So those are the 2 major reasons.

Okay. Any planning for mutual fund AUM -- increasing of mutual fund AUM?

Are you asking about the performance or are you asking the plans? I didn't get you.

Plan, plan.

So our hypothesis there is that because of people being a little bit more risk averse, including even the trading cohort. So some people have actually withdrawn from the market, specifically I'm talking about the F&O trading community, right? So while you can argue that, look, there are a lot of people who would continue to be in the market, but a lot of them would take losses, et cetera, and start to withdraw from the market become a little bit more risk averse. And that is the primary hypothesis that's why people have put money back in mutual funds, some of them. And also you could assume that the markets were also -- gave good opportunity for people to enter in the mutual fund segment, specifically around quality equity stock for that matter, right, mutual fund holding that. And that's why we actually see an increase in our mutual fund AUM during this period.

The next question comes from Rajvansh Bhatia from Share India Securities Ltd.

Just wanted to ask one thing about that IntraEdge platform, which is the AI-powered one. So what is the development there? And how are we looking upon like when are we going to introduce that?

Talking about AI?

Had that AI-powered built-in risk management that product, IntraEdge, I guess, that's the name if I am correct...

Yes, so it's in the pilot phase and we'll have a full rollout shortly.

Okay. So like when can we expect? By Q2 or like any guidance regarding that?

Yes. So I think by early Q2, we should be ready.

Okay, early Q2. So you think that would give you the edge in terms of both revenue and other broking?

Look, some of these enhancements are there as a product company. On an ongoing basis, we have to do -- to make sure that the customers are getting a good experience and we are adding value to that. It does not necessarily mean that, that one particular feature enhancement or tool will necessarily have a huge material impact on it. So we have an existing base of intraday traders. I think the idea is to actually serve them better. But yes, we believe that this will be a positive for our overall broking industry, you call say that.

Okay. Okay. And one last follow-up. So is there any other similar product in the line, which you think -- from which it can stand out as an investor's point of view?

We have not -- I mean, you're talking about -- your question is more about compared to what we have or compared to what's there in the industry?

What the industry has. Talking about what you're planning, is there any existing trading platform or website for similar kind of services?

I am not aware personally. I have as a retail customer gone and use something like this.

And this would be your first breakthrough, we can say, for such a technology?

I'm sure there's something -- I mean, other competitors might actually also be working on. So I would not like go and make that statement. But I think from our perspective, we definitely think it is -- it would be a good value addition.

[Operator Instructions] There are no further questions. 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.

Thank you.

Thank you, sir.