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

Good afternoon, ladies and gentlemen. I'm Akash, moderator for the conference call. Welcome to 5paisa Limited Q1 FY '27 Earnings Conference Call. We have with us today Mr. Gaurav Seth, Managing Director and CEO; Mr. Gaurav Munjal, Whole-Time Director and CFO. [Operator Instructions] Please note, 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.

Hi. Good afternoon, everyone. Thank you for joining us. So today, I want to take you through 3 things: the strong operational performance we delivered in quarter 1, a strategic context around where we continue to invest and the differentiated opportunity that we believe 5paisa is uniquely positioned to capture in the Indian capital markets, wealth management market. Right. So let's talk about our Q1 performance and financial momentum. Let me start with the numbers. Total revenue grew 14% year-on-year to INR 88.4 crores with a PAT of INR 11.6 crores. Our customer base now has grown to 52.6 lakh customers. But what's more important is the quality of that growth. Our average client funding book, which includes both MTF and the T+5 offering, which is also a related offering now stands at -- I mean for the last quarter stands now it's much higher, but it stands at INR 422 crores, which was an increase of 10% quarter-on-quarter. And this basically represents that it's not just user acquisition, but also wallet deepening that we are focused on from a customer standpoint. Our mutual fund assets under management reached INR 2,073 crores, which was an 18% increase quarter-on-quarter. Again, it shows that our customers are not just trading in isolation, but they're also building portfolios with us, and we believe that is the foundation of a sticky high lifetime value customer base. Now more importantly, on the product and technology side, over the past few years, we've built deep institutional knowledge of retail investors, what they actually trade and invest and combining that with the tech expertise and AI now stands to become a competitive advantage. So I want to focus on 3 things there on product. First, that we're making overall leverage and funding more accessible, which is demonstrated by the growth in our T+5 percentage book. we've expanded the T+5 offering, which is essentially you can hold the stock for 5 days to 2,500 eligible scripts with interest rates starting at 0.045% per day. We've also extended MTF to 1,500 scripts with funding limits, which we've increased up to INR 25 crores. And these are addressing real gaps in the Indian trading ecosystem and how investors want to operate. Second, -- we are directly simplifying our F&O/derivatives trading for -- obviously for serious traders, but also for nonprofessional traders. In our recent launches, which was the OI profile on charts, one click execution and the launch of Algo Space, which is the name that we've given to our algo trading platform. The idea is to reduce friction and democratize structured trading. Algo Space in particular is also a bet on retail adoption of algo trading and people who do not necessarily have the wherewithal to code the algos themselves are able to use this in [indiscernible] and package size algos to their advantage. So that is part 3 and then part 3 is that we are actively working on in fact, already on our way to embedding intelligence throughout the platform. So as an example, we launched AI insights on the app to [surface] both stock level. Folks who are not on just humble request if people who are not on [indiscernible] can go on mute or I think you need to mute it for everyone, operator. Yes. So on the app, we've launched both portfolio and stock insights. So if you have a portfolio or if you have a stock, we are able to use AI to uncover insights on that, and we've seen very encouraging response. So we are actually one of the first brokers to launch an NCP integration with a major LLM provider last year itself in which you can actually execute, analyze, execute and potentially do anything that we can do on the 5paisa app via using the conversational interface. We're building more on this, and you can expect a much more simplified version, much more easier to access version of this NCP integration. Now I want to cover where we are headed, the strategic initiatives that we're investing for scale. There are -- the reason that I'm highlighting these products is that they are all moving to production in the next few months. There are multiple platform upgrades complete revamped platform, which is happening. And in our early beta stage testing, we've seen very, very encouraging results. [indiscernible] product calendar, we have multiple strategic levers in motion. One is, as you all probably follow our company, understand that we raised about INR 468 crores in the rights issue as capital in the month of April. This has strengthened our balance sheet and which we're going to use for obviously, continued investment in the product and tech talent for improving and taking our product to the next level, plus partnerships and plus growth marketing, right? So that is one. Second is we are also looking at -- very actively looking at the right partnerships in the AI ecosystem to accelerate our AI journey, both within the company internally for improving productivity and unleashing creative forces, but also more importantly for our customers where they can leverage the power of AI to make them better investors and traders. And third, of course, we continue to selectively evaluate inorganic opportunities as well in the market, which can accelerate our journey and give us additional speed and talent to move forward as an integrated platform. Now just a few words on where we are and what is the sort of long-term opportunity. I think the long-term opportunity in the Indian market remains very robust, even though past few months have been volatile or the past year has been a little bit choppy. But we think Indian capital markets, the journey of retail trader is still in early innings. There are a lot of financialization that is happening in the economy and people are coming to the market. And the retail audience, whether it is the investment persona, whether it is a trader person, whether it is a combination of both is a very serious segment and a very robust and growing segment of customers in the market, which was not the case 5 years back, which is not the case 10 years back. And on top of it, obviously, the level at which AI is transforming tech platforms in almost every facet of life where it's becoming almost a lifestyle feature more than anything else, makes us very confident that a combination of a very strong fintech plus financial services offering, coupled with AI, we can completely transform the market and we can do various multiple things which have value, which will provide a value add to our customers, right? So that is the best we are making for differentiation at 5paisa. Over the next 12 months, we are focused on stepping up user engagement adoption and monetization for all of our new app and feature rollouts. As I said that like early stage beta trials are very, very encouraging as we transform the platform. We are looking to also make initial improvements to [indiscernible] economics to improve our margin and overall PAT. The idea is to get to a state very quickly where we have operating leverage from -- because at the heart of it, we are a tech platform to get to operating leverage very quickly. And from there onwards, the scale becomes very easy. So incremental revenue, we do not have incremental cost, right? So that's the area we want to go in. And also look at expansion into adjacent areas through organic [indiscernible] investment services through organic product development and both organic and inorganic ways. So I will continue to report on this over the next quarter meaningfully. And that's all I have today. With that, happy to take any questions.

[Operator Instructions] The first question comes from the line of [Jatin Sahani], an individual investor.

[indiscernible] I have a couple of questions from the financial perspective. Basically, we had a good [indiscernible] so i just wanted to understand whether [indiscernible] when should we look into this [indiscernible].

The result is a little [indiscernible].

Sure, sure. So basically what I am saying is that we had a good base in Q3 and we will really be good in Q4 but you made this quarter happening. Kind of [indiscernible] I just wanted to understand is like basically is this a one-off [indiscernible] or [indiscernible] growth picking up because you guys have set up [indiscernible] platform and operating leverage [indiscernible] so can we see growth from Q2 onwards there. [indiscernible] just wanted to understand how should we look into it.

Yes, so [indiscernible] a little bit of moderation in Q1 so that's slightly one-off overall revenue wise we have grown. But given the volatility [indiscernible] in the last quarter, there is some runoff effect on us as well. So I mean [indiscernible] forward, but we do expect growth to accelerate from the base that we have now because we're doing all the right things on the product side, we're doing all the right things on the growth marketing side. And I think in our business, those are the 2 most important things. I think the first one is the most important, which is continual intense focus on improving the experience. So I do believe that we can [indiscernible].

So my next question is [indiscernible] going through the presentation and debts that you guys have been [indiscernible] noticed that [indiscernible] it's kind of tapered off here. [indiscernible] just wanted to understand what steps are we taking in there to [indiscernible] monitor there [indiscernible] execution so like in Q3 we had kind of [indiscernible] so basically what steps we are taking to [indiscernible].

[indiscernible] so I would focus real but now [indiscernible] quantitive acquisition but more important qualitative acquisition and that is already getting reflected in our numbers when we look at unit numbers, right. So it's better RPC [indiscernible] customers we have seen for the last few months in fact in the last quarter as well. When our RPC regulated customers have actually grown. So that continues to be a [indiscernible] we want. I mean ideally we want to acquire customers at a little cost but again [indiscernible] RPC in long term value when the customer generates a [indiscernible] and we have seen this data multiple times a lot of [indiscernible] on the platform but better RPC customers better [indiscernible] give you higher retention. So that's really our focus and that reflects the kind of product we're building [indiscernible] what kind of customers we are acquiring, so our positioning for the people that we try to attract to the platform are all synced to the same [indiscernible]. So, long answer to your question is that we are already seeing, in the metrics we are already seeing improvement in those RPC ratings and we continue to do that. Now our focus is that we are able to bring in higher number of customers with high quality. So that is [indiscernible] headline number of how many customers are coming in.

Okay, and sir what about ADC growth.

ADC growth for overall [indiscernible] at least for Q1. So, slight dip for us on [indiscernible] and on the cash side it grew and [indiscernible] again see the [indiscernible] growth for us also [indiscernible] the kind of customers that are there on the platform, whatever they have is of value. The kind of pattern that they have [indiscernible] long term customers [indiscernible] growth for us and that will continue to be the focus so [indiscernible].

[indiscernible] I just wanted to understand your thoughts there. So, do you think that these guys have taken market share [indiscernible].

So everyone has their own strategy and depending on the kind of customers [indiscernible] strategy and others might have a different strategy. So, yes, [indiscernible] I would say [indiscernible] so after the [indiscernible] changes came in the month of October '24, there was a moderation [indiscernible] players source revenue from [indiscernible] and then a lot of them are diversified so that is their strategy. Our strategy is again quality customer acquisition, not quantity and then retaining them for a longer period of time to drive higher revenue share. And then obviously also offer adjacent value added products to them. For example, a good example of that is [indiscernible] products are grown through a lot of our existing customer retention because typically in [indiscernible] cycle that you have doesn't grow with new customers. Those will be older customers. They become, they trust your platform and over a period of time, they try out the offering. And for us, it's so encouraging [indiscernible]. So yes, there might be some moderation in terms of overall volumes. And because of that, you will see that some people have gained market share, some people have lost market share. But long-term opportunity, long-term I mean in the next 5 years that the market is going to grow and then there will be enough for everyone to go after.