Angel One’s fourth-quarter earnings for FY25 offered a mixed bag of insights — a quarter marked by declining profits, cost escalations, and regulatory headwinds. Yet, Motilal Oswal remains confident in the brokerage's long-term potential, reiterating a BUY rating with a revised price target of Rs. 2,800, implying a 19% upside from the current market price of Rs. 2,356.

Despite margin compression and a sequential decline in profitability, Angel One’s aggressive market positioning, rising client base, and growing financial services ecosystem are underpinned as key drivers for future resilience.

Q4 Snapshot: Regulatory Drag and IPL-Driven Costs Squeeze Profits

The March quarter was particularly harsh, as Angel One’s total income dropped 16% QoQ to Rs. 8.3 billion, tracking the fallout from tighter F&O regulations and subdued market activity. Net profit for Q4FY25 stood at Rs. 1.7 billion, down 38% QoQ, missing estimates by 13%.

Operating expenses remained flat sequentially, but when adjusted for one-off employee pay reversals (Rs. 640 million) and IPL advertising expenses (Rs. 344 million), the company’s customer acquisition cost (CAC) surged. This reflects its continued commitment to client acquisition even amid macro uncertainty.

Revenue Composition: F&O Dominance Faces Temporary Decline

Angel One's revenue profile in Q4 was characterized by a significant decline in its bread-and-butter segment:

F&O brokerage revenue dropped 26% QoQ to Rs. 4.9 billion due to new regulatory restrictions impacting retail participation.

Cash market activity declined 10% QoQ, with cash brokerage revenue sliding to Rs. 886 million.

The commodity segment held steady but posted an 8% miss versus expectations.

Notably, revenue per order remained relatively stable at Rs. 21.2, despite lower order volumes and declining F&O contributions.

Operating Metrics: Efficiency Ratios Worsen Amid Elevated Expenses

The company’s operating efficiency suffered in Q4:

Cost-to-income ratio (C/I) rose sharply to 68.2%, up from 58% in Q3.

Admin expenses increased 14% QoQ to Rs. 3.8 billion, attributed to branding, IPL-related campaigns, and ongoing digital transformation.

Even with one-time cost reversals, employee expenses stood at Rs. 1.9 billion, indicating the structural rise in compensation-led opex.

Management emphasized that variable pay remains a cost efficiency lever, adjusted mid-year depending on performance.

Market Share and Client Base Remain Firm

Despite the earnings hiccup, Angel One has seen continuous growth in its total client base, which now exceeds 7.6 million. However, active NSE clients declined marginally in Q4.

The broking platform has managed to hold its market share in NSE active clients at 15.6%, reflecting consistent traction even as peers take a more cautious approach.

Wealth and Distribution Businesses Gaining Momentum

Angel One’s long-term vision is to create a full-spectrum financial services platform. Significant progress has been made:

Mutual Fund AUM reached Rs. 740 million across three passive investment products.

Wealth management AUM stood at Rs. 38 billion, with 75% recurring and 680+ high-value clients onboarded.

Loan distribution disbursement stood at Rs. 7 billion, with the addition of three new credit partners.

The firm is also actively integrating AI and machine learning for credit risk assessment and personalized offerings.

Financial Forecast and Valuation: Expect Near-Term Pain, Long-Term Gain

Motilal Oswal revised Angel One’s earnings forecast to reflect headwinds:

FY26E EPS has been cut by 15%, and FY27E by 7%.

PAT is projected at Rs. 9.6 billion for FY26E and Rs. 13.6 billion for FY27E.

The target price of Rs. 2,800 is based on 18x FY27E EPS of Rs. 150.6.

While profitability took a hit in FY25, management expects operating margins to normalize to 40–45% by Q4FY26, as the impact of F&O regulations stabilizes and market sentiment revives.

Investment Triggers to Watch

Investors should monitor the following for potential upside:

• Recovery in F&O volumes as regulatory impact wanes
• Ramp-up in mutual fund and wealth management contributions to revenue
• Improved cost efficiency through tech automation and leaner CAC models
• Normalization of customer acquisition spending by FY26

Target Price and Recommendation

Motilal Oswal has reaffirmed its BUY recommendation on Angel One, setting a 12-month target of Rs. 2,800. The stock currently trades at 15.6x FY27E P/E and 2.7x P/BV, offering compelling upside for medium-term investors.

Conclusion

Angel One’s Q4 numbers underscore a transitional phase — one where near-term profitability is being traded off for long-term market share and platform expansion. While regulatory changes and rising CAC have affected quarterly results, the company’s forward-thinking investments in technology, wealth management, and passive investing signal structural strength.

The path ahead will require careful execution, but for investors with a medium-to-long-term horizon, Angel One presents a high-beta but fundamentally promising play in India’s evolving financial services landscape.