Angel Broking lists at discount, what should investors do?

Angel Broking disappointed investors on its market debut, starting off the day way below its issue price of Rs 306 on October 5 despite a strong market trend.

After opening at Rs 275, the retail broking house stock touched an intraday high of 296.45 and a low of Rs 256.60. It was trading at Rs 278, down 9.15 percent on the BSE at the time of publishing this copy.

Investors can exit fully or partially and invest in other stocks in the same industry that are better placed, analysts said.

Angel Broking's listing looks even more lacklustre when compared to the start other companies, which too launched their IPOs in recent weeks, got. Mindspace Business Parks REIT, Route Mobile, Rossari Biotech, Happiest Minds, Chemcon Speciality Chemicals and CAMS all listed with at least 10 percent premium.

"Investors should partly exit on the listing day and hold partial quantity at least for next few years for decent returns," Gaurav Garg, Head of Research at CapitalVia Global Research told Moneycontrol.

Manali Bhatia, Head-Research at Rudra Shares & Stock Brokers, advised investors to exit the stock at the listing price.

"As we recommended avoiding the issue, we suggest to avoid buying on listing day as well. Its peers such as ICICI Securities and IIFL Securities are better options as they offer higher return ratios, ROE at 44.32 percent and 26.39 percent respectively and are better placed when compared to Angel," she said.

"Even at the upper price band of Rs 306, the stock is available at a P/E ratio of 26.75x, which is higher compared to peers. Also, the broking house is heavily litigated with issues & punched with notices. Earlier, SEBI banned trading on one of its promoter Lalit T Thakkar for two years. Considering all these factors, we believe the stock to go down to the levels of Rs 180-225 going ahead," she said.

If someone wants to buy the stock, they should wait for a decent correction before adding this counter, Garg said. He is not over-bearish on this sector as sees decent growth over the next five years.

However, Motilal Oswal Financial Services may perform well compared to Angel Broking in terms of valuation and growth, and JM Financial, too, can be included in the investor's portfolio, he said.

Angel Broking is one of the largest retail broking houses in India in terms of active clients on NSE, as of June 2020. It is a technology-led financial services company that offers broking and advisory services, margin funding, loans against shares (through one of the subsidiaries AFPL) and financial products distribution to clients.

The company raised Rs 600 crore via public issue. Of which, net proceeds (from fresh issue of Rs 300 crore) would be used for working capital requirements and general corporate purposes. The remaining part was offer for sale of Rs 300 crore received by promoters and investors via stake sale.

Garg believes the brighter side for this industry is the shift of trading platform from offline to both online and offline which has also pushed up the revenues countered by full-service brokers.

"Apart from broking business, now full-service brokers are eying new area of operations, which include asset management services, portfolio management services, insurance broking and mutual funds. These might help to boost revenues apart from their core business. So there is scope of growth in the sector but companies have to implement and execute their strategies well," he said.