Angel One Q1 Review: Investec Maintains 'Buy' Remains Bullish Amid Market Headwinds
Despite an overall tough quarter, Investec points to strong traction in Angel One’s new initiatives, underscoring its potential to drive future growth.
Investec has maintained 'buy' rating on Angel One Ltd., with a target price of Rs 2,700, implying a modest total return forecast of 2.4%. This positive outlook comes despite a challenging first quarter for the financial services firm, where its Profit After Tax saw a significant year-on-year slip.
Investec's stance is backed by Angel One's better-than-expected Q1 performance and promising traction in new initiatives such as credit disbursements and wealth management. The brokerage remains positive, expecting sequential improvement in both revenue and earnings growth.
Q1 Performance: A Beat on Expectations
Angel One reported a PAT of Rs 1.14 billion for the first quarter of fiscal year 2026, marking a substantial 61% year-on-year decline. However, this figure still managed to beat Investec's estimates by 9%, primarily due to lower-than-anticipated operating costs. Total revenue for the quarter declined 20% year-on-year, but was 1% higher than Investec's projections.
The year-on-year revenue decline is attributed to several factors, including new F&O regulations, weak market sentiment impacting volumes, and "true to label" regulations that affected other operating income.
Broking revenue declined 23% year-on-year, but was up 7% quarter-on-quarter. Net interest income grew by 15% year-on-year and 6% quarter-on-quarter, while other operating income, despite a 52% year-on-year decline, improved by 11% quarter-on-quarter.
Operating costs remained flat year-on-year but increased by 23% quarter-on-quarter. This included IPL-related expenses of Rs 1.12 billion, comparable to Rs 1.14 billion in the previous year. Adjusted against this, non-employee expenses declined 10% quarter-on-quarter.
The Ebitda margin, however, saw a significant contraction, dropping to 22% from 38% in the first quarter of fiscal year 2025 and 32% in the fourth quarter of fiscal year 2025.
Traction in New Initiatives
Despite an overall tough quarter, Investec points to strong traction in Angel One’s new initiatives, underscoring its potential to drive future growth. Credit disbursements surged to Rs 2.3 billion in the first quarter, with a 123% quarter-on-quarter increase, with Investec expecting further ramp-up in fiscal year 2026 following the addition of Kredit Bee as a new lending partner.
As of June 2025, Wealth Management Assets Under Management (AUM) stood at Rs 50.7 billion, with a client base exceeding 1,000, and is expected to maintain its growth momentum in FY26.
Mutual Fund distribution AUM also grew to Rs 138 billion from Rs 111 billion as of March 2025, and the Asset Management Company AUM reached Rs 3.4 billion as of June 2025.
Outlook: Earnings Growth to Improve Sequentially
Investec acknowledged that FY25 was a weak year for Angel One due to multiple headwinds. However, the brokerage expects these effects to be largely absorbed into the base by the fourth quarter of FY26.
The brokerage expects revenue and earnings growth to improve on a quarter-on-quarter basis. The first quarter's revenue growth was better than Investec's expectations, coupled with the positive momentum in new initiatives. The company has a conference call scheduled for July 17, where further insights are expected.
