As we declared our Quarterly and Annual results yesterday, I thought of communicating with our customers, investors and community at large. As I am writing this, the world is grappling with the Covid-19 pandemic and we are facing one of the worst recessions in the last 100 years. A lot of industries are facing their worst times with businesses almost coming to a standstill. Though experts forecast a V-shape recovery after things come back to normal, I believe that it will a little while for normalcy to return and the world will change its perspective towards many things, business included. I am of the strong opinion that for every industry there comes a point of influx where everything turns in favour for that particular industry and business skyrockets in no time. For instance growth of digital payments after demonetization, growth of internet consumption after Reliance JIO, and growth of Indian pharmaceuticals during Covid-19 pandemic. I feel the same has now come for digital players - especially discount brokers like us. The heightened activity that we have witnessed in the last 45 days, inflow of new customers (especially millennials) in capital markets, and adoption of mobile app based trading are strong indicators of things changing drastically - for good!

We have now completed 4 years of our commercial operations. When we started 5paisa, there were many sceptics challenging the viability and sustainability of a discount broking model; but today, most of the large existing players have jumped ship and are offering similar services. Despite the foray of almost every large broking player in this space, I am happy to share that we are among the top 3 brokers in discount broking space and top 10 brokers of the country on an overall basis. Today, we have more than 41 lakh mobile app users and 600,000 registered customers, contributing to an average daily turnover of ₹30,000 – ₹40,000 crore and market share of more than 2%+ on stock exchanges. Over 75% of our turnover happens through the mobile app (one of the highest in the industry) and we have ZERO offline business. 

Let me discuss some key aspects of our business in detail. 

Financial Performance

For financial year FY19-20 our revenues are ₹108.27Crs, a robust 78% Y-o-Y growth. For quarter ended March 2020, despite being one of the toughest quarters, we reported revenues of ₹35.4Cr, a growth of 32% Q-o-Q and 69% Y-o-Y. Since inception, unlike other start-ups, we were always conscious about our spends and never went overboard with unnecessary expenditure. This has resulted in us, for the 1st time, reporting operating profit of ₹9.30Crs for FY 19-20. Overall (post interest and depreciation) for full year, our losses have reduced to just ₹7.89Crs, a 58% reduction as compared to previous fiscal. In my initial interaction, I had mentioned that in the online business, investments are required to build business including technology, infrastructure and marketing but as the revenues and customers increase, the incremental cost is less. This is proven from the fact that our overall operating expenditure increased by just 23% Y-o-Y to ₹98.97Crs. 100% of our business is online and done by our clients themselves. This is the reason that despite our revenues increasing by 78%, our manpower has just increased by 20% (975 people as on March 20) and manpower cost by just 8.5% to ₹29.15 Crs. Our variable expenses constitute 60% of total expenses.

FY19-20 was not just a year for achieving business milestones like crossing 500,000 customers and 2%+ market share, but also for financial milestones of raising ₹103Cr capital from our maiden Rights Issue. Our Rights Issue which concluded in August, was oversubscribed by 111%. This reassures us of the faith that our shareholders have in us. The much required capital will help us for our next round of robust and profitable growth. 

Customer Acquisition – The Driving force

In FY19-20 we added 2.2 lakh customers, a Y-o-Y growth of 171%. Our acquisition numbers have shown sequential growth in every quarter of this year. Despite having to adapt to a work-from-home situation in March, our acquisition was the highest ever, with 80% growth over February. I am confident that this trend will not just continue but with every passing quarter our acquisitions will grow exponentially. 

Another important factor is the marketing spends we have incurred to acquire these customers. Our Marketing expenses for the year grew only by 20% whereas our acquisition grew by 171%. 5paisa as a brand is now well established. We now acquire more customers organically by word of mouth than by marketing. 

With Covid-19, world is witnessing a tectonic shift in the investor behaviour. People, especially millennials and first timers are shifting to online, app-based brokers rather than traditional ones. I see the same trend in India. As we are one of the top 3 online discount brokers in the country, I am confident that we will conquer a substantial market share in the incremental business in coming quarters. This will not just help us achieve a remarkable milestone of 1 Million customers very soon but also to be in Top 3 brokers of the country.

New Business lines

5paisa is not just a discount broker but a Digital Financial Service provider. Our philosophy is to provide all financial products which can be served end-to-end digitally. Apart from equities, commodity, currency and mutual funds, we have also been distributing Digital Gold, Personal Loans, Research and Insurance products. I am very happy to announce a new line of business for 5paisa i.e. Peer-to-Peer Lending. In December 2019, 5paisa P2P Ltd, a subsidiary of 5paisa Capital Ltd., got approval from the RBI for P2P lending. We are now a registered NBFC and the first listed company entering in P2P lending business. We have just launched our website www.5paisaloans.com and mobile app ‘5paisa Loans’ on both Android and Apple. I am very optimistic about this business. Though it is still at a nascent stage in India, it has tremendous potential. 5paisa may be relatively a late entrant in P2P lending, but in the next 1 year we aim to be the market leader in this industry. 

Conclusion

Covid-19 has provided a once-in-a-lifetime opportunity for Digital Financial players. There is a significant shift in user behaviour. Millennials now want to approach capital markets and invest in stocks directly but not with traditional brokers. They will prefer online discount brokers. 5paisa has proved to be a strong alternative for these customers. If FY19-20 was the year of consolidation and reassurance of the fact that online DIY is the way to go, FY20-21 will be the year for exponential and profitable growth.