EQUITY RESEARCH OF

STOCKBROKING
COMPANIES
 
GROUP MEMBERS:
Rahul Raj 120096
Shilpi Kumari 120102
Shruti 120108
Tanu Singh 120115
Yukti Sharma 120120
The top 10 stockbroking companies on the basis of market capitalization are as follow:-

Market Cap
Company Name
(Rs. cr)
ICICI Securitie 14,167.29
Dhani Services 12,964.50
MCX India 8,210.99
Angel Broking 2,943.13
BSE Limited 2,497.95
Geojit Fin 934.14
5paisa Capita 877.21
Dolat Investmen 829.84
Share India Sec 346.19
AB Money 235.06
Dhani Services Ltd
• Dhani services Ltd, 100% subsidiary of Indiabulls Ventures Ltd is one of India's leading capital market
companies providing securities and derivative broking services.

• The company also provides healthcare solutions along with offering securities, commodities, and derivatives
broking services, mutual funds, and initial public offerings.

• It operates as a share broker on the NSE Limited and the BSE Limited; and commodity broker on the Multi
Commodity Exchange of India Limited and the National Commodity and Derivative Exchange Limited.

• The company also offers consumer and business loans through digitally-enabled loan fulfillment solutions.
The company operates completely on a digital platform and has shut all its physical sales locations.

• The company has its corporate offices in Mumbai and Gurugram.

• In FY 2019-2020 market capitalization of the company was ₹ 12,068 Cr, current ratio was 4.02. Company
has reduced debt in FY 2019-2020. Also the company has been trading its stock at 2.13 times its book value
and maintaining a healthy dividend payout of 1291.25%
Qualitative Aspect of Dhani Services Ltd.
Promoters:- Orthia Properties Private Limited, Zelkova Builders Private Limited, Inuus Developers Private Limited, and Orthia
Constructions Private Limited- It is involved in Real estate activities on a fee or contract basis. Sameer Gehlaut- Founder and
chairman of the Indiabulls Group.

Clients and end users:- NRIs, PIOs, Qualified Foreign Investors, Individual Investors, Partnership/HUF, Companies, Mutual Funds,
Societies and Trusts. Financial Institutions and Foreign Institutional Investors (FII’s)

Competitors:-ICICI Securities, MCX India, Angel Broking, BSE Ltd, Geojit Financial Services Ltd, Dolat Investment, 5paisa Capital
are some of the main competitors

Major Shareholders:- Promoters(31.91%), FIIs(26.10%), DIIs(0.05%), Public(40.04%) and Others(1.90%)

Plan to launch any new products:- The company is planning to introduce monthly subscriptions of various product offerings to
customers, a common platform for digital payments, and affordable digital healthcare services through dhanidoctor.

Products:- Healthcare(Doctors, Medicines Delivery), Financial(Loans, Credit Line, Wallet, Stocks, Insurance, Investment Advisory)

Subsidiaries:- The company has only three subsidiaries-Dhani Loans & Services Limited, Dhani Stocks, Dhani Healthcare Limited.
Bankers:- Indian Bank, Axis Bank, Bank of Baroda, Canara Bank, Central Bank of India, HDFC Bank, ICICI Bank, IDBI
Bank, IDFC First Bank, Indian Overseas Bank, Indusind Bank, Kotak Mahindra Bank, Punjab and Sind Bank, Punjab
National Bank, RBL Bank Limited, South Indian Bank, State Bank of India, Lakshmi Vilas Bank, South Indian Bank, Union
Bank of India, Yes Bank

Auditors:- Walker Chandiok & Co LLP( Statutory Auditor), N.D. Kapur & Co.(Internal Auditor), A.K. Kuchhal & Co.
(Secretarial Auditor)

Entry barriers for new participants to enter the industry:- Tight of rules and regulations, technology advancements, highly
volatile market, increasing compliances by governing bodies, availability of sophisticated trading tools and increasing
compliances by SEBI are the major barriers. Another major factor playing its role in today's market is the introduction of
discount broking and technology, putting a major dent in the profitability of conventional stockbrokers. Discount broking players
have started a major price war in the industry and hence is a reason for eradicating the mid and small size brokers in the market.
The industry today has become transparent, highly technology intensive and a lot tougher for new entrants. This industry today
has completely moved towards automation, be it risk assessment, order placing, portfolio management, market research or
investment advisory. The big players today are taking a great advantage of present market scenario, but, there still is a vast
potential in the niche market where only small players can serve.
Do they operate under heavy regulated environment?

The industry is regulated by strict rules and regulations by SEBI and Government. The industry has become
transparent to keep check on the stockbroking companies. The government is making every effort to ensure investor
safety. The regulations are imposed to control the volatile market and to avoid speculation or gambling.

Is the company manufacturing products that can be easily replicated in a country with cheap labors?

The company deals in providing services such as digital consultation with doctors, delivery of medicines at doorstep,
consultation of financial planning, investment, loans, credit line, wallet, online payment, insurance, and stock trading
which is not unique services. All these services are provided by different companies. Also, this model can be
replicated by different companies to grab more customers.
Quantitative Aspect of Dhani Services Ltd.
Gross Profit Margin:- The average Gross Profit margin for the last five years (2016-2020) is 93.49% which is above the
average of top 8 stockbroking companies i.e. 84.15% for the last five years. Also, the current GP margin of Dhani Services Ltd
is 93.50%.
  2016 2017 2018 2019 2020 Average (Rs Cr) Industry average
Sales (Rs Cr) 397 413 980 1,993 2,915 1339.6 84.15%
COGS (Rs Cr) 49.3 11.37 160.15 0 29.41    
GP (Rs Cr) 347.7 401.63 819.85 1993 2885.59    

GP margin 87.58% 97.25% 83.66% 100.00% 98.99% 93.50%  

Revenue Growth:- The revenue is in line with the GP from 2016 to 2020. In the last five years, the gross profit has increased
along with an increase in revenue. Though the rate of increase in GP is not in line with the rate of increase in revenue.
3500 160.00%

140.00% 143.09%
3000 137.29%

120.00%
2500
104.13% 103.37%
100.00%
2000

80.00%
1500
60.00%
1000
46.26%
44.79%
40.00%
500
20.00%
15.51%
0
2016 2017 2018 2019 2020 4.03%
0.00%
2017 2018 2019 2020
Sales GP
Revenue growth of Dhani Services GP Growth of Dhani services
Earning per Share:- The company's EPS is in line with Net Profit. In the last five years (2016-2020) when NP increased,
EPS also increased. Also when Equity increased, EPS increased along with the increase in NP.

  2016 2017 2018 2019 2020

NP (Rs Cr) 74 102 210 459 4
EPS 2.12 2.69 3.99 7.59 0.09
Debt(Rs Cr) 2,193 1,519 4,929 8,648 5,388
Equity(Rs Cr) 59 64 93 113 102

Debt Level:- The company has lower debt in 2020 than in 2019 which means the company has repaid its debt. Therefore
the finance cost has also decreased. But the EPS has also decreased due to a decrease in equity and a decrease in net
profit. The company is not highly leveraged in 2020.

Return on Equity:- From 2016 to 2019 the ROE has increased from 125.42% to 406.19%. But in the year 2020, the
return on equity was only 3.92% which is very less than its peers and from its past ROE. It stands at the last position
among the top 10 stockbroking companies if ROE is compared. Also in the past 3 years (2017-2020) the debt and ROE
have been in line, i.e. ROE increases, debt increases, and ROE decreases, debt decreases.

  2016 2017 2018 2019 2020

Return on equity (Rs Cr) 125.42% 159.38% 225.81% 406.19% 3.92%
Debt(Rs Cr) 2,193 1,519 4,929 8,648 5,388
Cash Flow from Operations:-The performance of cash flow from operations for the company has not been as smooth as
revenue generation. In the last five years revenue has been increasing whereas cash flow from operations in 2015 and 2016
was increasing but went negative in 2018 and 2019 as the company had a negative change in working capital which means an
increase in current assets was more than a change in current liabilities. And again the cash flow from operations was showing
an inflow in 2020.
8000

6000 6040

4000
2915
2000 1993
980
0397
10 413
203
2016 2017 2018 2019 2020
-2000
-2912
-4000

-6000
-7044
-8000

Cash flow from operations Revenue

Sales vs Receivables:- In the last 5 years, the sales have increased at a CAGR of 48.99% whereas Account Receivable has
decreased from Rs 318 cr in 2016 to Rs 152cr in 2020. Also, the account receivables are cleared in 19 days in 2020 than 292
days in 2016. Therefore the credit policies of the company is too tight and very less percentage of sales is in credit basis.

  2016 2017 2018 2019 2020

Sales (Rs Cr) 397 413 980 1,993 2,915

Accounts Receivables(Rs Cr)
318 337 264 273 152

Account Receivable Days 292 298 98 50 19

MCX INDIA
 Qualitative Aspect of BSE Limited
BSE Limited
1. What does the company do?   BSE Limited, formerly known as the Bombay Stock Exchange Ltd., is an Indian
stock exchange located at Dalal Street, Mumbai. It provides a transparent market for trading in equity, debt
instruments, derivatives and mutual funds. It was established in 1875, it is Asia's oldest stock exchange. The BSE is
the world's 10th largest stock exchange with an overall market capitalization of more than US$2.2 trillion on as of
April 2018.BSE ltd is a exchange platform of Financial market where Market securities can be readily sold in a
financial market if it is listed in Bombay Stock Exchange, thereby sufficing the liquidity needs of both businesses and
individual investors. Funds to meet any requirement of a company can be obtained through the issuance of debt and
equity securities, which investors purchase for the purpose of wealth creation. Securities purchased can be readily
sold through the electronic trading settlement of BSE, thereby allowing investors to effectively encash their
investment as and when the need arises. In FY 2019-2020 market capitalization of the company was ₹ 2,498 Cr and
current ratio was 1.90. Company is almost debt free. Stock is trading at 1.03 times its book value. Also the company
has been maintaining a healthy dividend payout of 56.13%

2. Who are the promoters? What are their background?   Foreign Institutions, BanksMutualFunds, Others,
General Public, & Financial Institutions
 3. Who are company's client or end users?   Company's clients and end users are their buyer and seller
members, corporate brokers.

4. Who are their competitors?   NSE, MCX-SX , The Multi Commodity Exchange of India Limited ,
NCDEX are some of the main competitors

5. Who are the major shareholders of the company?   Description Percent of Share (%)
Non-Institution 51.18
Promoters 29.48
Mutual Funds/Ute 2.63
Fi/Banks/Insurance 0.6
Government 0
FII 0

6. Do they plan to launch any new products?   They are doing tie ups with commodity exchange MCX to
launch new services, they are not in to products.
 7. What is the revenue mix?   Its only brokerage income

8. Do they operate under heavy regulated environment?   SEBI is the regulatory board of BSE and they
have to fulfill all compliance.

9. Who are their bankers, auditors? Bankers:- Edelweiss Financial Services, Axis Capital, Jefferies,
Nomura, Deutsche Bank, Motilal Oswal and SBI Capital Markets, said sources. While the first four will act as
joint global coordinators, the latter three will serve as book running lead managers.

Auditors:- M/s. S. R. Batliboi & Co. LLP( Statutory Auditor), M/s. Dhrumil M. Shah & Co. (Secretarial Auditor)

10. How many employees do they have? Does the company has labor issue?   BSE Ltd. has 519
employees and is ranked 2nd among it's top 10 competitors. They don’t deal with labours.

11. What are the entry barriers for new participants to enter the industry?   Common barriers to entry
include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and
high customer switching costs. Other barriers include the need for new companies to obtain licenses or
regulatory clearance before operation.
12. Is the company manufacturing products that can be easily replicated in a country with cheap labors?   No

13. Does the company has too many subsidiaries?   Indian Clearing Corporation Limited, a wholly owned
subsidiary of BSE, acts as the central counterparty to all trades executed on the BSE trading platform and provides
full novation, guaranteeing the settlement of all bonafide trades executed. They don’t have too many subsidiaries.
 Quantitative

aspect of BSE Limited

1. Gross Profit Margin The average Gross Profit margin for the last five years (2016-2020) is 55.66% which
is below the average of top 8 stockbroking companies i.e. 84.15% for the last five years. Also, the current GP
margin BSE Ltd is 55.66%.

2. Revenue Growth The revenue is in line with the GP from 2016 to 2020. from 2018 years, the gross profit
has decreased along with an decrease in revenue . Also the rate of in GP is in line with the rate of increase
in revenue is negative.
 3. EPS The company's EPS is in line with Net Profit. In the last five years (2016-2020) when NP increased, EPS also
increased and vice versa. Also when Equity decreased, EPS decreased along with the decrease in NP. The company
has maintained zero debt since 2018.

  2016 2017 2018 2019 2020

NP 133 221 689 199 122
EPS 12 41 128 38 27
Debt 1 3 0 0 0
Equity 11 11 11 10 9

4. Debt Level The company has no debt in 2020, 2019 & 2018 than in 2017 which means the company has repaid its
debt. Therefore the finance cost has also decreased. But the EPS has also decreased due to a decrease in equity and a
decrease in net profit. The company is debt-free.

  2016 2017 2018 2019 2020

Debt 1 3 0 0 0
Equity 11 11 11 10 9
 5. Sales Vs Receivables In the last 5 years, the sales have decreased at a CAGR of -0.83% whereas Account
Receivable has increased from Rs 47cr in 2016 to Rs 70cr in 2020. Also, the account receivables are cleared in
42 days in 2020 than 27 days in 2016. Therefore the company should look into its credit policies because sales
has decreased but credit sales has increased.

  2016 2017 2018 2019 2020    

Sales 635 572 676 652 609 CAGR -0.83%

Accounts Recievables 47 69 55 49 70    
Account Receivable Days 27 44 30 27 42    

6. Cash Flow from Operations The performance of cash flow from operations for the company has not been
as smooth as revenue generation. In the last three years revenue has been decreasing whereas cash flow
from operations has been increasing from 2018.
 7. Return on Equity From 2016 to 2018 the ROE has increased. But in the year2019 and 2020, the return on
equity was less from its past ROE. Also in the past 3 years (2017-2020) the company is debt free and ROE has also
decreased.

8. Business Diversity They are doing tie ups with commodity exchange MCX to launch new services

9. Subsidiary Indian Clearing Corporation Limited, a wholly owned subsidiary of BSE, acts as the central
counterparty to all trades executed on the BSE trading platform
Geojit Finance
5paisa Capital