IPO closes on 25 Sep'25
Anand Rathi Share & Stock Brokers Ltd
Minimum Investment
₹ 14,904 / 36 shares
Our Verdict:
Avoid
- Anand Rathi Share & Stock Brokers Ltd (ARSSBL) has demonstrated strong growth in both revenue and earnings over the past three years. However, the company remains modest in size and is heavily influenced by capital market volatility, while facing fierce competition in the core broking segment.
- The Indian broking industry is divided between full-service brokers like ARSSBL and discount brokers such as Zerodha, Groww and Upstox. Currently, discount brokers control 78% of the market, leaving full-service players with just 22%.
- Valuation-wise, the IPO appears fairly priced with a Price-to-Earnings (PE) multiple of 18x based on FY25 earnings, which is in line with the industry average. However, listed peers boast average EBITDA margins of 43% and PAT margins of 26%, whereas ARSSBL’s margins stand at 37% and 12%, respectively.
- Regulatory risks add further uncertainty to the investment outlook. Additionally, the IPO valuation seems fully priced, offering limited upside potential for investors.
- Given these factors, long-term investors are advised to stay on the sidelines for now.
About the company
Founded in
22 Nov'91
Managing director
Pradeep Gupta
- ARSSBL is a full-service brokerage firm with a diverse revenue model. The company generates 60% of its revenue from its Broking segment, which offers services in equities, derivatives, commodities and currency markets. Another 23% comes from the Non-Broking segment, which includes margin trading, portfolio management, and the distribution of investment products like mutual funds and alternative funds. The remaining revenue is derived from other income sources such as interest on deposits, bonds, and other financial assets.
- Currently, ARSSBL operates 90 branches across 54 cities and collaborates with 1,125 agents in 290 cities, serving a client base of 886,644, with 221,510 active clients. The company boasts the highest average revenue per client (ARPC) among its peers, achieving Rs 29,347 in FY25.
STRENGTHS
- Solid Growth: ARSSBL has shown impressive growth from FY23 to FY25, with a compound annual growth rate (CAGR) of 34% in operating revenue, 64% in EBITDA and 66% in net profit.
- Margin Expansion: ARSSBL has consistently improved its margins, with net margin rising from 8.05% in FY23 to 12.23% in FY25 and EBITDA margin expanding from 24.60% to 36.81%. This reflects effective cost control and operational efficiency.
- Client Retention: A significant 58.91% of ARSSBL’s clients have been with the company for over three years, and 44.88% have remained for more than five years, highlighting strong client loyalty.
- Robust Growth in Non-Broking Segment: ARSSBL is diversifying its revenue streams beyond broking, notably through its growing lending and distribution businesses. This is particularly evident in the significant expansion of its Margin Trading Facility (MTF) book. MTF income has increased nearly 2.5x in the last two years. Clients using the MTF facility generate 9x more revenue per head than others, serving as ARSSBL's key market differentiator.
RISK FACTORS
- Legal Issues: ARSSBL, its promoters and directors are currently involved in 25 criminal proceedings, including cases of cheating, forgery and unauthorized transactions in client accounts. The most significant of these is the NSEL scam. Recently, the Bombay High Court upheld a special court’s decision to continue trials and include Anand Rathi Financial Services in the case.
- Regulatory Hurdles: ARSSBL’s application to SEBI for a license to act as a commodity derivatives broker was rejected due to the ongoing NSEL-related investigations. Additionally, SEBI has barred the company from reapplying until it is acquitted. This regulatory setback delays ARSSBL’s ability to tap into a growing market segment, which had a total industry turnover of close to Rs 60,000 crore in FY25, expanding at a 44% CAGR over the past five years.
- Pledged Equity: Approximately 30% of ARSSBL’s equity is pledged, presenting a significant risk. If loan terms are not met or share values decline, the promoters may be unable to pledge additional shares, potentially triggering forced sell-offs.
- Negative Cash Flows: ARSSBL has reported negative net cash flows from investing activities in FY25, as well as negative cash flow from operating activities in the last three fiscal years. Persistent negative cash flows could negatively impact the company’s financial health and growth prospects.
- Competitive Landscape: Indian full-service brokers face intense competition from discount brokers like Zerodha, Groww, and Upstox that offer low trading fees, which put pressure on full-service brokers with slim margins, making it difficult for them to cover fixed costs.
- MTF Risks: While the Margin Trading Facility (MTF) boosts ARPC by 9x, it exposes the company to significant credit and liquidity risks, particularly if there is an increase in client defaults.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 745 crore
Fresh Issue
₹ 745 crore
OFS
₹ -
Price range
₹ 393 - 414
Lot size
36 shares
Issue Objective
The net proceeds from the fresh issue will be utilized for the following purposes:
- Funding the working capital requirements of the Company; and
- General corporate purposes.
Dates
Bidding open
23 Sep'25
Bidding close
25 Sep'25
Allotment date
26 Sep'25
Refund date
29 Sep'25
Listing
30 Sep'25
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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