Management

• Pradeep Navratan Gupta (Chairman and Managing Director)
• Roop Kishor Bhootra (Whole-Time Director)
• Vishal Jugal Kishore Laddha (Whole-Time Director)
• Priti Pradeep Gupta (Non-Executive Director)
• Suresh Kishinchand Khatathar (Independent Director)
• Suresh Mannalalji Kakani (Independent Director)
• Vijay Kumar Agarwal (Independent Director)
• Sudha Pravin Navandar (Independent Director)
• Chetan Pravinbhai Prajapati (Company Secretary and Compliance Officer)
• Tarak Kumarpal Shah (Chief Financial Officer)

Use of Proceeds

The total issue size is Rs. 745 cr which comprises entirely of fresh issue (Rs.745cr). The company intends to use the Net Proceeds from the issue towards funding long-term capital requirements of the company (Rs.550cr) and the rest for general corporate purposes.

Competitive Strengths

Strong Client Vintage and High ARPC Driving Stickiness Anand Rathi enjoys one of the strongest client franchises in the industry, reflected in the highest average revenue per client (ARPC) among peers at Rs.29,347 in FY25. The strength is underpinned by deep client relationships—58.91% of active clients have been with the firm for more than three years, while 44.88% have a vintage of over five years. This loyalty stems from a client base that is mature and well-capitalized, with 84.36% of clients above 30 years contributing 60.5% of total assets under custody (Rs.3,67,982 million). Notably, clients aged 45 years and above hold the largest share of assets, highlighting higher investible surpluses. Anand Rathi’s trusted-advisor approach, personalized solutions, and wide product suite drive long-term engagement and sustained revenue growth.

Diversified Revenue Streams with Strong Non-Broking Growth Anand Rathi’s balanced revenue mix between broking and non-broking services underpins its resilience and growth. While the broking segment contributed Rs.5,102.72 million (60.3% of FY25 revenues), the non-broking segment has expanded rapidly, growing at a CAGR of 35.4% between FY23–FY25 to Rs.1,925.90 million. This growth was led by rising distribution income from mutual funds, PMS, and AIFs, with assets under management doubling to Rs.64,598 million over the same period. Margin trading has also scaled sharply, with the book growing from Rs.3,766 million in FY23 to Rs.6,855 million in FY25 at a CAGR of 34.9%. Notably, 96.3% of broking clients traded in equity cash, reinforcing stability. This diversified model reduces dependence on transaction-led income while positioning the firm to capture long-term wealth management opportunities.

Strong Legacy and Experienced Leadership Anand Rathi’s over three-decade legacy, backed by the strength of the wider Anand Rathi Group, provides it with a strong brand recall and competitive positioning in India’s financial services sector. The group’s diversified presence across broking, wealth management, lending, insurance, asset management, and investment banking creates significant synergies that support growth. The company benefits from the vision of its founders, Anand Nandkishore Rathi and Pradeep Navratan Gupta, who continue to play an active role in shaping strategy. Whole-time Directors Roop Kishor Bhootra and Vishal Jugal Kishore Laddha, both with more than 15 years of association and over three decades of experience, add to this stability. Supported by a seasoned Board, the leadership team brings deep expertise and long-standing client trust, ensuring continuity and sustained expansion.

Pan-India Reach with Strong Digital Ecosystem Anand Rathi combines a wide physical presence with robust digital capabilities to drive client acquisition and servicing. As of March 31, 2025, the company operated through 90 branches across 54 cities and a network of 1,125 Authorised Persons covering 290 cities, ensuring deep penetration across Tier 1 to Tier 3 markets. Complementing this is its suite of digital platforms—web and mobile-based—that enable seamless client onboarding, trade execution, and reporting, extending its reach to geographies beyond physical branches. These platforms also empower relationship managers to scale client servicing efficiently through automation and technology-driven processes. This hybrid model of offline scale and digital strength ensures Anand Rathi delivers a consistent and personalized investment experience to retail, HNI, UHNI, and institutional clients nationwide.

Peer Comparison

Key Risks & Concerns

Regulatory Proceedings Linked to NSEL Case ARCL, part of the Anand Rathi group, has faced regulatory challenges relating to its application for registration as a commodity derivatives broker. SEBI, citing links to the NSEL matter, rejected ARCL’s registration in November 2022 and imposed a six-month bar on re-application, now expired. While ARCL has appealed before SAT, any adverse outcome in the pending proceedings or the ongoing EOW investigation could materially impact the brand reputation and regulatory standing of the Anand Rathi group.

Regulatory and Compliance Risk The company operates in a highly regulated environment, with oversight from SEBI, stock exchanges, depositories, AMFI, IRDAI, and other statutory bodies. Compliance spans multiple regulations covering broking, research, mutual funds, depositories, and insurance distribution. Any failure to adhere, or changes in laws, could result in penalties, restrictions, or reputational harm. Additionally, expanding into new products or markets, including GIFT City operations, may require further approvals and compliance, increasing regulatory risks.

Dependence on Broking and MTF Business The company’s revenue is heavily concentrated in its broking and margin trading facility (MTF) businesses, which together contributed 73.9% of revenue in FY25. Brokerage income depends on trading volumes, client activity, and market conditions, while MTF earnings rely on interest spreads and collateral usage. Any slowdown in trading activity, adverse macroeconomic factors, regulatory restrictions on fees, or reduced client participation could materially impact revenue, profitability, and cash flows.

Dependence on Authorised Persons A significant portion of the company’s revenue from broking and margin funding is generated through its network of 1,125 Authorised Persons, contributing 25.4% of revenue in FY25. Any loss of a substantial number of Authorised Persons, difficulty in expanding the network, or demands for higher revenue sharing could adversely impact business performance. Further, the company may face liability for lapses by Authorised Persons, posing additional operational and reputational risks.

Outlook and Valuation

Anand Rathi Share and Stock Brokers is strategically positioned to enhance revenue visibility by driving higher wallet share per client through cross-selling. With a diversified portfolio spanning broking, margin trading facilities (MTF), and distribution of financial products, the company is well placed to deepen client engagement. The MTF business offers significant potential given its rapid industry growth (87% CAGR FY20–FY25) and rising client adoption, enhancing both stickiness and profitability. Meanwhile, ARCL’s distribution business has scaled strongly, with AUM growing at a 43% CAGR between FY23–FY25, highlighting effective client cross-sell and the rising demand for comprehensive investment solutions.

Geographical expansion remains a key growth lever, especially in Tier 2 and Tier 3 cities, where active client additions have consistently outpaced Tier 1 markets. As of FY25, over 54% of ARCL’s active clients were from Tier 3 and beyond, reflecting deepening financial penetration outside metros. The company’s multi-channel approach of strengthening digital platforms, enhancing relationship-driven broking, and expanding its Authorised Person (AP) network positions it to capture the expanding retail investor base. With NSE’s active clients growing at a 32.8% CAGR since FY20, ARCL’s focus on tapping younger, digitally inclined demographics could accelerate client acquisition. Simultaneously, expansion of physical presence through selective branches and partnerships with APs provides further market reach.

Technology and talent will be crucial enablers of scale. Investments in AI, analytics, and digital transformation, particularly Generative AI pilots in risk management and sales, with the aim to improve compliance, productivity, and personalized client engagement. Complementing this is a growing employee team, which has expanded at a 9.2% CAGR over FY23–FY25. By aligning sales incentives with revenue growth, ARCL is building an entrepreneurial culture to drive market share gains. However, concentration in broking and MTF businesses, coupled with regulatory dependence, remains a risk. Significant fluctuations in equity markets may have a direct impact on revenues and exert pressure on margins. Nevertheless, ARCL’s focus on wallet share expansion, client base growth in emerging geographies, and digital-led efficiencies provides a robust foundation for sustainable growth, positioning it as a competitive, full-service financial intermediary. Anand Rathi Share and Stock Brokers is valued at 25x based on FY25 EPS, calculated based on the upper price band. We believe the issue is fairly priced. Considering the growth potential of the capital markets, we recommend a SUBSCRIBE rating for long-term investors.