5Paisa Capital Ltd Management Discussions

INDIAN ECONOMY OVERVIEW

Financial Year 2023-24 marked a significant milestone for the Indian economy. Once again, despite a global economic slowdown amid high-interest rates and geopolitical tension, India demonstrated resilience and stands strong as the worlds fifth-largest economy. According to the second revised estimation, released by MOSPI, India has registered a growth rate of 7.6%, surpassing the growth rate in the last financial year, which stands at 7%. The growth rate was registered on account of healthy domestic consumption, increased capital investment by the government, strengthening financial sector and stable monetary policies.

During the year, both the manufacturing and service sectors demonstrated robust performance. The manufacturing sector achieved an impressive growth of 8.5%. Moreover, the Index of Industrial Production (IIP) for manufacturing recorded year, significant reaching 142.5 during the first nine months. Meanwhile, the service sector in India displayed resilience, with the Purchasing Managers Index (PMI) consistently remaining above 50, indicating sustained expansionary activity. Furthermore, as of February 2024, GST collections stand at Rs. 18.40 lakh crore, reflecting an 11.7% increase over the corresponding period in FY 2022-23, which indicates robust domestic demand.

The geopolitical tension between Russia & Ukraine has resulted in elevated oil and energy prices and also brought grain scarcity, globally. Additionally, the rising tension between Israel and Gaza has exacerbated the situation and resulted in higher global inflation. The impact was quite visible on the Indian economy and the higher inflation became a key concern.

To curb the growing inflation, the Reserve Bank of India (RBI), has maintained its monetary stance, keeping key policy rates unchanged at 6.5% for the seventh consecutive review; it stood firm on ‘withdrawal of policy has cooled down the inflation, and the average CPI inflation was estimated to be under the tolerance band and stood at 5.4% during FY 2023-24.

Key policy announcements of Union Budget 2024-25

The interim union budget for 2024-25 demonstrates the governments ongoing commitment to infrastructure development, economic stability, sector-specific environmental sustainability, and strategic global positioning. It lays the groundwork for realizing the vision of a ‘Viksit Bharat (Developed India) by 2047.

The key highlight of the interim-budget 2024-25 includes: The government has increased the expenditure target by 11.11% to a record Rs. 11.11 lakh crore, this would be 3.4% of the GDP

The allocation for the Ministry of Road Transport and Highways (MoRTH) increased by 2.8% to Rs. 2.78 lakh crore for FY 2024-25

Rs. 2.55 lakh crore has been allocated for the Ministry of Railways, surpassing the previous years record of Rs. 2.4 lakh crore .Thetight monetary

Three major economic railway corridor programs:

(i) energy, mineral and cement corridors,

(ii) port connectivity corridors and

(iii) high traffic density corridors, are identified under the PM Gati Shakti to be implemented to improve logistics efficiency reduce and cost in all these segments is propelling

A corpus of Rs. 1 lakh crore will be established through a fifty-year interest-free loan to provide long-term financing or refinancing for research and innovation in emerging domains, including advanced defence technology

The government has also increased the outlay for the Production Linked Incentive (PLI) scheme by 33.5% to Rs. 6,200 crore

The budget for the Ministry of Rural Development increased to Rs. 1.77 lakh crore for FY 2024-25, an increase of around 12% from last years allocation of Rs. 1.57 lakh crore. Additionally, an increased allocation of Rs. 86,000 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGA) will boost the rural economy

Fiscal deficit is expected at 5.8% of GDP in FY 2023-24, down from 5.9% estimated earlier and 5.1% fiscal expected in FY 2024-25

Economic Outlook

Looking ahead, the Indian economy appears promising. The World Bank has projected a growth rate of 6.6% for FY 2024-25. This growth is supported by the service sector, while the industrial sector is expected to remain robust, particularly due to strong construction and real estate activities. Inflationary pressures are anticipated to ease, with inflation projected to remain around 4.5% during FY 2024-25. Additionally, various government initiatives such as the PLI scheme, Atmanirbhar Bharat, the Make in India campaign, and the relaxation of the FDI limit are expected to drive this growth.

Risks to Indias economic growth stem from inflationary pressures in advanced countries and potential supply chain disruptions due to ongoing geopolitical tensions. These disruptions could lead to volatile commodity prices. However, despite the challenges presented by a volatile global macroeconomic environment, Indias economic prospects remain positive. This is supported by robust consumer demand and private investment, improvements in physical and digital infrastructure, increased capital expenditure, and proactive policy measures by the government and the central bank.

FINANCIAL SERVICES INDUSTRY

Indias financial sector is diverse and rapidly expanding, with both existing firms experiencing strong growth and new entities entering the market. There are diversified segments under the industrys growth which include commercial banks, insurance companies, non-banking financial companies, cooperatives, pension funds, mutual funds, and other smaller entities. theThe ascent of fintech nations financial services industry to new heights, accelerating its growth trajectory with unprecedented speed.

The Government of India has implemented reforms to liberalize, regulate, and enhance the financial services industry. Both the government and the Reserve Bank of India (RBI) have undertaken measures to facilitate easy access to finance for Micro, Small, and Medium Enterprises (MSMEs). These measures include the launch of the Credit Guarantee Fund Scheme for MSMEs, the issuance of guidelines to banks regarding collateral requirements, and the establishment of the Micro Units Development and Refinance Agency (MUDRA).

In recent years, the financial sector has challenges, including bad loans and the NPA crisis, as well as the global turmoil caused by COVID-19. To address these challenges, the government and RBI have implemented various measures. There has been a change in credit culture, facilitated by the Insolvency and Bankruptcy Code, 2016 (IBC). Additionally, amendments have been made to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to enhance its effectiveness. The establishment of the National Asset Reconstruction Company Limited aims to resolve stressed assets above Rs. 500 crore, among other initiatives. The tighter monetary policy has also improved interest margins for lenders, and there is a degrowth in non-performing loans.

Looking ahead, the Indian financial services industry is poised for strong growth, driven by factors such as rising per capita disposable income, the countrys expanding economy, the adoption of digitization, and government policy support. Furthermore, the industrys enhanced focus on financial literacy is expected to help expand its customer base and increase its overall size.

USE OF DIGITAL TECHNOLOGY IN THE FINANCE INDUSTRY

India has become a leader in digital payments in recent years, accounting for 46% of all digital payments in the world. The industrys digital transformation and innovation have empowered it to adapt to customers evolving needs, enhance efficiency, and lower costs. This transformation deeper market penetration, leveraging smartphone and internet connectivity to offer a wide array of products and services digitally. Customers can now conveniently access services such as loan applications, e-KYC completion, and bank account openings online.

Indian digital payments include various types and methods of digital financial modes which include ATM Cards, Micro ATMs, Bank Prepaid Cards Aadhaar Enabled Payment System (AEPS), Internet Banking, Mobile Banking, PoS Terminals, Unified Payments Interface (UPI), Mobile Wallets, Unstructured Supplementary Service Data (USSD), and many others.

Digital payments in India have experienced remarkable growth over time. The transaction volume surged from 2,071 crore in FY 2017-18 to 13,462 crore in FY 2022-23, representing a CAGR of 45%. As of March 31, 2024, 18,592 crore digital payments have been recorded in FY 2023-24 indicating a growth of 38%. Government initiatives like the Pradhan Mantri Gramin Digital Saksharta Abhiyaan (PMGDISHA) to boost digital literacy in rural India, along with RBIs efforts to promote digital literacy, have been pivotal in driving this growth. The government also introduced the Aadhaar Enabled Payment System (AePS), enabling bank customers, especially in rural and semi-urban areas, to access their bank accounts and conduct transactions without an ATM machine. Furthermore, the proliferation of affordable smartphones, the surge in online shopping, low or zero transaction costs, and the availability of cheaper internet connections have also significantly contributed to this growth.

Despite the tremendous growth in digital transactions in India, several challenges such as internet connectivity, cyber frauds, technological disruptions, language barriers, and limited computer literacy pose significant threats to the continued expansion of digital financial transactions. Addressing these challenges requires a coordinated effort involving government authorities, financial institutions, technology providers, and users themselves.

Digital transactions in India are projected to reach 186 billion in volume and Rs. 200 trillion in value by 2025, driven by increasing smartphone users and technological advancements. NPCI International Payments Limited (NIPL) has partnered with several countries to create a compatible network for RuPay and UPI, enabling Indian citizens to use these platforms for financial transactions abroad. UPI is now available for non-resident account holders across ten countries, benefitingstudents,local inflows, thereby enhancing businesses of Indian origins, and others.

OVERVIEW OF CAPITAL MARKETS

Indias capital market is a crucial component of the countrys financial system, playing a significant role in mobilizing savings and channelling them toward productive investments. In India, the capital market comprises two major segments, the primary market and the secondary market. The primary market is where corporations issue new securities, such as stocks, bonds, and other financial instruments, to raise capital. The secondary market, on the other hand, is where existing securities are traded between investors. The capital markets in India are supported by well-established and digitally-savvy Market Infrastructure Institutions (MII), which provide infrastructure of trading, settlement and record keeping. These include stock exchanges, clearing corporations and depositories. These MIIs are systemically important in India as they have been facilitating the phenomenal growth in market capitalization of listed companies, capital raised and the number of investor accounts with brokers and depositories and the value of assets held in the depositories account.

The Indian equity market, comprising the National Stock Exchange (NSE) and the BSE, is the largest segment of the countrys capital market. In January 2024, the Indian stock market surpassed Hong Kong to become the fourth-largest equity market globally. The combined value of shares listed on Indian exchanges reached US$ 4.33 trillion, slightly higher than Hong Kongs US$ 4.29 trillion, according to data compiled by Bloomberg. Also, the financial year 2023-24 has seen a stunning rally in the Nifty and the Sensex. From the lows of March 31, 2023, the Nifty traversed 26.96% to its record high closing of 22,041.

However, during 2023-24, global headline inflation, unstable geopolitical conditions and supply chain disruption because of the continuous crisis on the Red Sea remain a key concern. These global concerns have impacted the overall flow of FDIs and FIIs as the Net FDI inflows minus the outflows, declined to US$ 13.54 billion in April-November 2023 from US$ 19.76 billion in the same period in 2022. On the other hand, domestic institutions maintained their position as a solid presence in the Indian equity market, outperforming their international counterparts for the third consecutive year. They served as a crucial stabilizing force, particularly during periods when foreign investors were withdrawing their investments.

Outlook

Indias capital markets hold considerable investment potential, as indicated by projections that being included in major bond the indexes could lead to significant markets growth. Moreover, the nation is garnering attention from prominent global funds, underscoring its confidencein the economic outlook. The governments emphasis on digitization, the expanding consumer base, and the shift of manufacturing supply chains away from China are anticipated to drive growth in the medium term. Jefferies, a global investment advisory firm, estimates that the stock market could reach US$ 10 trillion by 2030.

STOCK BROKING SECTOR

The Indian broking industry is very diverse with many intermediaries forming a part of the market infrastructure. The industry bifurcated into two main types of brokerage firms in India: Full-Service Brokerage firms and Discount Brokerage houses. In addition, there is a third category of hybrid broking houses.

The India Security Brokerage Market size is estimated at US$ 3.94 billion in 2024. Also, the broking industry has posted record revenues and net profits in FY 2023-24, fueled by a resurgence in investor confidence, as per an ICRA report. Analysis of 29 leading brokerage firms in the first half of the financial year revealed a substantial 20% annualized growth in net operating income, supported by increased market activity.

The number of Demat accounts has surged significantly, with an average of 31 lakh new accounts being added monthly. By March 2024, there were 15.10 crore new accounts added. Both major depositories, CDSL and NSDL, experienced an 11.9% year-on-year surge, bringing the total tally to 15.14 crore from 11.45 crore.

In recent years, the industry has become more dynamic with the entry of new players, digitization-led disruptions and changing regulations. Digitization has been a key driver for the financial services industry. With internet penetration on the rise, 5G services and digital payments, customers now have easy access to the market.

The players in the industry have restructured their strategies to diversify revenue streams. They focus on value-added services like wealth management, research, advisory, AMC, and financial planning to enhance customer engagement and enrich clients wealth creation journeys.

Outlook

Looking ahead, the competition in the retail brokerage sector is anticipated to transition from price competition to growth driven by value propositions, aiming to increase market share and profitability. Developing precise digital marketing capabilities will be crucial, as the effectiveness of performance marketing will determine the cost efficiency of acquiring and engaging new clients. Estimates from Bain & Company indicate that revenue in the domestic retail brokerage industry could more than double over the next five years. This growth is attributed to the emergence of Indias mass-affluent and affluent segments, coupled with increasing financial literacy.

MUTUAL FUND INDUSTRY

The Indian mutual fund (MF) industry is a dynamic and evolving sector, constantly adjusting to changing market conditions and investor preferences. In the financial year 2023-24, the industry demonstrated outstanding performance, with domestic mutual funds (MFs) growing by 35%. As of March 31, 2024, the Assets Under Management (AUM) of the Indian Mutual Fund Industry reached Rs. 53.40 trillion, compared to Rs. 39.42 trillion in March 2023.

Investor adoption of systematic investment plans (SIPs) continued to rise, with monthly net inflows touching approximately Rs. 19,300 crore in March 2024. For fiscal year 2024, net inflows through SIPs stood at nearly Rs. 2 lakh crore from Rs. 1.55 lakh crore last year, showcasing increasing investor confidence and commitment to disciplined investing.

Outlook

According to a report from Axis Capital, the Indian mutual fund industry is projected to reach a valuation of Rs. 100 lakh crore by 2030. This growth is expected to be driven by increased penetration of the mutual fund industry, which currently stands at 15% in India compared to the global average of approximately 74%. The report also anticipates that the current gross monthly SIP flow of around US$ 200 million will more than triple by 2030 as Indians increase their financial savings. Factors contributing to this growth include a seamless investment experience facilitated by digitalization, a rise in investments from smaller cities, the rapid growth of middle-class income earners, and initiatives promoting financial literacy.

DISCOUNT BROKERAGE INDUSTRY

The Indian stockbroking industry has witnessed a remarkable transition towards online trading platforms and discount brokers. The convenience of fast, state-of-the-art technology at lower cost has attracted a new wave of investors, leading them to enter and invest in the market. The Discount Brokerage Market size is estimated at US$ 24.24 billion in 2024.

In the past few years, discount brokers have emerged as significant players in the Indian stockbroking industry. According to Bain & Company, their market share has seen a substantial expansion from 8% to 23% between FY 2017-18 and FY 2022-23. Furthermore, the number of active clients has the same also grown period. Discount brokers have become major drivers of industry growth, as the Indian retail brokerage sector nearly doubled its revenue from Rs. 14,000 crore in FY 2018-19 to Rs. 27,000 crore in FY 2022-23, representing a compounded annual growth rate of 17%.

To safeguard investors interests, SEBI has mandated that brokers separate advisory services from broking businesses, implement risk management policies and increase disclosure requirements.

Outlook

Going ahead, the market outlook for discount brokers in India appears promising, marked by substantial growth and an expanding market share. It is estimated that the discount brokerage industry in India will showcase a CAGR of 6.29% between 2024 and 2029 and will stand at US$ 32.89 billion. Investors are prioritizing cost-effective trading options and enhanced client interface and service on the strength of technological advancements. Discount brokers are well-positioned to meet the evolving demands of the market and continue to challenge traditional full-service brokers. This has led to the emergence of the discount brokerage model, which offers trading services at reduced costs compared to traditional full-service brokers.

COMPANY OVERVIEW

5paisa Capital Limited (hereafter referred to as "our Company") was established in 2007 and operates as a technology-driven financial service firm with a strong online presence. Registered with SEBI as a stock broker, depository participant, and research analyst, and with AMFI as a mutual fund distributor, we cater mainly to retail investors and high-volume traders in the securities market. Our services are characterized by a DIY (Do-it-Yourself) approach, offering affordable financial products through online platforms and mobile applications. Leveraging simplifiedtech-driven solutions, customer-friendly mobile apps, an AI-powered Robo Advisory platform, and a paperless account opening process, we have emerged as Indias fastest-growing online broker.

		Product Offerings
Broking	Cash/Derivative/ Commodities Segments	Stock SIP	Tradestation	FnO360	Mobile Application	Quanttower
Mutual Funds	Direct Funds	SIP	Robo Advisory
Research Products Insurance	Swing Trader Health & Term	Smart Investor	Smallcase	Sensibull	Screeners	Portfolio Analyzer	Trendlyne
Algo Trading Learning Platform Community	Open API Finschool Stocky5	XTS	Smart Strategies	Scalping

CUSTOMER ACQUISITION

At 5paisa Capital, our focus is on developing a product pipeline that is prepared for the future and capable of capitalizing on emerging opportunities across our range of products. We have synchronized our business strategy with the evolving business requirements, concentrating on the innovation of specialized products that cater to customer needs.

We strive to universalize our value proposition, to bring more and more new customers, including from Indias semi-urban and rural areas, into the ambit of our financial services. During have recorded a new customer acquisition of 21% as our total customer base stands at 4.23 millions customers.

ENHANCING ONBOARDING EXPERIENCE

This year, we focused on promoting the potential customers to complete the Account Opening Journey in DIY mode which were earlier done mostly in assisted mode. In line with this goal, we revamped the entire customer journey and improved the DIY% from 2.5% to 7.5%.

Our focus areas/initiatives were:

Enhance UI and UX on both app and web Improve API Latency Work on backend logics and simplify them Automate manual systems

Onboard new vendors to provide best in the industry features Take only minimum required information from the user Leverage the data and prefill the fields for the users

Automation:

We automated our KYC Process which was earlier manual and time-consuming resulting in saving man hours and reducing the TAT for opening the Demat account.

Partnerships:

Bank Addition via Reverse Penny drop which prevents entering the user account number and IFSC code manually Digital Esign facility with 2 back-ups to ensure 100% uptime Fetch bank statement directly from the bank to help customer avoid the lengthy process of downloading bank statements and then uploading them Fetch user personal details and prefill it which helps in avoiding mistakes and makes the process faster

TECHNOLOGICAL UPDATES

5paisa is at the forefront of tech-enabled disruption in the equity ecosystem. We continue to invest in our engineering systems improving reliability, speed and performance. During the reporting year, we made significant in strengthening our technology systems. Our company has successfully eliminated technical debt, minimized redundancy, and prioritized the implementation of microservices. Moreover, we enhanced the resilience of our backend infrastructure to optimize our operations.

We have been striding towards adopting new technologies, especially in security, AI & data science, and built fresh product capabilities to further scale our digitally-enabled revenue pipeline.

Easing onboarding process

We have completely redesigned and relaunched our customer onboarding journey, with a strong focus on enhancing the user interface and experience. Our latest version introduces pioneering features like Reverse Penny Drop, Account Aggregator integrations, and API optimizations, resulting in a significantly accelerated onboarding process.

At 5paisa, we have enhanced our KYC journey for clients by integrating One-Click identity, optimizing our pipeline, and improving personalization. These processes will enable our company to attract new customers to our platform while making it easy for users to complete the joining process.

Seamless trading solutions

Our company has improved the option chain trading platform by adding support for various indices, including Sensex, Midcap Nifty, and Fin Nifty, in addition to Nifty and Bank Nifty. We have introduced bulk order modifications, a groundbreaking feature that enables users to simultaneously edit multiple orders. This feature is revolutionary for high-volume traders and marks an industry-first launch. Furthermore, we have optimized our option chain journeys to facilitate straddle and bulk orders, allowing users to effortlessly place multiple orders with a single click directly from the option chain.

We also launched our new Micro Charts, which is now integrated and available across all our platforms in Beta. Traders can now expect improved SLAs and throughputs when placing large orders during peak periods.

Integrating multiple platforms

Our company has incorporated several new features into our innovative trading platform FnO 360. These include F&O stacks, open interest data, advanced option chains, futures and options screeners, India VIX, and more. Traders no longer have to visit multiple platforms for data analysis; they can now conduct comprehensive market analysis and place orders directly through our platform.

Robust risk and cyber security management

To enhance our operational risk management framework and protect against cyber-attacks and threats to our systems, networks, and databases, we have developed a robust Cyber Security and Cyber Resilience policy in linewith theSEBI focus on future-circular. Under this policy, we conduct regular system audits by recognized auditors from the exchange/depositories. The audit reports, along with the necessary action taken reports, are reviewed by our audit committee.

Additionally, our management conducts periodical reviews of various technology concerns and risks, which include the protection of sensitive customer data, identity theft, cybercrimes, data leakage, business continuity, and access controls.

Prioritizing customers data security

To mitigate a range of security risks, we have implemented several tools and measures. These include privileged identity management to control access, advanced malware detection and protection, end-point encryption, mobile device management, network firewalls for cyber-attack protection, web application firewalls to prevent hacking, secure remote access from non-office networks, brand protection, dark monitoring for safeguarding organizational and customer data, and secured internet access.

Sustained Regulatory Compliance

Being in the business of financial services, our company needs to comply with various regulatory compliances which include SEBI, BSE, NSE, CDSL, and NSDL on the digital and technological front. Our company has maintained a clean compliance record without any reported deviations.

HUMAN RESOURCE

At 5paisa Capital, our employees are the fundamental pillar of our existence. We have always been extremely proud of the quality and commitment of our talent pool. We nurture, empower, and upskill our employees by providing them with a large canvas of opportunities and encouraging them to innovate beyond the realms of their imagination.

Our Companys Human Resources (HR) policies are centered on the comprehensive development and advancement of its competent and diverse workforce. The employees are the primary force behind our expansion in all market categories. Training and employee motivation are the most essential business components for our business.

Encourages our employees to broaden their professional horizons in order to climb the corporate ladder by providing meaningful opportunities for learning and advancement. To increase productivity and efficiency, our employees with the best performances are also rewarded. As of March 31, 2023, there were 548 permanent employees.

Nurturing a culture of continuous learning

We continue to invest in developing our employees capabilities and proficiencies, with a significant skills. As industries advance, technologies change and market dynamics shift for which organizations must adapt to stay competitive. This makes continuous learning and development imperative for the growth and success of the organization. We constantly scan the market for changes and, as per our business strategy, align our workforce to the transforming landscape by equipping them with relevant skillsets through training.

To improve the knowledge and skills of our people, we have developed various training modules. For our Sales and Business Broking employees, we have implemented a Sales Induction Training program. Additionally, we have introduced the NISM(NationalInstituteofSecuritiesMarkets)Certification process for support functions such as Product Development, Operations, Business Broking, and Technology.

Attracting and retaining talent web As a leading fintech organization, we have become a sought-after employer for high achievers and innovators eager to develop cutting-edge products for modern retail businesses. To achieve this goal, we prioritize recruiting top-tier talent from premier organizations. Additionally, our campus program for interns and lateral hires is tailored to attract high performers from leading engineering and management institutes for various roles at 5paisa Capital. Our company emphasizes leveraging social media platforms to reach a broader audience and effectively promote our work culture and transparent dealings.

To retain talent, we provide competitive salaries and benefits, including performance-linked bonuses, Employee Stock Ownership Plans (ESOPs), and health insurance coverage such as Mediclaim, Personal Accident, and Term insurance. During the year, our total training hours stand at 64 hours.

Diversity, inclusion and equal opportunity

Having a diverse workplace is crucial for driving innovation and improving decision-making. Recognizing the importance of a diverse workforce, we are dedicated to implementing initiatives that promote diversity and inclusion within our organization.

All our employees are bound by our companys policies, practices, and processes. Our people are treated fairly, irrespective of their age, race, religion, creed, color, national origin or ancestry, physical or mental disability, marital status, gender, gender identity/expression, sexual orientation, ethnicity, indigenous belonging, minority, political belonging, socio-economic status or any other basis safeguarded under any law or ordinance or regulation.

Health and well-being

A motivated and healthy workforce is pivotal to achieving business success. Initiatives centered around health and well-being are critical for retaining top talent, ensuring employee satisfaction, and effectively managing turnover and absenteeism. In the past financial year, we organized periodic health check-up camps and provided comprehensive mediclaim coverage to offer financial protection and support during healthcare emergencies, thereby enhancing the well-being of our employees.

Employee engagement

At 5paisa, we nurture our employees to become the leaders of tomorrow. We prioritize effective personal communication across all levels of the organization, complemented by regular town hall meetings. Our internal and external employee survey programs provide authentic feedback, guiding us in addressing gaps and enhancing employee engagement.

At 5paisa, we believe that our people are our greatest asset. As a forward-thinking organization, we are committed to creating an inclusive, engaging, and dynamic work environment where our employees can thrive. Our HR initiatives for FY 2023-24 are a testament to this commitment, showcasing our dedication to employee well-being, development and satisfaction.

At 5paisa, a pivotal element of our success lies in our exceptional leadership. Our leaders champion a culture that is transparent, meritocratic and performance-driven, which significantly aids in attracting and nurturing a talented workforce. By harnessing the power of advanced technology, we continuously seek to enhance productivity, work efficiencyand overall effectiveness. This commitment to leveraging innovative tools and practices ensures that our team operates at the highest levels of performance, driving the companys growth and success.

ENABLING OUR PEOPLE

Adopted all Employees welfare schemes (Gratuity, PF, Medical insurance etc.)

Strengthened hiring practices to ensure a diverse and inclusive workforce, focusing on underrepresented groups

Launched new e-learning platform offering technical skills, and personal development

Organized virtual and in-person team-building activities to strengthen teamwork and collaboration

Provided extensive training on data privacy and cybersecurity to protect sensitive information and ensure compliance with industry standards

Held quarterly award ceremonies to celebrate outstanding achievements and contributions across the organization

Upgraded to a unified HR management system, offering employees easy access to their profiles, performance reviews, and benefits

Launched initiatives celebrating various cultural backgrounds and promoting an inclusive workplace environment

At 5paisa, we prioritize the continuous growth and development of our employees, recognizing that a knowledgeable and skilled workforce is crucial to our success. Our comprehensive training programs are designed to empower employees with the confidence and independence needed to excel in their roles.

We leverage cutting-edge technology to deliver diverse learning experiences, including e-learning modules, video-based training, simulation learning, and mobile-based courses. These innovative methods ensure that our employees stay ahead of evolving industry trends and regulatory requirements.

In our commitment to compliance and ethical practices, we offer training on vital topics such as Anti-Money Laundering, Prevention of Sexual Harassment, Prevention of Insider Trading, Anti-Bribery & Corruption, and Information Security. These modules underscore our dedication to maintaining a safe and ethical work environment.

Moreover, we believe in celebrating cultural festivities as a team, fostering a sense of unity and camaraderie. By promoting collaboration and teamwork, we create a positive and inclusive workplace where every employee feels valued and motivated.

Through these initiatives, 5paisa is committed to nurturing talent, driving innovation, and ensuring that our employees have the resources they need to thrive and contribute to our collective success.

SWOT ANALYSIS Strengths

Strong Digital Business Model

At 5paisa, our digital business model is defined by innovation, scalability, and a focus on our clients. We have embraced digital transformation across all aspects of our operations, providing clients with a seamless and personalized experience.

Robust Trading Platform

Our trading platform is distinguished by its user-friendly interface, advanced features, and efficient trade execution capabilities. It is tailored to meet the diverse needs of investors and traders, offering a comprehensive suite of services. Furthermore, we incorporate the latest technology into our trading platform and mobile application to provide a seamless experience for our customers.

Diversified Product Offering

5paisa Capital Limited, a leading fintech broker, provides an extensive range of financial products and services to meet the diverse needs of its clients. The companys offerings include stock broking, systematic investment plans (SIPs), initial public offerings (IPOs), commodities, currencies, mutual funds, direct funds, and robo-advisory services. Additionally, 5paisa offers access to US stocks, algo trading, and a learning platform for individuals seeking to enhance their trading knowledge and skills.

Experienced leadership team

Our Board consists of Directors with deep expertise in the sector, and our management team has played a crucial role in navigating our company through both favorable and challenging times. With their guidance, we can anticipate future trends and are well on our way to realizing our full potential.

Weaknesses

Exposure to intense competition

The Indian brokerage industry is indeed highly competitive, with various players vying for market share and offering a range of services to attract and retain clients. The industry comprises full-service brokers, discount brokers, and hybrid brokers, each catering to different segments of investors with distinct business models and service offerings.

Opportunities

Growing digital financial services sector

The rapid growth of Indias digital financial services sector is fueled by several factors. These include the expanding adoption of smartphones and the Internet, a rising demand for convenient and cost-effective financial services, and regulatory reforms that have simplifiedthe provision of digital services by financial institutions.

Growing young and middle class population

Indias youthful and expanding population, coupled with rising affluence, has spurred a surge in demand for financial products and services. Moreover, the rapid expansion of the Indian middle class is paving the way for a burgeoning market for financial offerings.

Favorable government intiatives

The Digital India initiative has spurred the growth of online platforms and mobile applications, which 5paisa Capital utilizes in its operations. Capital market regulations introduced by SEBI and other regulatory bodies have enhanced transparency, investor protection, and market integrity, benefiting 5paisa Capital and other market participants.

Additionally, government policies supporting fintech, such as the Fintech Regulatory Sandbox, have facilitated the development and testing of innovative fintech solutions. Furthermore, through the Start-up India initiative, 5paisa Capital can leverage various incentives and benefits offered to start-ups, further enhancing its growth prospects.

Threats

Global economic slowdown

The global economic slowdown is expected to adversely affect the macro environment, potentially resulting in decreased liquidity and corresponding orders that could impact the industrys growth rate.

Upgrading technologies

Technology obsolescence poses a significant risk to 5paisa Capital, particularly in the fast-evolving landscape of financial services. As technology advances, older systems and software can become outdated, leading to inefficiencies, security vulnerabilities, and a lag in offering innovative solutions to clients. This can result in a loss of competitive edge, decreased customer satisfaction, and potential regulatory issues if the technology fails to meet compliance standards.

Regulatory changes and uncertainties

The threat of regulatory changes is a major concern for 5paisa Capital, given its operations in the highly regulated capital market industry. Regulatory uncertainties, including policy and regulatory changes, can significantly impact the companys operations and financialperformance. Therefore, it is crucial for 5paisa Capital to stay informed about regulatory developments and ensure compliance to mitigate the potential impact of regulatory changes on its business.

Some of the key regulatory changes in so far as it relates to the segments in which we operate during FY 2023-24 are summarized below:

With effect from July 01, 2023, SEBI has designated certain stock brokers as QSBs (Qualified Stock Brokers). This designation is based on a number of factors including size and scale of operations. QSBs are required to meet enhanced obligations and discharge responsibilities to ensure appropriate governance structure, risk management policy and processes, scalable infrastructure and a proper framework for cyber security and investor services including online complaint redressal mechanism. In adherence to the said regulations, 5paisa Capital Limited is also recognized as a Qualified Stock Broker with effect from July 01, 2023.

SEBI has taken measures to safeguard customer funds with stockbrokers and clearing members, mandating daily upstreaming of funds to the Clearing Corporations. The primary objective of the said change is to mitigate fund-related risks by placing surplus funds in low-risk instruments and providing independent daily confirmations to investors.

To minimize the leverage risk and risk to clients funds, SEBI mandated all stock brokers that no new Bank Guarantees (BGs) to be created out of clients funds effective from May 01, 2023 and all existing BGs created out of clients funds to be wound down by September 30, 2023.

SEBI revised the regulations on short selling for both institutional and retail investors, aiming to improve transparency.

BSE Limited (BSE) and National Stock Exchange of India Limited (NSE), under the guidance of SEBI, have established a technology-driven platform to streamline the process of data backup and repository concerning IPO, FPO (Follow onPublicOffer),RightsIssue, and increase of 52%, amounting to other capital market activities. This platform will serve as a repository for due diligence documents compiled and maintained by merchant bankers for various capital market transactions.

SEBI introduced Online Dispute Resolution (ODR) as the primary method for resolving disputes in the Indian

Securities market. The circular issued by SEBI provides a detailed framework for escalating cases to ODR, selecting ODR institutions, conducting various ODR processes, defining timelines for each process, and determining the associated costs.

SEBI reduced the timeline for listing shares on stock exchanges after the closure of IPOs from T+6 days to T+3 days. This reduction in timelines voluntary for public issues opening on or after September 01, 2023 and mandatory for issues after December 01, 2023 benefits both issuers and investors.

SEBI, through its Master Circular dated October 16, 2023, has outlined a comprehensive framework for Offer for Sale (OFS) of shares to employees via the stock exchange mechanism. Previously, OFS to the eligible company employees occurred outside the stock exchange ncy, ease compliance, and efficie mechanism.Toenhance reduce costs, SEBI has amended the procedure, allowing promoters to offer shares to employees in OFS through the Stock Exchange Mechanism. This process, effective from February 23, 2024, aligns employee OFS with the retail category on T+1 day.

FINANCIAL PERFORMANCE

We showcased robust financial performance during the year, with our total revenue reaching Rs. 3,947 million, marking a growth of 16.3%. Additionally, our other operating income saw a significant Rs. 946 million. However, this growth was accompanied by a rise in expenses, as employee costs surged by 51% due to the onboarding of new talent, and finance driven by changes in exchange-related laws. Despite these challenges, we reported a Profit After Tax (PAT) of Rs. 544 million for FY 2023-24, compared to Rs. 436 million in FY 2022-23, reflecting our strong financial management and operational efficiency.

Consolidated Financial Statement (Rs. in million)

Particulars	March 31, 2024	March 31, 2023
	Audited	Audited
1 Income
a. Brokerage Income	1,592	1,435
b. Allied Broking Income	1,175	1,107
c. Cross Sales Income	235	229
Other Operating Incomes	945	623
Total Revenue	3,947	3,394
2 Expenses
Employee Benefits Expense	895	591
Finance Cost	286	206
Depreciation and Amortization Expense	95	88
Others	1,950	1,928
Total Expenses	3,226	2,813

 

Particulars	March 31, 2024	March 31, 2023
	Audited	Audited
3 Profit before tax (1+2)	721	581
4 Tax Expenses
Current Tax	195	83
Deferred Tax	(18)	62
Total Tax Expenses	177	145
5 Profit for the period (3-4)	544	436
Key Financial Ratios (Consolidated)
Key Ratios	FY 2023-24	FY 2022-23
Debt/Equity Ratio (x)	0.62	0.37
Return on Net Worth	10.9%	10.4%
Interest Coverage Ratio (x)	3.86	4.24
Net Profit Ratio	14.0%	13.0%
Return on Capital Employed	11.0%	10.0%

OPERATIONAL PERFORMANCE

In FY 2023-24, 5paisa Capital Limited demonstrated strong operational performance, highlighted by substantial growth across key metrics. The company achieved its highest-ever revenue of Rs. 395 crore, marking a 16% year-over-year increase. This growth was driven by a 21% increase in the total client base, which expanded to 4.2 million, and an 86% surge in the average daily turnover (ADTO), which reached Rs. 3.5 trillion. Additionally, the companys average client funding book grew by 30%, reflecting its successful efforts to scale its digital acquisition and engagement strategies. Despite increased employee costs and finance expenses, 5paisa Capital reported a 25% year-over-year growth in profit after tax, amounting toRs. 54 crore.

RISK MANAGEMENT

Risk management is crucial for our organization as it preserves value, enhances decision-making, and ensures business continuity and resilience. It promotes compliance, cultivates reputation, and boosts stakeholder confidence, all while driving long-term sustainability and competitive advantage.

Our Company adheres to the "three lines of defense" (3 LOD) model to ensure efficient risk management. This model designates management control at the business entity level as the first line of defense, followed by the implementation of various risk control and compliance oversight functions by management as the second line of defense. The third line consists of the internal audit/ assurance function.

The company faces a range of risks, which stem from either inherent aspects of the business or changes in the external environment. Below, we outline some of these risks along with the measures taken to mitigate them:

INTERNAL CONTROLS

Our company conducts its internal audit in accordance with the Annual Audit Plan approved by the Audit Committee.Theaudit approach and scope encompasses all facets of our business, including regular front-end and back-end operations, as well as internal compliance. The focus of the audit is on process controls, the measures we have taken to monitor risks, and the detection of non-compliance, leakages, or fraud.

We have invested in ensuring that our internal audit and control systems are adequate andappropriateforthenature audits, and verification of our business, regulatory requirements, and the scale of our operations. Our internal control system is supported by concurrent and internal audits, as well as special audits and periodic reviews by management. For company-wide internal audits, we have engaged an independent top audit firm, Mahajan and Aibara, Chartered Accountants, to provide a broader and more diverse verification thus enhancing the value derived from the audit process.

Additionally, we engage specialized audit firms to conduct specific or concurrent audits of critical functions, such as half-yearly internal audits mandated by SEBI/Exchanges/ Depositories, DP processes, Know Your Customer (KYC) verifications, demat transfers, payouts verifications, systems audits,end-useverification of related party transactions, among others. We also comply with various specific audits mandated by regulatory authorities such as SEBI, Exchanges, and Depositories, with reports periodically submitted to these regulators.

The Board and Audit Committee review the overall risk management framework and the adequacy of internal controls established by the management team. The Audit Committee reviews major instances of fraud on a quarterly basis, and necessary actions are taken as required. It also focuses on implementing the necessary systems and controls to strengthen the system and prevent such occurrences. Our internal processes are designed to ensure adequate checks and balances and regulatory compliance at every stage. The internal audit team conducts risk-based audits of these processes to provide assurance on the adequacy and effectiveness of internal controls for the prevention, detection, reporting, and remediation of non-compliances and fraud.

INTERNAL FINANCIAL CONTROLS

We have implemented robust internal controls related to financial statements and operations, which are currently operating effectively. The Internal Auditors conducted tests on 66 key financial controls, including Finance & Accounts, Fixed Assets, Administration, HR Payroll, Retail Broking, and compliance areas, and found no significant. Additionally, the Statutory Auditors examined the systems and processes, validating the adequacy of the Internal Financial Controls system over financial reporting, which is also operating effectively.

OUTLOOK

The Indian economy remained resilient and currently holds an advantageous position within the global economy, which has become relatively uncertain, with international shocks affecting nations worldwide. Looking ahead, India is set to benefit from a young demographic inclined toward digital technology, which continues to permeate various business facets, particularly the financial sector. Individuals and enterprises stand to gain from faster, more transparent, and more efficient services in this segment of the economy.

With a surge in new investors and listings, the capital markets, especially the stock markets, have experienced significant activity, including rising participation at the individual and institutional level and numerous IPOs throughout the year. With the equity culture expands, our company is strategically positioned to cater to a growing customer base nationwide, especially in tier 2 and 3 towns and villages. This advantage is supported by substantial investments in people, processes, and technology made in prior years. Our company remains committed to delivering consistent performance and staying at the forefront of trends in the capital market and brokerage segment, utilizing its technological edge.

CAUTIONARY STATEMENT

This document contains some statements about expected future events, financial and operating results of 5paisa Capital Limited, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statement.