Angel One's margin is back at its 2024 level; its profit is not

Angel One's net profit rose 58% from a year earlier in the September 2026 quarter, to ₹335 crore. That comparison starts from a weak point: a year ago the stockbroker was in the middle of a slump in trading, and its sales were well below the level of the year before. A tougher yardstick is the same quarter two years ago, the last time the business earned this much on each rupee of revenue. Measured as operating profit before depreciation and interest divided by sales, the margin is 44.6% now against 44.4% then. Profit before tax, however, is 19.9% lower.

Part of the recent jump is simply the calendar. In each of the past three years, shown below, Angel One's margin has risen by about ten points from the first to the second quarter of its financial year, which starts in April. Last quarter's sales were almost exactly those of the quarter before; the improvement came from lower costs. The chief financial officer, Vineet Agrawal, said as much: "Importantly, after normalizing for seasonal IPL expenditure and ESOP-related reversals, consolidated operating margins remained stable at 43.8%, compared to 43.6% in the preceding quarter." Those are the company's own margins, measured on its own basis rather than the one used here.

Against a year ago, the gain did come from growth. Sales rose 18.7%, while costs before interest barely moved, so nearly all the extra revenue reached operating profit. Management expects employee costs of about ₹1,100 crore this financial year, flat on last year, and has slowed hiring to replace people who leave. Mr Agrawal said further margin gains would come mainly from revenue growth, which leaves the business more dependent on trading activity than on its own spending decisions.

Most of the gap between an unchanged margin and a lower profit is the interest line: of the ₹114 crore fall in profit before tax, ₹72 crore is higher interest; the rest is sales about 6% below the 2024 quarter and higher depreciation. Angel One lends money to clients who buy shares on credit, and it borrows to fund that lending. Its interest cost was ₹147 crore last quarter against ₹75 crore two years earlier, and borrowings at the end of September were far higher than a year before. Of the operating profit the company added over the past year, about a quarter went straight to higher interest, calculated from the reported figures.

Management had expected relief on this line. In January 2026 it described a jump in finance costs as a temporary effect of a regulatory change in how brokers hold client cash, and said it expected a lower figure by the end of that financial year. The interest cost was ₹127 crore in the quarter it was then discussing and has risen since. Borrowings at the end of September were slightly below their level at the end of March, even though the client funding book reached what the company called a record. Mr Agrawal said the company's borrowing cost had risen marginally after the Reserve Bank of India raised its benchmark rate, while the rate Angel One charges clients is unchanged.

The borrowing is not dead weight. The money is lent on to clients at interest, and the company said its interest income grew with the funding book, so the lending adds rupees of profit even as it pulls down profit as a share of sales. The tables below record the cost of the lending, not its income, so the spread it earns cannot be checked from them.

Management now guides a consolidated operating margin of 40% to 45% in the near term, on its own definition. With employee costs guided flat and funding costs drifting up, most of the remaining gap with the earlier quarter's profit would have to come from revenue, which the company itself calls the dominant force for further margin gains.