Geojit Financial Services Limited (532285) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Geojit Financial Services Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Satish Menon from Geojit Financial Services. Thank you, and over to you, sir.

Thank you, operator. Good morning to all those people who have joined. Along with me, I have Mr. C.J. George, Managing Director, CEO; Mr. A. Balakrishnan and Jones George, Executive Director; Mini Nair, CFO of the company; and Liju Johnson, Company Secretary on the call. Again, a warm welcome for you for joining this yearly call of Geojit '23-'24. Let me start by giving the synopsis of the financials declared day before yesterday, and then we can open for Q&A. In terms of the income. For the quarter 4 '24, we have done INR 208.56 crores, which is a 79% growth over the same period last year. And for the full year, the income was at INR 623.97 crores, which is 39% growth from FY '23. If you look at the split of income. Brokerage, the liquidity and equity-related, we have done INR 117.67 crores in quarter 4, which is an 89% growth over the same period last year. And for the full year, it is INR 375.42 crores, which is a 33% growth from FY '23. Financial products income. The fourth quarter is normally the best quarter for this division. In the fourth quarter, we did INR 64.06 crores, which is 94% higher than the previous year. And for the full year, it stands at INR 151.64 crores, which is a 54% growth compared to FY '23. In Mutual Fund. Over the year, mutual fund income has grown 17% to INR 83.43 crores, and insurance has grown 176% compared to the previous year, INR 66.16 crores. Software income remains subdued. For the full year, we have declared INR 8.82 crores, which is down by 16% compared to FY '23. Other operational income for the year stands at INR 78.25 crores, which is a 64% increase from FY '23. In terms of expenses. Total expense of -- for the quarter was INR 142.18 crores, which is a 34% increase -- sorry, 62% increase from same quarter previous year. And for the full year, INR 432 crores, which is a 31% increase from FY '23. Split of expenses. Employee cost, INR 220.78 crores for the full year, 38% increase from FY '23. Fees and commission expenses directly related to the business, INR 86.39 crores, 41% increase. Others, INR 96 crores, which is a 23% increase. That is as far as the figures are concerned. As envisaged some years before, we have reduced the dependence on the brokerage business. The brokerage income is 45% of the total revenue compared to 58% in FY '20. Another highlight was the distribution income crossed INR 150 crores, stands at INR 152 crores now. Mutual fund AUM of 12% INR 200 crores end of March '24, and a PMS AUM of INR 914 crores. I hope all of you have gone through the shareholders' presentation which we have uploaded. If there are questions, we are now ready to take them. Operator, over to you for Q&A.

[Operator Instructions] First question is from the line of Darshil Pandya from Finterest Capital.

Congratulations on this great set of numbers. Sir, 2 things I want to ask you. One is on the press release that the company has mentioned, the Board has approved an investment of up to USD 1 million to form an entity in Dubai. So just wanted some clarity on this, what are the plans going ahead?

Satish, I will take this question. I'm C.J. George here. For the last 25 years, close to 25 years, we have been working in the local market in UAE for the retail customers and that company is doing well. DIFC is a platform where high net worth and ultra-high net worth customers are serviced. And that requires that -- that relationship requires significantly different quality of products and perhaps complex structures, et cetera. So since we've started taking initiative to grow our wealth management business, the integral part of the wealth management business is to have a set up in UAE DIFC. Using that platform, we will be able to service ultra-HNIs and HNIs. Today, a large number of our own clients in Middle East, they are also clients of other entities in DIFC. In order to complete the bouquet of products, we have come to a stage when we have to start this. And we are of the view that this is the right time to go forward and start an operation in DIFC. This is the background.

Okay, okay. And when you say products, what does that include? Like [indiscernible] for what exactly you will be targeting?

Global products, structured [indiscernible], bonds, leverage products, all that we are unable to do today in the local domestic market in Dubai, those products will be made available to a large number of our own customers as we got new customers whom we could acquire there.

Okay. Okay. And sir, anything on the software income? We are seeing a subdued demand over there. What is the management thinking about it? And how will we take it forward?

See, at the moment, we do not have an aggressive business plan on the software business. But over a period of next 1 year to 18 months, we will think about growing that business. We haven't done -- it is largely servicing in-house operations.

[Operator Instructions] The next question is from the line of Mr. [ George ], an individual investor.

Congrats for the great set of results. A question regarding like previously, there were some disclosure regarding the appointment of CEOs for private wealth and PMS. Does the company intend to significantly expand this portfolio?

Sorry. Satish, what was the question? The question was not...

The question is that we have given press release on appointment of CEOs for private wealth and PMS, what is our outlook?

Yes. Okay. Good question. We have, over a period of time, identified the importance of scaling up private wealth business domestically for Indian clients. A large number of our own clients, over a period of time, have created wealth significantly. And outside our client universe also, the rate of growth of wealthy individuals, ultra-high net worth individuals in India. And so all of us are aware that number is going up. So it is in market which is to be serviced by our own set of people. So we have decided that we will go ahead and aggressively place our position in the private wealth business in the country. So that is why we've started hiring the team, we've started hiring a CEO. We were also not very aggressive in terms of our portfolio management business. We have decided that we cannot wait any longer. We wish to go aggressive on that business, too. So these are the 2 business lines we would like to aggressively pursue going forward. This is in line with the rate of growth of high net worth individuals in India. So this is a market, which we cannot ignore and our own clients have become high net worth and ultra-high net worth over a period of time. So this is an organic attempt to grow the business. Thank you.

Okay. One more question regarding the insurance premium side. Could you please provide the total insurance premium collected during the year and what will be the outlook for the next year?

For '23-'24, we have totally collected INR 100 crores of premium, which is compared to INR 76 crores for the previous financial year, which includes up to INR 4 crores of general and health insurance. There is still a lot of growth left in this business, and we are hoping that '25 also should be good for insurance without giving any estimates. Thank you.

Next question is from the line of Praveen Gramle from Ananya Research.

Congrats on the great set of numbers, sir. I have 2 questions to ask. One is the significant growth we can see in the Geojit PMS AUM. I wanted to understand what synergies have worked very good? And what kind of a growth is it because we have seen almost from INR 450 crores we've jumped to INR 914 crores. So going forward in the next 2, 3 years, what is your projection in terms of what kind of a growth rate that you could expect in the AUM? Second part is, I would like to understand more in terms of your Gulf regions, what are the synergies that you are seeing? What kind of interest that you're looking at and how significant this portion can become?

So I will answer on the PMS business, and Mr. George can take up the Gulf business, though maybe again replying what he had replied in the first question. In terms of PMS, like Mr. George said, we have not been aggressive in the earlier years in selling our PMS. And now we have decided to be an aggressive player in that business. We have grown from INR 450 crores in FY '23 end to INR 914 crores. And we have invested hugely in that business in terms of manpower cost. We are in line to start division in terms of managing the PMS in terms of fund manager. We are expanding that team to a larger base so that we can have many more schemes to cater to our clients' needs. So it is an aggressive focus area for us in this year also. And like I said, again, we don't give any numbers for the future, but we will definitely see an aggressive push for PMS business this year also. Mr. George can answer the wealth side?

Yes. Thank you, Satish. Our plan is, as I told you earlier, although we have a significant presence in the Middle East through our joint ventures in UAE, Bahrain, Oman, Kuwait, et cetera, these businesses were largely servicing retail NRI clients. Now a time has come, we're of the view that our clients' demands for products that are suitable for their risk appetite has gone up. They have become -- heritage clients became HNIs, HNIs became ultra-high net worth. So that particular -- and if you look at the Dubai as a city, over a period of last 4, 5 years, there was a significant migration of high net worth and ultra-high net worth individuals. So this is a segment where we couldn't resist from operating. So in the past, we have been thinking often and then we couldn't start this business in the DIFC. Currently, with the DIFC plan, along with IFSC new changes in the regulation, we have already a presence in IFSC. So through these linkages, we are of the view that we can service the high net worth, ultra-high net worth investors outside India. And with the PMS and private wealth business growing for us in India, we will be basically completing the bouquet of products for the life cycle requirements for HNIs and ultra-high net worth clients. Thank you.

Sir, one follow-up on the same, sir. Apart from the Gulf region, are there any other countries on the cards where you would like to explore?

See, we are a company looking for opportunities wherever we could identify significant NRI population, if the local regulations permit. So we are on the lookout for geography where regulations are permitting us to operate without much complexities. So we will come back and announce at the appropriate time. Thank you for the question.

The next question is from the line of [ Tushar Sarda ] from [ Athena ] Investments.

Congratulations on a very good set of numbers. I haven't tracked Geojit before. So if you can explain as to what -- where the growth will come from? You already mentioned that you're reducing focus on brokerage, but which segment will drive the growth? Will it be mutual fund, will it be insurance, will it be PMS? And in what order?

I will come in Satish to intervene and tell you that our focus, we did not make it appropriately perhaps. We are not reducing our focus on brokerage. But we are significantly increasing our focus on nonbrokerage business lines, like distribution of mutual fund, distribution of insurance, private wealth business, PMS business, et cetera. So that is why the brokerage income is, today, only 45% of the total income. So without losing any focus, we wish to build the best possible trading platform, investment platform in Geojit and that will service our customers. So technology will be a great service provider for our clients, and there will be no kind of compromise on the focus on brokerage business. But having said, our aggressive focus will be on other businesses, so that we could also manage eventually the cyclical kind of movement and behavior of the markets and our revenues. So this was the whole idea.

Okay. And on mutual fund, if I see, markets have done well, but your AUM growth has not been much. So is it that you have much more of debt AUM than equity AUM?

Satish, you might give the numbers?

So in terms of mutual fund growth, I think we are at par with the industry. The industry equity AUM grew 48% over FY '24; over FY '23, we have grown 46%. Our 95%-plus of our portfolio is only into equity.

Is only into equities. Okay. Okay.

Income has not grown accordingly. Income has grown only 17% in mutual fund distribution for the year.

Yes, yes. But the AUM growth is 46%. The income growth is depending upon the commission rates we received from the mutual fund...

And how much of this is trail and how much of this is new distribution?

We are only at trail. I didn't -- maybe I didn't understand the question. Now mutual fund base is only on trail income.

[Operator Instructions] The next question is from the line of [ S. M. Kamal ], an individual investor.

Congratulations for a great set of numbers. Just I would like to know about do you have any plan in future for inorganic acquisition? And the second question regarding how much cash available in our book?

The question about, one, with regard to inorganic acquisition is an opportunity we will explore as and when we see opportunities that are aligning with our culture as well as the -- particularly on the compliance culture, et cetera. So when we see such an opportunity, we will certainly explore. And with regard to cash in hand at the moment, we have utilized almost now full amount of our cash in margin-bearing book. So we do not have, at the moment, free cash flows to look at the cash investment in acquisitions. But if there are opportunities, we have options to manage that.

I think the question was, what is the cash in the group, which CFO can reply.

Yes. This is Mini Nair, CFO. On the group basis, the cash available is INR 750 crores. But as MD said, majority of that is used for NPS book -- lending NPS and another major portion is used for the working capital requirements on a regular basis.

But having said this, our interest income has gone up to around INR 110 crores last year.

[Operator Instructions] The next question is from the line of Chander Bhatia from Seers Fund Investment Management.

Many congratulations on a great set of numbers. Sir, my first question is, what is the yield on PMS and what is the yield on mutual fund side?

Yield on mutual fund is 0.8. And on PMS, it varies around -- the estimate around 2.2%, 2.4% range. We understand PMS is -- you have performance fees as well as the fixed fee. Average, it's around 2.2% to 2.4%.

Okay, sir. And what is the size of AUM of PMSs from the performance fee side and what is purely on the percentage side basis or AUM basis?

I will try to get that. I don't have it right now. I don't have it right now for '24. If you have some other questions, you can go ahead with other question by that time, I'll get this number.

Yes, sir, I have one more question about the other operational income, which is INR 24 crores. So can you maybe give a little more color on this from where this other operational income is coming?

CFO?

Yes. Okay. I will give other operational income, interest on loans is INR 1.46 crores, INR 54 crores is FD interest and the PMS reached INR 18.57 crores and other operating income of INR 1.65 crores. So largely, it is coming from FD interest.

FD interest and the PMS income.

And INR 18.57 crores PMS income, correct. So interest is coming largely. It's about INR 54 crores, INR 55 crores. INR 18.5 crores is PMS. That is a major portion. Performance fee is INR 5.22 crores out of INR 18.5 crores.

[Operator Instructions].

If there are no questions, we can conclude.

Okay. Ladies and gentlemen, since there are no further questions, I would now like to hand the conference over to Mr. C.J. George for closing comments.

Thank you very much, ladies and gentlemen, for participating in this investor call. If anybody has any more inquiries, please feel free to contact us. We will be very happy to help you and give you the information. We have uploaded the investor presentation also, please go through that. Thank you very much, once again.

Thank you very much. Have a nice day.

Thank you. On behalf of the Geojit Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.