SMC Global Securities Limited (543263) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '27 Earnings Conference Call of SMC Global Securities Limited, hosted by XB-4 Advisory. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Kothari from XB-4 Advisory. Thank you, and over to you, Mr. Kothari.

Thank you. Good evening, everyone, and thank you for joining us on the Q1 FY '27 Earnings Conference Call SMC Global Securities Limited. Joining us today on the call are Subhash Chand Aggarwal, Chairman and Managing Director, SMC Group; Mr. Mahesh Gupta, Vice Chairman and Managing SMC Group; Dr. D.K. Aggarwal, Chairman and Managing Director, SMC Capital; Mr. Ajay Garg, Director and CEO, SMC Global Securities Limited; Mr. Anurag Bansal, Whole-Time Director; Mr. Himanshu Gupta, Director and CEO of Manulife Financial Services Limited; Ms. Shruti Aggarwal, Full-Time Director, FMC Global Securities Limited; Mr. Pranay Agarwal, Director and CEO, Stoxkart. Mr. Rohit Nayyar, Group CFO. Before we begin, please note that today's discussion may include forward-looking statements, which reflect the company's current views and expectations -- these statements are subject to risks and uncertainties, and actual results can differ materially. A detailed shareholder statement is provided on the second last page of the earnings presentation, which is available on the taxane and the company's subside as we -- with that, I now invite Mr. Subhash Aggarwal to share your opening remarks. Over to you, sir.

Thank you, Mr. Gautam Kothari. Good evening, everyone, and a warm welcome to all participants on this call. We hope you have had the opportunity to review our quarter 1 financial year '27 financial results and the company's earnings presentation both of which are available on the stock exchanges and on our website. Before I take you through our financial performance, let me begin by highlighting the key industry trends and market development that define the business environment during the quarter. Starting with the broking industry in Q1 financial year '27 witnessed a relatively stable operating environment supported by resilient domestic investor participation and a healthy activity in the cash market, while the derivative segments continue to reflect the impact of regulatory measures implemented over the past year. The industry remains focused on building more balanced and diversified business models through wealth management, distribution, advisory and other fee-based units. We believe this transition continues to strengthen the long-term quality and sustainability of industry earnings. During the quarter, Indian equity markets remained broadly resilient despite entering Mitel global macroeconomic and geopolitical uncertainties. Strong domestic institutional participation and sustained SIB growth continue to provide septal support to market sentiment while increasing financialization of household savings and growing retail investor station reinforced the long-term growth opportunity for the group is -- on the regulatory front, the industry continues to operate in an evolving but constructive environment. Market participants remain focused on inventory, governance, risk management, and technology infrastructure, while adopting 2 regulatory initiatives in aiming at financing market integrity and investor production. We believe firms with diversified revenue streams, robust compliance framework and discrete capital allocations remain well positioned to capitalize on the sectoral growth of printed opportunities in India sector market. Turning to the insurance working industry, the second continued to witness LD momentum during Q1 FY '27, supported by sustained demand across both life and non-life insurance segments. Customer awareness around financial protection continued to improve, particularly in health and retail insurance while digital adoption and expanding distribution network further strengthen market reach. The industry also continued to benefit from the long-term structural drivers of increasing insurance penetration and favorable regulatory initiatives, reinforcing our confidence in the sector's sustainable growth prospects. With respect to the financing and NBFC segment, our operating environment during Q1 FY '27 remains stable with the sector continuing to balance growth of alongside prudent risk management, improving systematic liquidity and adding interest rate expectations provided a more supportive backdrop for credit growth, while lenders remain focused on portfolio quality and disciplined underwriting. The industry also continued to witness a preference post core lending segments with asset quality trends remaining broadly stable. We believe well capitalized institutions with diversified lending portfolios and strong risk management practices remain well positioned to benefit as credit demand continues to recover. Overall, while the operating environment continues to evolve across our business segments, the long-term structural drivers remain firmly intact. We believe our diversified business model despite execution and continued focus on governance and customer centricity position us well to capture this option. With that drop let me now walk you through the key highlights of our performance for the quarter. In Q1 FY '27, our consolidated operational income stood at INR 515.1 crores, representing a Y-o-Y growth of 21.2%. EBITDA for the quarter was INR 107 crores, up 6.9% Y-o-Y with an EBITDA margin of 20.9%. Profit after tax stood at INR 36.7 crores as against INR 30 crores in Q1 FY '26, representing a growth of 22.3% Y-o-Y. Within our broking distribution and trading businesses, Q1 financing yea '27, revenue rose 15.1% Y-o-Y to INR 16.3 crores with segment EBIT improving by 17.6% Y-o-Y INR 74.3 crores in the quarter. Our booking client base, including Stoxkart grew to 13.8 lakh accounts as of Q1 FY '27, while our booking DP AUA expanded to INR 1,64,962 crores. Our distribution business continued to scale with cumulative mutual fund AUM reaching to INR 4,787 crores, supported by 92,129 active SIPs aligned with evolving customer preferences and industry trends. We have continued to strengthen our presence approach app delivery distribution advisory in, which we believe will remain the key sector growth drivers for our booking franchisee over the long term. Our financing business operated through forces across 7 states with a continued focus on asset quality or full diversification and disciplined growth in an improving operating environment. Let me address the key data points directly. And we actually as stood at INR 1,025 crores as of June 2026. The lending portfolio remains well diversified across SME, WC TL SME LAP, onward lending SME assets, Micro Loan loans and capital market funding. With macroeconomic and credit conditions, showing signs of improvement, we remain cautiously optimistic about the growth outlook for this business while continuing to port the locality. In our insurance broking business segment revenue stood at INR 167.3 crore and segment EBIT stood at INR 1.6 crores in Q1 FY '27. Gross premium for the quarter stood at INR 759 crores with in issuing 2.7 lakh policies supported by a work force of 492 employees, 16,747 POS and 385 motor insurance service providers. Overall our Q1 FY '27 witnessed a constructive operating environment across our benefit, supported by resilient customer demand and improving market conditions. Our diversified business model and continued investments in technology and risk management enabled us to deliver steady performance across our base businesses while maintaining a disti approach to growth and asset quality in our financing business. We believe these can position the group well to catalyze on the long-term opportunities across our operating segments and continue creating sustainable value for all our stakeholders. With that, I now hand over to Mr. Rohit Nayyar, our group CFO, to take you through a more detailed overview of our financial performance over to you.

Thank you, Subhash Ji, a very good evening to everyone on the call. Thanks for joining. For the benefit of all, I take you through our financial and operational performance briefly as details have already been covered by our games. For the current quarter ended June '26, our consolidated operational income stood at INR 515.5 crores, representing a Y-o-Y growth of 21.3%. A EBITDA for the quarter was INR 107 crores, up 6.9% Y-o-Y with an EBITDA margin of 20.9%. Profit after tax came in at INR 36.7 crores as INR 30 core in Q1 FY '26, representing a healthy 22% growth Y-o-Y. On a stand-alone basis, Q1 FY '27 operational income stood at INR 273.4 crores, up 11.1% Y-o-Y with an EBITDA of INR 71.5 crores at a margin of 26.2%, an expansion of 100 basis points Y-o-Y. The stand-alone PAT for the quarter was INR 25.1 crores, up 9.6% Y-o-Y. I will now turn to the segment-wise performance. We have 3 segments in the Broking Distribution and Trading segment. Q1 FY '27 revenue grew 15.1% Y-on-Y to INR 316.6 crores, with the segment EBIT rising by 17.6% Y-o-Y to INR 74.3 crores. The healthy revenue growth was supported by a stable market activity with sustained client engagement across our core businesses, while the improvement in EBIT reflects disciplined cost management and operating leverage. In the Insurance Broking segment, Q1 FY '27 revenue grew 44.4% Y-o-Y to INR 167.3 crores, with segment EBIT of INR 1.6 crores. The robust top line growth reflects the strength of our distribution platform our expanding Post network and the structural industry tailwind. The moderated EBIT growth versus revenue reflects investments in distribution capacity and technology infrastructure to support the upcoming reinsurance opportunity following our composite broker upgrade. In the financing NBFC segment, Q1 FY '27 revenue stood at INR 46.5 crores with segment EBIT of INR 261 crores. The moderated financial performance reflects our calibrated approach to growth amidst an evolving operating environment. Our strong capital position predominantly secured loan portfolio healthy collection efficiency and stable asset quality continue to reinforce the resilience of our financing business, while prudent risk management remains central to our long-term growth strategy. During the quarter, we continued to strengthen our franchise across businesses as broking client base increased to INR 13.8 lakh. Insurance gross premium grew to INR 759 crores, while our cost network expanded to 16,747 reflecting continued traction in our distribution-led strategy. These milestones reinforce the strength of our diverse financial services platform and provide a solid foundation for sustainable long-term growth. The quarter also witnessed continued progress across our key operating metrics. The assets under advice in our broking business increased to INR 1,64,962 crores. and mutual fund AUM reached INR 4,787 crores, reflecting our continued focus on quality growth across businesses. Overall, our Q1 FY '27 performance reflects the strength of our diversified business model, the resilience of our customer franchise and our disciplined approach to execution. We remain focused on enhancing operational efficiency, strengthening our digital capabilities, deepening customer engagement and maintaining prudent risk management across our businesses. We believe these priorities will continue to support sustainable growth and long-term value creation for all our stakeholders. With this, we conclude our remarks and open the floor for questions. Thank you.

[Operator Instructions] The first question comes from the line of Mani with Quantum Shares Private Limited.

Hello, am I audible?

Yes, you are.

My first question is that the previous guidance has listed approximately 25% growth in AUM, so could you please elaborate on the reasons for the variance between the effective and actual performance? And by what time can we expect it to materialize?

Manish, very good afternoon. I'm Himanshu Gupta, Director and CEO, Moneywise Financial Service. Basically, the AUM, we go at INR 1,005 crores for the quarter versus INR 1,118 crores for the quarter ended March 31, 2026, quite in the AUM. However, we are working on the product with strategy that I formed this year. We are focusing on the secured retail products, cola and Wollan. And therein, we can see a good growth in the ingo. However, a couple of products that we had no different for items, which are the apps which we had different there will be a decline of about INR 50 crores during the quarter. And because the other product that we had tightened was on [indiscernible] obsess that was a caution for that vernals there was a like of INR 30 crores eluate. These are the 2 products which are pulling down the AUM growth. However, for the full year, we still attract to closing, we were at about INR [indiscernible] crores. So the quarter 1 is a little slow with lending and the focus products for in...

Okay. Understood. So what I wanted to ask is what is the next 5-year target for AUM growth? And how fast this growth can be achieved?

Our aim is to increase our part initial this year would be there would be a still above effect from the old products that we have discontinued. How I see that we should wait for a year or so and then we would see a change or go.

Okay. Okay. Understood. And just 1 more follow-up question from my side that within the AUM, which loan category is performing well.

That what I was coming to. So would be no change in the product focus. Now gradually, the book is shifting more granular, more detail and moving towards a higher proportion of secured book, so you will see even at the end of quarter end, we could constitute 75% of the AUM, which is slightly higher than the last quarter ended and even year-on-year to book has [indiscernible]% and even in our are also in because that will be distended that speaker...

Sorry for interrupting, speaker we cannot hear you. Can you come a little closer than talk?

Hello.

Yes, please go ahead.

Yes. Should I repeat or....

I wasn't able to hear the last 2 sentences so...

I give you by saying that apart from the increase in fixed core lending, our yields and margins are also going up with the change in mix.

So just 1 more question from my side that the insurance broking was the fastest-growing business during Q1, right? So what are the key factors driving this strong performance.

For your question. This is Sakshi Mehta, CFO at SMC Insurance. So basically, general generally, insurance was the major factor for the Y-on-Y growth. So none less insurance is a major factor for the strong growth in SMC insurance.

[Operator Instructions] Next question comes from the line of Aditya Dar with CAP Investments.

Hello, am i audible?

Yes, you are audible.

Just had a couple of questions. So regarding our broking revenue business, so we saw steady growth during the Q1 FY '27 despite a moderated derivative dating environment, what are the key drivers for the growth during the quarter?.

This is Ajay Garg, Director and CEO sent Global. Quarter 1 has been a bit better with [indiscernible] grew almost 6% to 7%. And though FPI sold around INR 1.5 lakh crores, DIR more than 2 lakh crores so -- and routine crisis have been settling down. So again, the U.S. Iran issue raised, but during the quarter, the crude price has gone down and we have seen that increase in the cash market business. The delivery rail business, MTS, our MTF book has increased from INR 750 crores to more than INR 900 crores MTFs book and the cash market, brokerage percentage has increased from 45% to 55%. And we have seen some reduction into derivative revenue. So I think the segmental shift from derivative to cash market, and people are holding the stocks and bullish on the reman economy and in time to come, the Indian sectors are very, very strong and because of geopolitical crises and crude prices, some individuals are there. So Q1 is better. Q2 might be much better and this -- the coming year should be much better as compared to the last year.

Understood. Sir, regarding the mutual fund AUM, we saw that it also grew during the quarter. So what are the basic reasons or the initiatives which the company took to -- for the expansion of our wealth management and the distribution business?

Yes. This is Anurag Bansal. As far as distribution business is concerned, we have renewed our strategic focus on mutual fund distribution with the objective of accelerating AUM growth. key initiatives undertaken include enhanced product planning for employees and distributors, investor awareness initiatives and extensive adoption of our digital distribution platform that is easy invest. And these efforts have yielded encouraging results. Our mutual fund AUM grew from INR 4,294 crores as on March '26 to INR 4,787 crores as on 30th June, representing a growth of approximately 7.5%. While a person of this growth is attributable to market appreciation and investing portfolios, the increase has also been driven by net mobilization resulting from our focus distribution initiatives undertaken during the quarter. And we expect that these initiatives will continue supporting sustainable growth in AUM over the coming quarters. As far as wealth management is concerned, we have increased our focus on H&I and salt offices and tie-ups with the quality third-party manufacturers is the priority. Anybody who would like to add? I think that's it, Akita.

I have 2 questions regarding the insurance business as well. Sir, regarding -- we saw a revenue growth, which remains on for our insurance business, but EBIT moderated during this quarter. Could you elaborate on the investment banking investment being made in technology, people and distribution and when you expect the operational leverage to improve?

This is Sakshi. So basically, we are primarily investing in manpower. Where in corporate and life insurance is manpower cost is increasing. -- and we expect operating leverage in the future quarters, we are in results in flow.