SMC Global Securities Limited (SMCGLOBAL.BO) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of SMC Global Securities Limited, hosted by X-B4 Advisory. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gautam Kothari from X-B4 Advisory. Thank you, and over to you, sir.

Thank you. Good evening, everyone. Thank you for joining us on the Q1 FY '26 Earnings Conference Call of SMC Global Securities Limited. Joining us today on this call is Mr. Subhash Chand Aggarwal, Chairman and Managing Director, SMC Group; Mr. Mahesh C. Gupta, Vice Chairman and Managing Director, SMC Group; Dr. D.K. Aggarwal, Chairman and Managing Director, SMC Capital Limited; Mr. Ajay Garg, Director and CEO, SMC Global Securities; Mr. Anurag Bansal, Whole-Time Director, SMC Global Securities; Mr. Himanshu Gupta, Director and CEO of Moneywise Financial Services; Ms. Shruti Aggarwal, Whole-Time Director, SMC Global Securities; Mr. Pranay Aggarwal, Director and CEO of Stoxkart, Moneywise Invest Limited; and Mr. Vinod Kumar Jamar, President and Group CFO. Before we begin, please note that today's discussions 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 may differ materially. A detailed safe harbor statement is provided on the second last page of our earnings presentation, which is available on the stock exchanges and the company's website as well. With this, I now invite Mr. Subhash Aggarwal to share his opening remarks. Over to you, sir.

Yes. Good evening, everyone, and a warm welcome to all participants on this call. I trust you have had the opportunity to review our quarter 1 financial year '26 financial results and earnings presentation, which are available on both the stock exchanges and our website. Before discussing our financial performance, allow me to provide some context on the industry landscape and recent developments that have shaped the business environment. The broking and financial services industry is undergoing a pivotal transition shaped by regulatory changes, including stricter F&O norms and revised expiring cycles alongside global uncertainties. These factors have led to a temporary dip in derivatives trading volumes and client activity despite robust retail participation marked by 8.4 million new NSE demat account in financial year '25. While intermediary faced near-term revenue pressure, long-term growth drivers such as digital-first investing, product innovation and expanding Tier 2, Tier 3 market penetration remaining strong with pivot measures aimed at fostering greater stability and transparency in the capital market. India NBFC sector has displayed resilience amid evolving microeconomic dynamics though credit growth is expect to moderate to 13% to 15% in financial year '25-'26, down from 17% over the last 2 fiscals as per ICRA rating. And MSME lending remains the primary growth levers with demand supported by improving borrower credit profiles and steady disbursements. However, NBFCs are adopting to tighten RBI regulations such as restrictions on default loss guarantee for fintech originated loans and are recalibrating pricing and provisioning particularly for MSME borrowers. Despite these adjustments, asset quality has remained stable and the sector is poised for sustainable recovery aided by favorable borrowing conditions and rising demand from underserved segments. The life insurance industry had sustained double-digit growth projecting India's life insurance market to grow at 10.5%, double the global average of 5%, driven by rising financial awareness and product diversification. Premium collections for April, May financial year '26 have already closed INR 52,000 crores, up 11% Y-o-Y. The general insurance sector saw a temporary moderation, but continues to gain traction on the back of increased corporate retail coverage needs with digital channels increasingly driving distribution. Insurance booking remains a key beneficiary, leveraging the structural demand for protection-oriented products. As macroeconomic conditions stabilized, both life and non-life segments are poised for a strong rebound, supported by digital penetration and evolving customer trend. We view this take as a strategic inflection point rather than a setback. Regulatory measure make a core initial inflection, but they are crucial for creating a more transparent, disciplined and resilient market ecosystem. For well-positioned intermediaries like us this environment opens opportunities to consolidate market share, enhance customer trust and scale digital offerings. While current financial indicators, such as older accounts margins and returns ratio may not fully reflect this transformation, this represents temporary adjustments with the stabilization of trading patterns. We expect more robust sustainable growth supported by sound regulatory foundations and a maturing investor base, including the continued expansion of new retail participant and SIP investors. Now let me walk you through some key performance highlights for SMC Global Securities Limited. Despite facing regulatory headwinds, we are pleased to report that SMC Global Securities delivered quarter-on-quarter revenue and EBIT growth across bookings, distribution and trading and financial business segment. In quarter 1 financial year '26, our consolidated revenue stood at INR 425.1 crores, marking a growth of 0.9% on a quarter-on-quarter basis. Our EBITDA came in at INR 100.3 crores, reflecting a strong 59% growth quarter-over-quarter, while our PAT stood at INR 30 crores, delivering a growth of 632% compared to the previous quarter. In quarter 1 financial year '26, our extensive network compared -- comprised 2,137 APs across 412 cities, truly reflecting our pan-India presence. We had 6,811 financial distributor and our mutual fund AUM stood at INR 4,519 crores. In our NBFC operations, we are [indiscernible] through 42 branches across 9 states. Our insurance vertical continued its growth momentum in quarter 1 financial year '26, operating through 8 branches nationwide, backed by a robust network of 16,102 POS agents and 356 MISPs. While quarter 1 witnessed some pressures due to external factors, we remain confident of a revival across all verticals, broking, financing and insurance, and market conditions normalize and investor sentiment improves. Our diversified business model growing nationwide network and continued investment in technology, position us strongly to drive sustainable and long-term growth. With that, I now hand over to Mr. Vinod Kumar Jamar, our President and Group CFO, for a detailed overview of our financial performance. Over to you, Mr. Jamar.

Thank you, Subhash, sir, and good evening to everyone on the call. Let me now take you through our financial performance for quarter 1 FY '26 on a consolidated basis. For quarter 1 FY '26, operating income stood at INR 425.1 crores. Operating EBITDA was approximately INR 100.3 crores. EBITDA margin came in at 23.6%. PAT stood at INR 30 crores with a PAT margin of 7.1%. Segment-wise performance, in the Broking, Distribution & Trading segment, Q1 '26 revenue was INR 274.9 crores. Branch network expanded to 210. In broking, over 26,000 new clients are added during this quarter. Wealth advisory AUM reached INR 1,007 crores, a 6.2% increase -- a 6.2 percentage increase compared to last year. Mutual fund AUM rose to INR 4,519 crores, an 8.2% increase compared to last year. We added 1,095 new [ ships ] in this quarter. In the financing segment, quarter 1 revenue was INR 51 crores, showing a growth of 25% quarter-on-quarter. NBFC AUM stood at INR 1,191 crores. GNPA and NNPA was 3.9% and 2.6% respectively for the quarter. In the insurance broking dividend, Q1 FY '26 revenue stood at INR 116 crores. Total insurance policies sold were 2,32,000 in Q1 FY '26. With this, we conclude our remarks and open the floor for Q&A. Thank you.

[Operator Instructions] The first question is from the line of [ Deepak Tyagi ] from Vyom Investments.

Sir, my first question was our EBITDA margin has expanded sharply Q-on-Q. So basically -- I was sharing EBITDA rose significantly Q-on-Q. I just needed an elaboration on that. And my second question is what will be our future outlook for revenue and profitability going forward in FY '26?

Over to Jamarji.

Deepak, this is Vinod Jamar. Actually, our EBITDA margin grew up Q-on-Q because in the quarter ended March 31, we had an investment loss of INR 9.33 crores, whereas in this quarter, we had an investment gain of INR 5.81 crores. So that was a major driver. Apart from this, our arbitrage income also improved. These were 2 major factors among others.

Okay. And sir, what will be revenue and profitability outlook for the remaining quarters?

We are hopeful that we will keep the growth momentum continued. We'll have a top line growth of around 10%, 12% and bottom line growth of around 15%, 15% to 20%.

Okay. And sir, also one more question was that, how -- can you give some of your take on your NBFC sector? Why is it facing challenges to grow?

Mr. Himanshu Gupta will be taking that.

Deepak, I think you are referring to the change in AUM over the quarter. So you can see that the AUM has not grown during the quarter. So there are a couple of reasons to it. First of all, given the stress in the SME portfolio overall in the industry. So we have tightened a lot of underwriting policies. So as a result, the [ batch ] disbursement numbers have gone down. So this is the first reason. And going forward, our team reporting channel and the sales team, they have been trained to get the business as per the new policy. So initially, it is taking some time, but we will cover up the business momentum as per the new underwriting policy. That is the first reason. Secondly, I talked about it on the last call as well that we have discontinued large ticket loans and focusing on the retail loans, particularly in the LAP segment. So therein, if you compare it over the last periods, particularly -- there used to be a disbursement of about INR 50 crores on an average in that product, which is not there in quarter 1. And correspondingly, we are also running that book down and had some foreclosures during the quarter 1 for large ticket loan to the tune of about INR 40 crores. So cumulatively, this rundown impact is coming from a reduction in the large exposure and tightening of the underwriting policies.

[Operator Instructions] The next question is from the line of [ Vimal D'Souza ], an individual investor.

My question is, in the recent years, broking advisory and CMS businesses in India have grown significantly due to increased retail participation. How does SMC Global plan to differentiate itself from the competition and position itself to stand out in this crowded market?

Okay. Madam D'Souza, you see competition is always there. We always face competition. And we are investing in technology to face any competition because nowadays broking is like a technology company. So we are investing in technology and we are improving. And every time we are making our products more innovative and research-based and efficiency-wise, we are improving our app. So all those things we are doing to face the competition.

The next question is from the line of [ Pulkit Gupta ] from SBS Brokers.

My question was also mostly on the NBFC side. We have seen that the revenue has actually seen a 15% decline, which I think Mr. Himanshu had talked about, where large ticket loans were actually -- they had come down. But the other thing that I had noticed was that the EBIT had also dropped about 30%. And the asset quality has actually declined. So what is the explanation for the asset quality? I mean, do you see that the NNPA has actually grown from 0.9% to 2.6%? And we've also seen a very sharp drop in the PCR.

I got your question, [ Pulkit ]. The first point that you highlighted is the decline in the total revenue. So I believe you are comparing year-on-year numbers for quarter ended June 30. So if you see there was a item in the corresponding quarter last year. Net gain on fair value changes of about INR 17.5 crores, which was INR 4.7 crores in this quarter. So that is the abnormal gain that we had last quarter under this head. Otherwise, the interest income has gone up if you compare year-on-year figures. So that was number one. Number two, regarding the asset quality. So the GNPA numbers have gone up. That is primarily new because of stress under -- building up under the SME sector in the market. However, in our portfolio, the GNPAs are mainly constituted by the secured portfolio, which are covered by the -- backed by the immovable property. And we have proper -- the properties are legally verified, and we are under recovery measures wherever we want to repossess the property or engage with the customers and some of the customers are paying the amount. So it is a matter of time and those high GNPAs that you are seeing in the current quarter as well as last quarter. So we are very optimistic and hopeful that we will recover those GNPAs and probably in the coming quarter, you will see much better portfolio quality number in terms of GNPA. And that is, again, the same reason why the PCR is low because these GNPAs are backed by immovable property. And we have adequate coverage till we have made a little higher provisioning basis the property value that we have.

Okay. So if I understood you correctly, you are saying that the GNPA increase has essentially been because of the increase in asset quality stress in the secured segment. So you're not looking at any stress in the unsecured part, which is close to about 37% of your book.

That's correct. But however, the delinquencies have slightly gone up in unsecured book as well given the market scenario. However, since last 1.5 years, we have started taking guarantees under various guarantee schemes available from central government. So we are -- have -- we see less delinquencies due to the tightening of underwriting policies as well as the guarantee coverage that is available on unsecured book. So that is -- there is nothing to worry in the unsecured book. And the unsecured book, anyways, we are reducing over period, if you see over the last couple of years, we have reduced unsecured exposures from 50% to 36%. And going forward also, we'll continue to do that and want to bring it down to 25% to 30%.

All right. So would it be possible to then have a sense of what is the breakup between -- in the slippage between secured and unsecured? The fresh slippage that you would have seen?

So that I have to -- it's not readily available right now with me. We can share these numbers. But to give you a rough figure, 80% of the incremental slippages, they are from the secured book.

Okay. Okay. Okay. My second question is essentially on the insurance debt. So what would sort of be the reason for the decline that we have seen in the insurance business also, I mean the insurance broking business, where we have seen a 9% decline in the top line, Y-o-Y again?

Praveenji you take up? Or Sakshi, you take this question?

So the main reason for the decline in the insurance brokerage is because of the -- so basically, by 8% are general insurance business has declined because of the -- basically because the motor industry is seeing a downfall. But we hope in the next quarter it will increase.

Okay. And so what is -- so this entire drop in the overall revenue is attributable to the drop in the motor vehicle segment or...

Yes. So basically, 90% of our revenue is from the -- is basically from the MISP vertical, which is the motor insurance verticals. So the main reason is because of that only.

Mr. Pulkit, does that answer your question?

Yes. No. So I was just saying that I would assume that, that would also be the reason for the fall in the EBIT also that you have seen in the segment.

Yes, yes, yes, exactly, exactly.

The slowdown in total vehicle sales.

Yes, yes. But we hope to improve it in the coming quarters, yes.

Okay. And how has been the life insurance a bit over there? I mean, has that also -- it seems that it has increased slightly by 1% from 8% to 9%. So is it more because the vehicles have declined?

Yes. So life insurance has also seen a dip in the revenue as compared to the Y-o-Y number, because of the major group insurance client that we had in the last quarter, but we are again looking forward to the client retention in the coming quarters. So that will also improve in the coming quarters, the life insurance segment.

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

Am I audible?

Yes, you are audible, Mr. Jain.

Sir, my question is that like already, there is a big players like Zerodha and Groww. So how SMC Global like dominate the differential in technology and how it inspire the retail investors like. So this was my query.

Okay. I didn't get your name.

My name is, Jitesh, Jitesh Jain.

Jitesh, this is Pranay Aggarwal.

You voice is cracking.

Sorry.

Voice is cracking.

Am I audible?

No, sir. Actually there is a -- again, sir, should I repeat the question?

No, no. I got your question, but am I audible?

Yes, sir. Now it's clear.

Okay. So Jitesh, we have launched a discount broking of our own called Stoxkart. So Stoxkart is a 100% subsidiary of SMC. So you can say Stoxkart is competing in the market with the likes of brokers you just talked about. So in Stoxkart, we have a different kind of strategy. We have gone ahead with Software-as-a-Service model. We believe that the trading platform is the product, which is essentially we are offering. So we have invested a lot in technology over the past 1 year. And hence, the result is, we have launched the app, which is Stoxkart and it has been rated 4.5 plus on Google Play Store and AppStore. And I'm happy to inform that we are growing month-on-month. Even in May, I can say in this quarter, we have nearly tripled the accounts we opened in Q1. We will see -- by the trend line of the first month, we will probably triple the accounts we have opened in Q1. So I think your question was mostly how are we competing in the market. So this is -- I think do you have something else, which I can talk about...

Actually, even -- there is one thing just need because already the Zerodha and Groww also providing the discounts. So how it can be like -- because how it would be a KPI for all like because already there are the big players in the market. So I just need to understand about the KPI because how it would be differentiated. Because as you mentioned just now, like you are providing discounts and like things like -- but same has been -- same strategy has been also provided by them also. So...

So we are running on a different model. We are running on subscription model. so as I told you, we provide software subscriptions. You -- a client can basically pay just INR 99 per month and do unlimited trading on our platform, on the Stoxkart app. So this is kind of a Software-as-a-Service model. And we are growing our subscriber base. So it's INR 99 per month and INR 699 per year, both the options the clients have, and they can choose either of the model and they can subscribe to the platform. So this is innovation in the industry, which we brought. This is kind of apart from the existing models existing in the industry, which others are providing. Even our cost of acquisition has also come down a lot since we launched this model because a lot of clients are organically coming to us because of this particular problem we are solving in the market.

Okay. Right. Sounds fair. Fine. Like I don't have any query as such like because -- like fine, I just need to think and like because what happened like when I see the result, and when I see the -- as you mentioned, the consumer cost acquisitions, like when I compare the cost, it would be like Zerodha and even Groww like their acquisition would be like even into like very less favorable, very less favorable cost. So just you are like pretty acceptable, like fine.

Right. So just to give you an idea, our cost of acquisition has come down from around INR 1,000 per account to around INR 200 per account since we launched this model. And our ARPU is about the same in this model also because if you talk about industry, industry average ARPU per active client for a discount broker is INR 2,000 from brokerage. There are other schemes of income also. But from brokerage, it's INR 2,000 per active user, and the activation ratio is around 20% to 25% on an average. So if you talk about per client, not on active client, it comes down to INR 500 or INR 600. And because we are taking subscription upfront, all our users are paying customers. They are not just opening an account and not actually with the intention of trade. So our ARPU per client comes down to the same level as the other brokers, if that answers your question. And the cost of acquisition is significantly less.

[Operator Instructions] The next question is from the line of Ayush Seth from AS Investments.

Am I audible?

Yes, you are audible?

Yes, sir. So my first question was, can you, sir, provide insights into the asset quality, including the trends in the collection efficiency and the gross and net NPA and as well as any -- if any stress pockets are emerging into the business?

Yes. This is Himanshu. So I'll take this question. So as we discussed earlier, there are certain delinquencies that have been observed during the quarter, particularly in the secured portfolio. So as a result, the GNPAs have gone up. And we are taking appropriate measures like we have [indiscernible] right, and we are in active discussions with the client. So we are very hopeful to get the recoveries done. Some of them would happen in quarter 2 and rest of them, we are hopeful to get it done during the year, most of them. And so this was the major trend that you were asking. And on the top of it, we have been focusing now on the retail portfolio. So the average ticket size of the new book that has gone down to around INR 10 lakhs to INR 15 lakhs vis-à-vis on the old book, which was around INR 1.5 crores for the LAP portfolio. So that will also help to avoid new spikes in the delinquency numbers in certain quarters. We have already implemented that since about quarters. And we have been building the micro LAP book, which has reached AUM of about INR 35 crores.

Okay. Understood.

And we have also started taking the CGTMSE coverage on the unsecured portfolio for all the loans, which are getting disbursed since about a year now. So that is also helping us reduce the delinquencies.

Okay, sir. So my -- basically, I also had a second question. So it was regarding how would you describe your capital position, sir? Are there any considerations or plans for fresh capital infusion into the near or medium term?

Yes. So we are open for the capital raise. For the debt facilities, that is a continuous process which we do on a regular basis from banks as well as from -- through NCD mode. And regarding the equity infusion, we will see to it as and when it would be required. Right now, the capital adequacy is around 43%. So we are very comfortable.

Okay, sir. I also had one question regarding the insurance broking segment. Just wanted to know that we saw a drop in gross premium collections in this quarter. So basically, do you consider this could be a seasonal fluctuation or an indicative towards to a broader trend?

So this basically is due to the seasonal nature of the industry, the premiums in quarter -- last quarter of the financial years are always higher. That is basically seasonal.

The next question is from the line of [ Deepak Tyagi ] from Vyom Investments.

Yes, sir, I want to understand that as you said that your revenue from Stoxkart on a yearly subscription basis is INR 699. So how is the trend of acquisition of the customers? How are we onboarding new clients every month? Can you give us some elaboration on that?

Yes. So in the Q1, we opened around 11,000 accounts only from Stoxkart, but we have launched this plan in mid of the month of May itself. So you can say in 1.5 months primarily this acquisition took place. And that trend is ever increasing. In Q2, we are seeing a trend that probably will triple this account count.

Okay. And sir, how is our full-time broking segment performing as through the Stoxkart, currently, it is our very small part of the broking segment. So how is that going?

Yes. I am Ajay Garg. Even in [indiscernible], you see like because of these new regulations where the weekly option has been only 1 -- contract 1 exchange, an increase of margin in expiry and less FPI activity because there was a dip -- industry-wide there was a dip of around 25% into volumes after Q3, Q4 last year. So as compared to Q4 last year, this year has been -- Q1 has been almost steady. But if you compare it with the Q1 last year, in FMC, there is a dip of around 20%, whereas the market has dipped around 25%. So we are better off that way. And as Subhashji pointed out that we are spending a lot on improving technology and you see [ cake ] size is increasing day by day, INR 27,000 crore SIP AUM was there in the month of June. We do have largest number of IPOs. And today, we have INR 19 crores of [ demat ] account though the unique numbers are much lesser. So what -- I feel that the penetration is still very low in India. If you see the penetration, it should be around 5% to 6%. So we have to -- we have a long way to go, and there is room for everyone. So SMC do have presence in more than 400 cities, and we do have more than 2,200 franchisee network at around 200 branches all across India. So because in Q1 and even in Q2, the -- because of various trade tariff global cues and because of some uncertainties, the market was a bit spectacle. But I think the second half should be much, much better. Q2 even we have to observe. But second half, should be much better, and we can see a very good growth in this year by the year-end.

Okay. Okay, sir. Got it. And sir, my last question is that in going future, what we do want to be? A discount broker or a full-time broker? What will be our major focus on?

It's really like there is a room for both the things. So because in discount broker, brokerage, the client is off his own. In full brokerage, it is the relationship because at the end of the day, though, because I had a full broking arm. So I feel that at the end of the money, client has to make profit. So we do have a lot of branches like around 2,200, 2,400 physical offices. Then, we do have a big research team. Our research is also very, very good. We do have very good tools. And now the algo circular has come. So now the algorithm-based trading would be leveraged to the retail clients. So we do have edge as far as this thing is concerned. Discount brokerage has also revolutionized. It has like without discount brokerage and without the technology, this number would not have been INR 19 crores from INR 4 crores pre-COVID. So it is very good for financial inclusion. And I feel that we are still at a very nascent stage, and there is a room for both discount as well as full booking.

[Operator Instructions] The next question is from the line of [ Vimal D'Souza ], an individual investor.

A question is to Mr. Subhash Aggarwal. The question is, in a recent online interview, you mentioned a target of reaching INR 8,000 crores in AUM. Could you please elaborate on the key strategy or the growth drivers that will help you achieve this milestone and the time line you're aiming for?

Miss, you say which target we have given? You're talking about mutual [indiscernible]?

Sorry.

You are referring certain figure. What is that?

No, I saw an online interview on YouTube. So you had mentioned that you are reaching for a target of INR 8,000 crores in assets under management. So I wanted to know what are the good drivers and the time line, which you are aiming for?

Okay. Okay. So that is we have around 4,500 mutual fund AUM with distribution team. So we can achieve INR 8,000 crores in 1 year.

In 1 year, okay.

Yes. We are trying to achieve that.

Sir, what are the growth strategies for this?

Yes. Actually, our app -- through app, we are procuring mutual fund, and we have so many distributors and it's more than 6,000 distributors. And by that, we can achieve. So that within 1 year, we are targeting to achieve this.

The next question is from the line of Anuj Dutt, an individual investor.

So I wanted to know how viable is the mutual fund distribution as a long-term revenue stream, particularly with the ongoing shift between direct and regular plan?

Anuragji, are you there?

Yes. So I'll take this question. So no doubt, we can see some shift from indirect to direct. But again, the size is increasing. And further, we are very small in the pond as of now. We are just at INR 4,500 crores of AUM. We have grown approximately 17%, 18% in last couple of years, and we are targeting a much higher growth in the coming year, and that will definitely add to our top line and bottom line.

The next question is from the line of [ Deepak Tyagi ] from Vyom Investments.

So sir, as you mentioned that you are targeting INR 8,000 crores AUM in mutual fund in next 1 year. So basically, I just wanted to understand how we are going to achieve that?

You see earlier, what we were not providing a back office software to our mutual fund distributors. So we are able to provide them. And due to that IT technology, we are hopeful that our mutual fund will be double in 1 year time.

Okay. So are we doing also any marketing strategies or any other such things to increase our distribution?

Anuragji, you can take this question, marketing strategy.

We have started all that. We have completely revamped our strategy. As I said earlier, with the complete changes in our back end and front-end systems, we'll be definitely targeting a much higher account base.

[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Mahesh C. Gupta for closing comments. Over to you, sir.

Thank you all for joining today's earnings call. We trust we were able to address your queries effectively. Should you have any further questions or need more information about the company, please feel free to reach out to Investor Relations adviser at X-B4 Advisory. Stay safe and healthy. Thank you very much to you all. Thank you.

Thank you. On behalf of X-B4 Advisers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.