SMC Global Securities Limited (SMCGLOBAL.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY 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 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 Q2 and H1 FY '26 Earnings Conference Call of SMC Global Securities Limited. Joining us on today's call are Mr. Subhash 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, Full-Time Director, SMC Global Security; Mr. Himanshu Gupta, Director and CEO, Moneywise Financial Services; Ms. Shruti Aggarwal, Full Time Director, SMC Global Securities; Mr. Pranay Aggarwal, Director and CEO, Stoxkart. Moneywise Invest Limited; and Mr. Vinod Jamar, President and Group CFO. Before we proceed, please note that some of the statements made during this discussion may be forward-looking in nature and are subject to certain risks and uncertainties. The actual results may differ materially from those expressed or implied. A detailed safe harbor statement is available on the second last page of our earnings presentation, which can be accessed on the stock exchanges and the company's website. With that, I would now like to invite Mr. Subhash Aggarwal to share his opening remarks. Over to you, sir.

Thank you, Gautam Kothari. Good evening, everyone, and a warm welcome to all participants on this call. I trust you have had the opportunity to review our Q2 H1 financial year '26 financial results and earnings presentation, which are available on both the stock exchanges and our website. Before discussing our financial performance, I would like to provide some context on the broader industry landscape and recent developments that have shaped the business environment. The broking and capital market industry witnessed a phase of consolidation during quarter 2, our FY '26 as tighter F&O margin arms, revised expiry cycles and heightened global uncertainty continue to weigh on trading sentiment. The average daily turnover in the derivative segment declined sequentially with cash market participation also moderating as retail investors adopted a cautious response. Several listed intermediaries have reported sequential pressure on their booking income for the quarter. Nonetheless, underlying investor engagement remains healthy, reflected in continued growth in active demat accounts and a strong SIP inflows in ducative mutual fund. Over the medium term, the industry remains well positioned to benefit from expanding retail penetration, improving financial literacy and SEBI initiative to enhance transparency and [indiscernible]. All of which are expected to support a more resilient market structure. India's nonbanking financial service sector continues to demonstrate resilience, image, evolving macroeconomic and regulatory dynamics. Industry credit growth is expected to moderate to around 13% to 15% in FY '25-'26 compared with the strong 17% pace seen over the last 2 years, as per ICRA. The moderation is largely attributed to a calibrated approach towards SME and unsecured retail lending. Following the Reserve Bank's tighter oversight and higher risk rate norms. However, asset quality across large and midsized NBFC has remained stable. Supported by prudent provisioning and diversified portfolios. Meanwhile, funding conditions remain uneven with only marginal easing in borrowing cost offering and limited in relief. Overall, sector growth has clearly shifted from a high-growth [ H2A ] consolidation base, indicating a more subdued near-term outlook for NBFCs. The Indian insurance sector has continued to exhibit strong growth momentum through Q2 FY '26, outpacing most of the segments in the financial services space. The life insurance industry new business premium collection grew by over 10% Y-o-Y in the first half of our financial year '26, driven by rising awareness, product diversification and a continued shift towards protection-oriented and annuity claims. The general insurance segment to maintain healthy traction with growth led by health and motor portfolios and increased adoption of digital distribution platforms. Insurance broking and distribution churn, intermediaries have particularly benefit from this extension as corporate and retail demand for comprehensive risk coverage continue to rise. With deepening digital penetration, supportive regulatory reforms and growing financial inclusion. The insurance industry remains on a strong multiyear growth trajectory. We believe the broking industry is currently undergoing an important period of realignment, one that may appear challenging in the short term but holds significant permission for the future. The regulatory changes reshaping the broking and financial services landscape are posting strong market discipline and data investor production. Though these shifts have led to temporary moderation in trading volumes and earnings, they are setting the stage for a more stable and transplant capital market. For established players, we strong governance technology capabilities and diversified business models. This transition phase offers an opportunity to consolidate and strengthen long term positioning. As the environment stabilizes, we expect trading equity and investor participation to gradually recover, driven by continued retail engagement, growing SIP flows and deepening digital option. Meanwhile, our insurance segment continues to benefit from favorable structural challenges such as rising financial awareness, product broader product adoption and expanding distribution channels. With our integrated financial services platform, we remain confident of navigating the current cycle effectively and building a strong more -- stronger, more future-ready franchise. Let me take you through some of the key performance highlights for the quarter. In Q2 of FY '26, our consolidated revenue from operations stood at INR 440.3 crores, reflecting a 3.6% quarter-on-quarter growth, supported by a steady performance in our insurance. EBITDA for the quarter was INR 84.4 crores and PAT stood at INR 21 crores, impacted sequentially by softer trading volumes and higher trading higher funding cost. Our broking, trading and distribution segment witnessed temporary moderation due to market-wide adjustments, holding regulatory changes in the dilutive segments. Despite this, our client base and distribution network continue to expect. As of September, those are purchased, we had 2,152 authorized persons, spread across 412 cities and 6,573 financial distributors, assuming our strong pan-India presence. Our mutual fund AUM rose to INR 4,459 crores, reflecting continued investor trust in the study as SIP improved. Our NBFC arm operating through 38 branches across 7 states, maintained a healthy asset quality with collection efficiency of 98.47% and a net worth of INR 485 crores. The overall AUM stood at INR 1,088 crores, supported by a well-diversified lending portfolio across SME LAP, gold and onward lending. Meanwhile, our insurance broking business continued its growth momentum reporting a strong uptick in premium volume and policy issuance. That division operates through 8 branches nationwide supported by over 16,200 crores agents and 370 MISP leveraging digital channels to reach new customers segments. The quarter witnessed slower growth and margin cooperation, largely influenced by regulatory changes and challenging market condition. Nonetheless, our diversified business model wide geographic reach and continued investment in technology, position us well to navigate the near-term headwinds and drive sustainable growth over the long term. With that, I now hand over to Mr. Kumar Jamar, our President and Group CFO, for a detailed overview of our financial performance. Over to you Kumar Jamar.

Thank you, Subhash, and good evening to everyone on the call. Let me now take you through our financial and operational performance for quarter 2 FY '26 on a consolidated basis. For the quarter ended September 2025. Our operating income stood at INR 440.3 crores, reflecting a 3.6% quarter-on-quarter growth. EBITDA came in at INR 84.4 crores with EBITDA margin of 19.2%. Profit after tax stood at INR 21 crores, translating to a PAT margin of 4.8%. For the segment-wise performance in the Broking, Distribution & Trading segment. Revenue for quarter 2 FY '26 was INR 240.9 crores compared to INR 276.2 crores in quarter 2 FY '25. Mainly due to softer trading volumes and regulatory changes in the derivatives market. Our distribution and client network continued to expand with 2,152 authorized persons across 412 cities and 6,573 financial distributors pan-India. Our mutual fund AUM stood at INR 4,459 crores while the broking DP AUA reached INR 1,42,214 crores, demonstrating strong investor engagement. Online trading now contributes 67% of overall turnover underscoring the success of our digital initiatives. In the financing NBFC segment, Revenue for Q2 FY '26 stood at INR 46.4 crores compared to INR 50.4 crores in Q2 FY '25. The AUM stood at INR 1,088 crores with a collection efficiency of 98.47% secured AUM over 65%. The business continues to maintain healthy asset quality with GNPA at 3.6% and NNPA 2.5%. Our NBFC operates to 38 branches across 7 states, serving diverse SME and retail segments. In the Insurance broking division, revenue grew by 21% Y-o-Y to INR 162.5 crores, driven by robust growth in both life and general insurance. The total gross premium stood at INR 1,364 crores for H1 FY '26. And we sold 4.93 lakh policies during H1, reflecting continued traction in retail and corporate segment. The business operates through 8 branches nationwide, supported by over 16,200 agents and 370 MISPs with strong digital adoption through smcinsurance.com. While this quarter reflected moderation in the broking and financing businesses, our insurance vertical continues to be a key growth driver, supported by sustained demand and rapidly expanding distribution network. Our diversified business model is strong digital ecosystem and nationwide reach positions us well to capture opportunities as market activity normalizes and investor participation strengthened further. With this, we conclude our remarks and open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of [ Dhruv Para ] from DP Investments.

Am I audible?

Audible.

So your EBITDA margins dropped from 19.2% to 26.4% year-on-year. What specific cost pressures or revenue mix changes contributed to this decline?

Yes. Actually, EBITDA margin dropped because of 2 main reasons. I'm talking about 6 months in number. So one is that our fee and commission income are reduced by INR 35 crores which is in line with the exchange turnover also. And another contributing factor is our fair value gains on investments which was around INR 25 crores in the last half year, whereas this year, it is around INR 7 crores or so, these 2 factors reduced our profit before tax and accordingly, EBITDA also reduced.

Okay. So are these pressures expected to persist in H2?

No. We expect the situation to improve because if you remember, last year, in October, SMC brought in certain changes in derivative segments and all those activities hampered the business across the industry. So for first 2 quarters, the base was higher. And now we will be growing and market conditions will improve. So we expect the next 2 quarters to be better.

Okay, and your PAT also fell 54% year-on-year in Q2. So could you elaborate on the key drivers behind the decline, and when a rebound is expected?

Same reasons, which I narrated 2 main factors. So we expect the next 2 quarters to be better.

All right. And one more question. Your borrowing rose from INR 1,500 crores in March '25 to INR 1,700 crores as of now. So what portion of that relates to NBFC operation? And how is the cost of borrowing trending?

NBFC, there is not much rise. Actually, we raised 2 series of NCDs around INR 220 crores of NCDs were raised, and that is required for our working capital requirement for the better facilities to the customers and allowing them some credits.

The next question is from the line of [ Subhash Be ] from Value Investments.

Am I audible?

Yes, you are audible.

I've been following you guys from over a year now, and I've been your investor. I think last year, you saw you were guiding for 20% growth over FY '25, right? But looking at the first half, definitely, I don't think 20% growth would come either in top line or bottom line. Do you think H2 would be so great that you would achieve 20%? Or this year will be subdued? Or do you want to revise your guidance?

Definitely, Subhash, you are correct. We have said that this year should be better, but unfortunately, as you know, industry turnover has been reduced in F&O and cash market from 15% to 40%. So -- and this expense remains that same more on high side and revenue considering reduced, so PAT has been affected. And so I think -- but next quarter, we are expecting these 2 quarters will be very good. And perhaps we can recover to the extent we have profits in last year. So we are expecting a better quarter, third and forth.

Okay. So you're expecting a similar profit compared to FY '25? Or will it be lesser than last year?

Let us hope for the best. We should achieve with our good working and so many things we are putting in place. So I think we will be able to do that.

Okay. We'll be able to achieve last year's profit, okay. And also, the other question that I had was when I went through your investor presentation, I mean I could say that due to the SEBI rules, the broking activity has come down because of which the overall volume and your margins have come down. But what's happened in the insurance industry? Because I can see that EBITDA has come down even in insurance and also in NBFC, even there compared to last year, year-on-year, the margins have come down. Why is that? And do you expect that to be similar to last year in the second half of the year?

Sir, the insurance -- the performance is almost at par with the previous year -- previous 2 quarters. So last year, September '24, half year, we had a PAT of INR 5.42 crores, and this year, it is INR 5.57 crores. So slightly better than last year. And the next 2 quarters, obviously, in insurance, quarter 4 is always better. So we expect a further improvement in the revenue is consistently -- revenue is consistently increasing, but it's a low-margin business. Because of motor insurance premium and payouts to the MISP dealer.

Right. So compared to last year, the margins are definitely coming down, right?

There is not much impact. It is just a few points here and there. And if you see the GST was reduced on certain insurance products which resulted into what insurance companies did, they made the all commission slabs inclusive of GST. So that also will impact slightly the commission rates have come down slightly because of inclusive of the GST rate.

Does GST affect your top line or the EBITDA level? I think it affects your top line, right?

GST. Yes, it will affect top line as well.

Top line only, right? Yes. But I see that your EBITDA is down by 9.6% by almost 10% compared to last year, right?

No. EBITDA is down...

Compared to FY '25, you can see the investor presentation, Page #6. So you mentioned 9.6% down. And NBFC is down by 25% for the...

Yes. NBFC, if you look at the numbers, the major factor is fair value changes. So last year, we had a very good IPO. And since we get the allotment on preferential basis as a financial institution. So last year, our income from IPO allotment was INR 23.31 crores.

I think I got the answer from the previous investor question. Thank you for NBFC. But what about the insurance like 10% down away?

Yes, it is -- our EBIT is -- last year was 7.3%. Now it is 6.6%. Marginally down.

Yes. The reason being...

PAT is slightly higher.

Okay. I think that one [indiscernible]. So maybe FY '26, I mean if the markets recovers well and there is more investor participation, we could see some growth rate. Because I mean, from 2 years, we could see that definitely, your share price is undervalued compared to your peers. The valuation that you're getting is definitely lesser. But now that the growth is also less. I hope you get the right valuation, at least, to be at the fair price. I can see that last year's profit was INR 147 crores. And until now -- sorry, how much is your PAT until H1?

Consolidated PAT, you are talking...

INR 51 crores.

INR 51 crores.

INR 51 crores, okay. So in H2, do you think you would be able to achieve like INR 90-odd crores PAT?

If market conditions support, we are hopeful to assume that.

But that's your target, right, INR 90-odd crores.

In [ INR 90 to INR 400 crores ].

[Operator Instructions] The next question is from the line of [ Kritika Meta ] from Meta Investments.

Am I audible?

You are audible.

I just had a few questions from your business front. One is that your NBFC revenue declined and your EBITDA declined. So what drove the compression and the decline in the AUM particularly?

I'm Himanshu Gupta. So the main reason for the decline in revenue are twofold. One is the dip in the fair value net gain on fair value changes on the investment. And second is there is a slight dip in the AUM of the company. And interest income has gone down. So basically, the reason for dip in AUM is that -- the main reason for the dip in AUM is that we have discontinued the prime LAP product where we were getting low spread and that we are shifting that prime LAP book to the micro LAP book. So that is one reason. And secondly, considering the market situation, we have tightened the underwriting policies for the unsecured product. So therefore, the disbursements have gone down in those products. So these are a couple of reasons for the dip in AUM and, therefore, the interest income as well.

Okay. And another would be the gross and the net nonperforming assets has also rose slightly to 3.6% and 2.5%, respectively. So what would be the reason for the same?

So if you compare with the last quarter, so it is almost on the same line. The main contributors to the GNPA as few secured accounts. wherein we have adequate collateral, but it is taking some time for the recovery due to the legal and recovery process, which is involved. And we expect good recovery out of that GNPA and we have made adequate provisions on that portfolio.

Okay. And also, the SME working capital on term loans from 35% of the portfolio. So is your company planning to rebalance to will be secured or short tenure as well?

Not short tenure really, but this is the business tool that I was referring to, that we have tightened the underwriting policies for the unsecured product. So this is the unsecured business phone product that we offer to SME customers. And this is a conscious call by us. Over the last couple of years, we have reduced this exposure from over 50% of to 35% today, and we plan to reduce it further to below 25% over the next year or so.

Ladies and gentlemen, as there are no further questions, we have reached to the end of the Q&A session. Now I would like to hand over the conference to Mr. Mahesh C. Gupta for closing comments. Please go ahead.

Yes. Thank you all for taking the time to join today. We hope we were able to address your queries and provide useful insights into our performance. For any further information or follow-up please connect with our investors relations partners at X-B4 Advisory. Stay safe, and we look forward to interacting with you again next quarter. So thank you once again. Thank you.

Thank you.

Thank you. On behalf of SMC Global Securities Limited. I will conclude this conference. Thank you for joining us, and you may now disconnect your lines.