SMC Global Securities Limited (SMCGLOBAL.BO) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 and 9M FY '26 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, sir.

Thank you. Good evening, everyone, and thank you for joining us on the Q3 and 9M FY '26 earnings conference call. Joining us today on the call are Mr. Subhash Chandra 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; Mr. Anurag Bansal, Whole-Time Director, SMC Global; Ms. Shruti Aggarwal, Whole-Time Director, SMC Global; Mr. Pranay Aggarwal, Director and CEO of Stoxkart, Moneywise Invest Limited; Mr. Vinod Kumar Jamar, President and Group CFO; [indiscernible]. 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 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. With that, I now invite Mr. Subhash Aggarwal to share his opening remarks. Over to you, sir.

Good evening, everyone, and a warm welcome to all participants on this call. We hope you have had the opportunity to review our Q3 and 9 months FY '26 financial results and the accompanying earnings presentation, both of which are available on the stock exchange and on our website. Before we move into our financial results, let me first outline the prevailing industry dynamics and the key developments that have shaped the operating environment during the period. Starting with the broking industry. The capital market environment during the period remains broadly constructive. Market participation continued to stay healthy, supported by sustained retail engagement, steady institutional flows and stable levels of market volatility. Trading activity across cash and derivative segments remained resilient even amid phases of market consolidation, reflecting deeper investor participation and improved market depth. The ongoing adoption of digital platforms, increasing multiproduct engagement by clients and a stable regulatory framework have together contributed to more predictable operating conditions for the industry. Overall, these trends point to a structurally stronger broking ecosystem, where scale, technology and diversification are increasingly supporting consistency and durability in performance. Turning to the insurance broking industry. The sector continued to exhibit steady momentum, underpinned by improving insurance penetration, rising customer awareness and sustained demand across life, health and general insurance product. Industry growth was supported by a favorable shift towards protection-oriented offerings, strong renewal trends and broader coverage across both retail and commercial segments. At the same time, the industry has been witnessing a gradual transition towards advisory-led distribution models and greater use of digital processes, enhancing efficiency and customer engagement. While certain margin pressures persisted at the insurer level, overall industry volumes remain healthy, providing a stable and supportive environment for insurance intermediaries and reinsuring the long-term structural growth outlook of the sector. Finally, with respect to the financing and NBFC segment, the operating environment during the quarter was relatively more challenging. The industry navigated a phase of moderated credit growth, tighter underwriting standards and heightened focus on risk management across select borrower segments. Although policy measures towards the latter part of the period aim to improve liquidity and funding conditions, the benefit of these measures have been gradual in translating into balance sheet extension and earning recovery. Asset quality considerations and a cautious approach to disbursements continue to shape industry performance, resulting in uneven outcomes across participants. As a result, the near-term outlook for the financing segment remains measured with performance closely linked to credit discipline, funding stability and evolving macroeconomic conditions. Let me now walk you through the key highlights of our performance for the quarter. In Q3 FY '26, our consolidated operational income stood at INR 494.8 crores, reflecting a sequential improvement over the previous year, driven by a balanced contribution across our core business lines. EBITDA for the quarter was INR 102.1 crores, translating into an EBITDA margin of 20.6%, while profit after tax stood at INR 30.8 crores. Within our broking distribution trading business, the quarter witnessed continued expansion in our client engagement and geographic footprint despite periods of market recalibration during the year. As of the end of the period, our network comprised 2,154 authorized persons across 413 cities, supported by 6,485 financial distributors nationwide, reinforcing our pan-India reach. Our broking DP AUA reached [Foreign Language], while mutual fund AUM stood at INR 4,768 crores as of 9 months financial year '26, supported by steady investor participation and sustained SIP activity. The segment continued to benefit from increasing digital presentation and deeper client engagement across multiple asset classes. Our financing business operating through 38 branches across 7 states maintained a strong focus on asset quality and portfolio diversification. As of 9 months financial year '26, AUM stood at INR 1,107 crores with a secured portfolio ratio of 69.42% and collection efficiency of 97.96%. The business reported a net worth of INR 487.51 crore, ROA of 2.42% and NNPA level of 1.99%, reflecting disciplined underwriting and prudent risk management. The lending portfolio remains well diversified across SME asset, LAP, working capital term loans, gold loans and supply chain financing, supporting stability across credit cycles. In our insurance business, growth momentum remained steady, supported by rising policy volumes and expanding distribution capabilities. As of 9 months FY '26, the business had issued 825,638 policies, generated gross premium of INR 2,236 crore and operated through 8 branches nationwide supported by a workforce of 49 employees, a network of 16,420 POS agents and 381 MISPs. Continued investment in digital platforms and advisory-led distribution have enhanced reach across both retail and institutional segments, strengthening customer acquisition intention. Overall, while the operating environment during the year presented challenges in terms of margin pressures and funding costs. Our diversified business model, strong national distribution network and continued investment in technology and risk management position us well to navigate near-term volatility and build sustainable long-term value. With that, I now hand over to Mr. Vinod Kumar Jamar, our President and Group CFO, to take you through a more detailed overview of our financial performance. Over to you, Vinod Jamarji.

Thank you, Subhash sir, and good evening to everyone on the call. I will now take you through our financial and operational performance for Q3 FY '26 and 9 months ended FY '26 on a consolidated basis. For the quarter ended December '25, our operational income stood at INR 494.8 crores, representing a quarter-on-quarter growth of 12.4%. EBITDA for the quarter was INR 102.1 crores with an EBITDA margin of 20.6%, reflecting a 140 basis point quarter-on-quarter sequential improvement. Profit after tax came at INR 30.8 crores, marking a 46.7% quarter-on-quarter increase with PAT margin of 6.2%. On a 9-month basis, we reported consolidated revenue of INR 1,360 crores, EBITDA of INR 286.7 crores and PAT of INR 81.8 crores. Margins during the period were influenced by funding cost and a calibrated growth approach in the financing segment, while fee-based and distribution-led businesses continued to provide stability to the overall performance. Turning to segment-wise performance. In the Broking, Distribution and Trading segment, Q3 FY '26 revenue grew by 17.3% year-on-year to INR 286.6 crores. Segment EBIT increased by 13.9% year-on-year to INR 66.4 crores, reflecting overall operating leverage despite periods of market recalibration during the quarter. In the financing NBFC segment, Q3 FY '26 revenue stood at INR 48.4 crores compared to INR 71.2 crores in Q3 FY '25. As of 9 months FY '26, AUM was INR 1,107 crores with a secured portfolio ratio of 69.42% and collection efficiency of 97.96%. The business reported a net worth of INR 487.51 crores, ROA of 2.42% and NNPA level of 1.99%, underscoring continued focus on balance sheet quality and risk discipline. In the Insurance Broking segment, Q3 FY '26 revenue increased by 22.2% year-on-year to INR 181.1 crores on a 9-month basis. Segment revenue grew by 12.1% year-on-year to INR 459.4 crores, while segment EBIT for the quarter rose by 52.4% year-on-year to INR 3.2 crores, reflecting improved operating efficiency. Overall, our performance for the quarter and 9-month period reflect a balanced contribution across business lines with growth in fee-based segments helping offset cyclicity in capital-intensive businesses. We remain focused on maintaining financial discipline, optimizing our cost structure and strengthening return metrics as we progress through the remainder of the financial year. With this, we conclude our remarks and the session is open for our question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of [ Akshay Mehta from Dual Investments ].

Hello, am I audible?

Yes, audible.

Yes, sir. So I had a question regarding the Broking division. So...

What's your name? What's your name, Chetan Mehra?

Akshay Mehta, sir.

Akshay Mehta, okay.

Yes. So my question was that, sir, we saw a growth of around 17.3% on a year-on-year basis in the Broking and Distribution segment on the top line. So just wanted to know what was the basis of this growth? And coming forward, basically, what is the growth we expect for the full financial year, sir?

Ajay?

The penetration of Broking business is increasing day by day. And even we have seen like good traction into commodity business as well. So we have seen that a good percentage. Earlier, we used to have around 4% share from commodity. Now it is increasing towards 10%. So overall, like growth would be there in tune of 10% to 14%. And we have to see even in this budget, the FTD has been increased. So our major focus would be there in increasing cash market business and the commodity business in time to come.

Understood, sir. So basically on the Broking division itself, sir, could you just elaborate on what would be the difference between the online and offline channels margins? And how does this basically impact on our blended segment profitability?

What is your second question?

So basically, the question is that what is the major difference between the online and the offline channels? And how will this basically impact our blended segmental profitability or segmental margins?

You see from full broking, 60% of our revenue comes from online business. And in discount, almost 100% is online. So in totality, around 70% business comes from online. And we are even focusing on algorithm-based trading. So recently, SEBI had allowed algo trading to the retail players. So we are even going to integrate algo trading into our mobile trading. So we see good traction even into that and good because algo players do a lot of trading and business would be huge. So online penetration would increase day by day.

So could you just also tell me what would be the marginal difference, sir -- margin difference, sir, basically from the online, how much margins would be generating and from the offline channels?

60% revenue, even number of clients and revenue, it is almost same, it's coming from online, so...

The margin is same, whether you are in offline or online. Your brokerage will not have any difference, except the discount brokerage, brokerage model is different.

Akshay, I think your question is regarding to the discount broking arm of SMC, right? You mean by online, the discount broking arm Stoxkart. So in Stoxkart, so our ARPU is around INR 10,000, if you see per year if a -- for an active client, right? And that is somewhat -- I think in SMC, our ARPU is around INR 20,000, right? But the thing being that discount broking is 100% online, there is no brick-and-mortar cost involved. So when the discount broking will scale to a certain level, the margins will be even better than the full-service broking. But currently, we are spending a lot to market the services. And currently, we are in that gestation period. We are opening around 12,000 accounts per month. And for that, we are spending a lot of marketing. And once that rationalizes, we will see a good margin.

Understood. And the last question was regarding the mutual fund AUM. We saw a decent increase in the AUM for the current period into FY '26. So just wanted to know what is the proportion of this growth coming from SIP versus the other segments of the business? And what is the expectation for the closing the AUM by the end of FY '27?

Anurag, you take.

Akshay, Anurag here. So to answer to your first question, approximately 21% of net inflows are coming from SIP. And interesting data point is out of total AUM of ours, 80% is equity. And we plan to close -- see, we plan to grow at around 20%, 25% for next couple of years in terms of AUM. So if I give a number to it, we can reasonably expect it to close about INR 6,000 crores at the end of FY '27.

[Operator Instructions] The next question is from the line of Riya Mehta, an Individual Investor.

So my first question is that around what percentage of policies are sourced via digital channels versus the physical POS? And how does this affect the cost to acquire per policy basis?

Vinodji?

I think Pravinji from insurance can take this up.

Riya, actually, our digital presence is -- sourcing business through digital presence is very minimum, it's 0.01% only. We don't acquire B2C business. We don't do B2C business. All this is through our POS and MIC business using digital media digitally? Your second question is how much the ticket size? What was the...

Correct. How does this affect the cost to acquire.

Our cost is roughly -- acquiring cost is very minimal because we are not targeting POS model. And our average POS acquisition cost is roughly 1,000.

Okay. Got it. So my next question is that do you see any pricing pressure on the broker commissions, mostly in the motor and group health segment? And if so, then how are you protecting the margins?

No, ma'am. Actually, we are not seeing any commission structure -- reducing commission structure. And yes, we are -- rumors are in the market commissions are reducing, but we are not foreseeing this. And we are -- just we have taken impact of group life -- sorry, health and life insurance GST impact in October quarter -- with effect from 1st of October, right? So we have already taken 15.25% GST impact. So we are already impacted, but we are already [ strategized ] our business model in this quarter only.

So I have a few more questions. So the AUM stood at INR 1,106.99 crores in the 9M FY '26. And it was INR 1,291 in FY '25. So is this a strategic slowdown or it is driven by funding constraints or demand softness? And...

This question is for NBFC? Sorry, this question is for NBFC?

Yes.

Riya, thanks for the question. I'm Nitin from Moneywise. Riya, this is a conscious decision by the management to churn the portfolio. Earlier, we were doing LAP portfolio, which constituted around 30% of my loan book. Last 1.5 years, we have moved from LAP to Micro LAP, and that's driving the portfolio now. So currently, we stand at INR 80 crores of Micro-LAP portfolio, and we plan to increase it to INR 125 crores by March end FY '26, which will constitute around 10% of my portfolio. And one more change management has done, we have stopped doing the surrogate programs in the unsecured portfolio. And now we are doing only the [indiscernible] programs. So when this happens, obviously, your portfolio is going down, but this is a temporary phenomenon. Once these 2 things stabilizes, we expect the AUM to again start have traction itself.

Okay. So I have one more question. So the cost of borrowing is at 10.57% and return on asset at 2.42%. So how much headroom do you think exists to expand the NIM if like policy rates ease more further?

So Riya, just a brief background. The repo rates have increased -- reduced by 5x in the last 1 year. So normally, it takes 6 months to 1 year's time for actually the rates to come down and actually pass on to the borrowers. So in our case, what we have seen around INR 0.05 to INR 0.10 every month that reduction is happening. Currently, we are 10.57. I expect another 15 to 20 basis point reduction in the next 6 months. And from there on, I don't think policy -- there may be one repo rate cut. But during next financial year, I think the rates would largely remain the same, largely. And plus in our case, most of my loans are on MCLR based. So when the repo rate goes down, some of my loans are already locked, say, if you take a 1-year MCLR and I've taken a loan in March 2025, that impact will come to me in March 2026. So a couple of my big ticket size loans, the repo rate is likely to come down for me in the month of March itself. So probably by -- in the June quarter, I'll have the impact of 10 to 20 basis points, which I referred.

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

Thank you for joining us today. We trust this session has helped address your questions and provide clarity on business. For any additional information or follow-ups, please feel free to reach out to our Investor Relations partners at XB-4 Advisory. We appreciate your continued engagement and look forward to connecting with you again in the next quarter. So thank you very much. Stay healthy and safe.

On behalf of SMC Global Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.