Geojit Financial Services Ltd (NSE:GEOJITFSL) Q4 FY23 Earnings Concall dated May. 02, 2023.
Corporate Participants:
Satish Menon — Executive Director
Mini Nair — Chief Financial Officer
Analysts:
Varun Bang — Brimstone Investment — Analyst
C J George — Managing Director
Ratish Nair — Individual Investor — Analyst
Sumit Jankar — Vardesam — Analyst
Anil R. — Individual Investor — Analyst
Presentation:
Operator —
Ladies and gentlemen, good day, and welcome to the Q4 FY ’23 Earnings Conference Call of Geojit Financial Services. [Operator Instructions] Please note, that this conference is being recorded.
I now hand the conference over to Mr. Satish Menon, Executive Director. Thank you, and over to you, sir.
Satish Menon — Executive Director
Thank you very much, and welcome, and a warm good evening to everyone who is attending this fourth quarter earnings as well as the full financial year ’23 earnings call. With me on this call, I have my Managing Director, Mr. C J George; my colleagues on the Board, Mr. A Balakrishnan and Jones George; and our CFO, Ms. Mini Nair.
I would just like to take you through the synopsis of the fourth quarter earnings as well as the full year, but from broad numbers. And then, maybe we can open for Q&A. In terms of total income for the fourth quarter, we have done INR116.83 crores, which just similar to what we did in the third quarter, and a 5% drop from the previous year. In terms of the full year, the total income stands at INR447.62 crores, a 11% drop from the previous years. When you split the income, equity and equity related, that is primarily the brokerage services, we have done in quarter four, INR62.42 crores, which is 16% down from the third quarter and 25% down from the full year — from the fourth quarter last year. And for the full year it was INR282 crores., which is 21% down from the last year.
In terms of financial products, we have done INR32.97 crores in the fourth quarter, which is 39% up from the December quarter and 31% up from the similar period last year. And for the full-year, INR98.78 crores, which is up 21% from FY ’22. And financial product distribution is split into primarily two items, mutual funds, full-year income of INR71 crores, which is up 16% compared to the last year. And an insurance income of INR23.95 crores which is 33% up from last year.
So, PAT [Phonetic] INR2.13 crores for the quarter and INR10.48 crores for the year, which is down by 13% compared to FY ’22. Total income INR447 crores, 11% de-growth. In terms of expenses, total expenses was INR87.89 crores for quarter four, which is 2% up from the December quarter and 14% up from the same quarter last year, but the full year it was INR338 crores, which is 10% up from the FY ’22. PBT is 5% down for the quarter compared to December, and for the full year it was INR118.93 crores, 41% down from FY ’22 PBT. In terms of PAT, INR30.15 crores, which is up 20%, when the December quarter and for the full year it was INR100.96 crores, 35% de-growth from FY ’22.
In terms of stock market volumes, cash market volumes was down by 36%, Y-on-Y. And in terms of [Indecipherable] 70% up, the cash market yields remain more or less the same at 0.163%. 83% the volumes and 57% of the brokerage comes through online, that is as well as Internet, as well as mobile. Geojit Mutual Fund AUM, more or less the same as to last year, in-spite of INR643 crores of net inflow compared to INR490 crores with the previous year, is up by 31%. So, this is the broad numbers.
Now, we can open up for Q&As. Operator, up to you.
Questions and Answers:
Operator —
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Mr. Varun Bang from Brimstone Investments. Please go ahead.
Varun Bang — Brimstone Investment — Analyst
Hello, am I audible?
Operator —
Yes, sir.
Varun Bang — Brimstone Investment — Analyst
So, yeah, thank you for the opportunity. I have a couple of questions. First is what we are seeing is off let, the larger brokers are gaining market share at the expense of smaller brokers and smaller brokers they have higher cost of capital and thus they are unable to offer, funding at competitive rates and they are also unable to keep pace with the raising compliance. So, what I’m hearing is some of them are shutting down and while and sub brokers of the larger brokers. So, how are we looking at capitalizing this opportunity given our strengths in the current — given our strength in the current environment, what is our strategy and how are we executing? That’s the first question.
Satish Menon — Executive Director
Okay.
C J George — Managing Director
Satish, can I take this question? I am C J George here, Managing Director of the company. I agree with the observation that a significant number of brokers are in a mood to quit the kind of stock exchanges through active membership due to the reasons that you have explained.
We are in touch with many small brokers. We are also planning to opt for the attractive terms to these colleagues who have been in this business for us last minute details in few cases. So, we are also going aggressively and contacting them, and we will be very happy to work with all this potential partners. This is my observation with regard to this. I have to make one more point in addition to work for this, it is also relevant to the question you have asked. Last year, we had declared and paid INR3 per share dividend. This time, this dividend is now changed to INR1.50 per share of INR1 face value. So, this is our information I wanted to share with you. I hope this is fine. If you have any more questions, I can take it that later.
Satish Menon — Executive Director
Yeah. What was your next question?
Operator —
Mr. Varun, may I request you to unmute your line?
Varun Bang — Brimstone Investment — Analyst
Hello, am I audible? Yeah.
Operator —
Yes, you are audible now. Please go ahead.
Varun Bang — Brimstone Investment — Analyst
So, the second question is in the context of previous question. So, how easy or difficult it is to consolidate acquisitions in this industry? Is it very difficult, I mean, just trying to understand.
C J George — Managing Director
Varun, thank you very much for this question. It was very difficult in the past, but in terms of at least relatively speaking, the process is eased a little bit. It’s also because due to lot of regulatory changes, the customer stickiness is probably something which is very, very important in this kind of a transmission, but what we have started noticing is that this is probably the right environment at the moment, unlike the past, because many of these smaller brokers were offering personalized life to service, personal life to credit etc. So, none of these will, personalized service will work but personalized credit that need not work in the new environment. So, because of that, it is relatively easy compared to the past to transfer the customers. So, this is something what we have observed in in the recent past.
Varun Bang — Brimstone Investment — Analyst
Okay, that is helpful. And what I have seen is in the previous down cycles we have always proactively bought strong control on operating expenses, but what I am seeing differently in this down cycle is that Geojit is expanding branches and also adding employees, and there is steep rise in employee cost as well as operating expenses. So, just to get a sense of what is happening, and what are we doing differently in this down cycle versus the previous ones?
C J George — Managing Director
Satish, I will take this question also. So, let me be very frank with you. If you look at ’22, ’23, which is the first post COVID year. So all those customer relationship activities that were postponed in 2021 and 2022 have taken up in 2023. So, we have active customer relationship kind of engagement through 350 plus branches. So, it’s slightly different from probably, the parallels that you have in mind. So, because of that travel cost has gone up, and then if you ask me the major increase in the cost are basically in connection with some investments that we are making. For example, advertisement cost has gone up. Investment in technology, the capex as well as the opex has gone up. So, these are, apart from the employee cost, even in the bad markets we thought of increasing the number of branches. We went ahead and added 25 more branches in last 18 months or so. These branches are — many of these cases, these are in rural areas, so we go ahead and start developing relationships in the deeper [Indecipherable] of the country. This is also part of the policy. This is definitely for the short term, increasing the cost, but we are very confident that we can manage our mid-term periods. Thank you.
Varun Bang — Brimstone Investment — Analyst
Okay. Just one last question, sir. I was looking at the business model of Charles Schwab, they too started as a broking entity, but eventually they diversified into wealth lending, asset management and so on. So, one thing, whatever they did, they thought of doing it at a scale and they offered everything at a lower cost and they always focused on acquiring larger number of clients and they also acquired a lot of companies. So, and this ensured that irrespective of the market scenario, they grew. So, I’m sure, you would have looked at their journey. So, my question is in Indian context, how do you think the situation is different? Can something similar be worked out in India? And like Charles, I think Geojit also has been pioneer in doing a lot of things for the first time.
So, from our perspective is it possible to do something similar at a size and scale, what Charles Schwab did? If you can just share your thoughts, that would be helpful.
C J George — Managing Director
I will only make one remark because of this Charles Schwab, generally, the regulatory environment is certainly different in India. Most of those leading brokers in the United States are also buying. That means brokers membership, can get, I’m not sure, brokers can get the bank license on top, unlike in India. So, their ability to hold the customer cash, and then basically to offer various products to customers is very high and at a scale level. Whereas we have significant limitations. In India broker is not fit in proper even to be on the board of a bank, whereas they’re slightly different the US markets. So, it is not compatible in my view, probably I am very sure over a period of time when there is consolidation, when there is institutionalized business development etc.
May be regulatory changes will also happen. So, at the moment in my view these are not comparable, but we will be very happy, and we are very keen to offer all the investment products that we can offer to customer. Thank you.
Varun Bang — Brimstone Investment — Analyst
Okay, Thank you. I will join back the queue for more questions.
Operator —
Thank you. [Operator Instructions] Our next question is from the line of Ratish Nair, individual investor. Please go ahead.
Ratish Nair — Individual Investor — Analyst
Thank you, Sir, for giving the opportunity. So, I got two questions. First question is on the insurance premium collection. So, what would be that for the quarter and for the full year? And my second question is on the net inflow of mutual funds for this year compared to the last year, Sir. Thank you.
Satish Menon — Executive Director
I will take this. So, insurance premium collection for the January-February quarter was INR48 crores and for the full year it was INR78 crores compared to INR57 odd crores FY ’22. So, of course, thanks to the tax announcement made by the FM also helped us in the January, February, March quarter. Net inflow, because I already covered in my beginning, in my first talk we did INR643 crores of equity mutual fund net inflow compared to INR. 490 crores for financial year 2022, so which is the growth of around 31%.
Ratish Nair — Individual Investor — Analyst
Okay, Sir. Thanks Sir. That’s great Sir. That’s all from my side.
Operator —
Thank you. [Operator Instructions] Our next question is from the line of Sumit Jankar from Vardesam. Please go ahead.
Sumit Jankar — Vardesam — Analyst
Thank you for providing me the opportunity. My question is regarding the cash market, ADTO. I am seeing in the PPT that the cash yield has dropped and also the ADTO has dropped. But as if ADTO drops, yield showed slightly increase, as we look into derivatives, the ADTO is increasing, the yield is dropping. So, when ADTO drops it usually showed yield is increasing. So, can you put some light into this?
Satish Menon — Executive Director
So, did not understand the question clearly, but the cash ADTO is INR304 crores, which is compared to INR477 crores, so there is a drop there. But the yield at 0.163% is more or less similar to 0.167% and 0.168%. So, it doesn’t mean, so you should understand this is the blended yield of cash, it is not the delivery business only. If there is a blended yield of cash, which includes day trading as well as delivery. So as the percentage mix changes, the yield can also change.
Sumit Jankar — Vardesam — Analyst
Okay, Sir. Got it. And my second question is regarding the client acquisition. So, are you looking to increase the client acquisition in coming quarters? And what would be the reason to drop client acquisition in previous quarters?
Satish Menon — Executive Director
So, this is primarily coming from the market sentiments. If you look at the sentiments and if you look across the industry, even if you look at the growth in the DP account, because the market was subdued in the January, February, March quarter, the entrance of new clients in the quarter was subdued. So, that is what we have seen more or less across the industry. But I can only show you a small change which has happened in the active clients. This is the active client which NSE publishers every month. There, what we see is Geojit has a positive growth compared to of most of the other competitors, which have seen negative growth. So, but what to answer your question, it is family because of the market sentiments.
Sumit Jankar — Vardesam — Analyst
Thank you, Sir. And best wishes for you.
Satish Menon — Executive Director
Thank you.
Operator —
Thank you. And next question is from the line of Varun Bang from Brimstone Investments. Please go ahead.
Varun Bang — Brimstone Investment — Analyst
Sir, my question is with respect to implementation of ASBA in the secondary markets. How do you think industries prepared for this and how do you think this implementation will pan out?
Satish Menon — Executive Director
So, ASBA as of now it is optional. It is the preference of the client whether to do ASBA or to keep the money with the broker. There are still some challenges in terms of operational if it is made compulsory. Our feeling is we still need to see how would evolves out. As of now, we because you know there are lot of transactional advantage client has when he keeps the money with the broker. So, till that time all of them are sufficed in the new ASBA rule, I don’t think as of now a large chunk of people that is my personal feeling, a large chunk of clients will move to ASBA.
Varun Bang — Brimstone Investment — Analyst
Okay. And would this implementation — I mean, look, I mean make our balance sheet a bit lighter in terms of overall working capital requirement? Because the settlement will happen between client and the clearing corporation. So, just trying to understand.
Satish Menon — Executive Director
I don’t think so, because it is only a channel. So, what today happens is the client keeps the money with the broker and the broker next day pays the exchange. If a compulsory, if an ASBA comes through, the direct click client will pay to the exchange. So, I don’t think it will have much impact on the balance sheet of the broker. It is only a pass-through vehicle.
C J George — Managing Director
Now, let me come in. Maybe, yes, if the clients are paying in advance, etc. The demand for working capital might go down, but we have products like margin trading, etc., there we need to basically provide the facilities to clients. In my view, the clients, as Satish rightly said, the clients may not talk for ASBA at the moment, because we are already getting complaints at the time of quarterly payout because some to clients are after giving that it is creating some amount of inconvenience to them all those SEBI has done this in the best interest of customers. The referral customers, in our experience, they have considered as more of an inconvenience to them. Thank you.
Varun Bang — Brimstone Investment — Analyst
Okay, that is a helpful information. Thank you.
Operator —
Thank you. Our next question is from the line of Mr. Anil R, individual investor. Please go ahead.
Anil R. — Individual Investor — Analyst
Thank you. Can you share the PMS income for this year? Thank you.
Satish Menon — Executive Director
PMS income for FY ’23 was INR8.23 crores. Also, I would like to inform you that the last year, we have collected close to net INR100 crores of new PMS subscription amount for Geojit PMS, and the book right now stands at INR450 odd crores. So, it is compared to INR8.23 crores compared to INR17 crores for the FY ’22.
Anil R. — Individual Investor — Analyst
Okay, Thank you. Can you share the cash in the books also? That’s on my head.
Satish Menon — Executive Director
Cash in the books?
Mini Nair — Chief Financial Officer
Yeah. So, it’s Mini Nair, CFO. The cash is INR655 crores in the books, but more than one third of this cash is being used for MTF funding and also for clients funding, and also we require working capital. So, even if we have INR655 crores of cash, we are using it for the regular business requirement.
Anil R. — Individual Investor — Analyst
Okay. Thank you.
Operator —
Thank you. [Operator Instructions]
Satish Menon — Executive Director
Operator, there are no further questions, we can conclude.
Operator —
Noted, sir. As there are no further questions. I would now like to hand the conference over to Mr. Satish Menon for closing comments.
Satish Menon — Executive Director
Thank you everyone for joining this call. Our office is always here, if you have any specific queries. Have a nice day. Thank you very much.
Operator —
[Operator Closing Remarks]