SMC Global Securities Limited (NSE:SMCGLOBAL) Q4 FY23 Earnings Concall dated May. 19, 2023.
Corporate Participants:
Purvangi Jain — Investor Relations
Subhash C. Aggarwal — Chairman and Managing Director
Vinod Kumar Jamar — President and Group Chief Financial Officer
Pravin Agarwal — Chief Executive Officer of Insurance Business
Ajay Garg — Director and Chief Executive Officer of SMC Global
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
Mahesh Gupta — Vice Chairman and Managing Director
Analysts:
Kevin Shah — Individual Investor — Analyst
Forum — Individual Investor — Analyst
Siddhanth — Individual Investor — Analyst
Karan Sharma — Individual Investor — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to SMC Global Securities Limited Q4 FY ’23 Calling Conference Call. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you and over to you, Ms. Jain.
Purvangi Jain — Investor Relations
Good afternoon everyone and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of SMC Global Securities Limited.
On behalf of the company, I would like to thank you all for participating in the company’s earnings conference call for the fourth quarter and financial year ended 2023.
Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today’s con-call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. The purpose of today’s earnings conference call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.
Now, I would like to introduce you to the management participating in today’s earnings conference call and give it over to them for their opening remarks.
We have with us Mr. Subhash C. Aggarwal, Chairman and Managing Director of SMC Group; Mr. Mahesh C. Gupta, Vice Chairman and Managing Director of SMC Group; Mr. Ajay Garg, Director and CEO of SMC Global Securities Limited; Mr. Himanshu Gupta, Chairman and CEO of Moneywise Financial Services Pvt. Limited; Dr. D.K. Aggarwal, CMD of SMC Capital Limited; Mr. Anurag Bansal, Director of SMC Global Securities Limited; Mr. Pranay Aggarwal, Chairman and CEO of Stoxkart; Mr. Vinod Kumar Jamar, President and Group CFO. I will hand it over to Mr. Subhash C. Aggarwal for his opening remarks. Thank you.
Subhash C. Aggarwal — Chairman and Managing Director
Thank you, and good afternoon, everyone. It is pleasure to welcome you to the earnings conference call of our company for the fourth quarter and financial year ended 2023. For the benefit of those joining this call for the first time, let me begin by providing some background information on our company to get everyone on the same page.
SMC Global Securities Limited over the years has grown into a diversified financial services company offering a wide spectrum of services, like brokerage, investment banking, wealth management, distribution of financial products, financing, insurance broking, clearing and depository services, fixed income securities, financial advisory services to corporate, institutional, high-net worth individuals and other retail clients. We have a strong network of more than 2,548 subbrokers and authorized persons spreading across 452 cities in India.
Over the years, we have also launched various innovative digital technology-enabled capabilities to offer best-in-class products and services. Our discount broking arm under the brand name of Stoxkart, which is a first of its kind play form in the broking industry has noticed a very positive response. The company is governed by strong Board including six Independent directors of high standing and is run by highly qualified and experienced management team.
With our established presence and by embracing the latest technology, we are pioneered for continued growth in these upcoming years. I now hand over to Mr. Vinod Jamar, our Group CFO to take you through the financial and operational accomplishments for the fourth quarter and financial year ended 2023.
Over to Mr. Vinod Jamar.
Vinod Kumar Jamar — President and Group Chief Financial Officer
Thank you, Subhash sir, and good afternoon, everyone. Let me take you through the financial performance of the company for the fourth quarter of financial year 2023 of our company on a consolidated basis. The operating income for the fourth quarter was INR306 crores, which grew by 5.5% on year-on-year basis.
Operating EBITDA was reported at approximately INR63 crores. EBITDA margin stood at 20.48% for the quarter. Net profit after tax was reported at INR22 crores while PAT margin stood at 7.17%. For the financial year ended 2023, the operating income stood at INR1,217 crores, growth of 8.9% year-on-year. Operating EBITDA reported was approximately INR270 crores and EBITDA margins stood at 22.18%. Net profit after tax was reported at approximately INR120 crores while the PAT margin percentage stood at about 9.9%.
Let me now take you through quarterly segmental performance on a consolidated basis. In the broking, distribution and trading segment, Q4 revenue stood at about INR182 crores, which is decreased by 3.6% on a year-on-year basis and for FY’23 revenue stood at INR768 crores. Number of branches in this segment have increased from 83 a year ago to 119 as on March 31, 2023.
Coming to insurance division, revenue for Q4 stood at about INR95 crores, which grew by 21.9% on a year-on-year basis, and for FY ’23, it was INR348 crores, which grew by 26.2% year-on-year. EBIT increased in Q4 by 44.6%, and in FY it grew by 13.9%.
Lastly, in financing division segment, revenue for Q4 was around INR36 crores, which grew by 24% year-on-year basis and in FY it was INR137 crores, which grew by 39% year-on-year. Loan AUM increased to INR901 crores from INR690 crores, an increase of 31% on year-on-year basis. EBIT in Q4 grew by 10.7% on a year-on-year basis, and in FY ’23, 65.1% on year-on-year basis. The NPA and MNPA decreased to 2.27% and 1.44% respectively from 2.83% and 1.99% in last financial year. Disbursement has increased by 99% in FY ’23 to INR858 crores from INR431 crores on a year-on-year basis.
With this, we can now open the floor for the questions and answers session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line Kevin Shah [Phonetic], individual investor. Please go ahead.
Kevin Shah — Individual Investor — Analyst
Good afternoon, sir. My very first question is, sir can you [Technical Issues]
Operator
Kevin, we lost your audio in between. May I request you to speak through the handset.
Kevin Shah — Individual Investor — Analyst
Sure. Now is it audible?
Operator
Yes, much clear. Thank you.
Kevin Shah — Individual Investor — Analyst
Great. So sir, my very first question is, can you guide us on the revenue growth and the margins and the profits for FY ’24 and FY ’25 that we are estimating?
Subhash C. Aggarwal — Chairman and Managing Director
Mr. Shah, basically, we were guided by the advisors that we cannot comment on the future numbers, but we can see one thing. Our growth would be good this year and since we have invested in technology in a great way, we have expanded our network by way of subbrokers and branches. So we are very confident and we also booked our back office, front office, hardware and we have invested in all these this year very much. And we are very confident that we will give very good growth in time to come. That we can say.
Kevin Shah — Individual Investor — Analyst
Sure sir, absolutely. My continuing question would be, then what would be the approx revenue mix for the upcoming financial year FY ’24 and FY ’25 and there should be what kind of growth can we see in the insurance and —
Subhash C. Aggarwal — Chairman and Managing Director
Yeah. In insurance also and in our all other financial services, our revenue increasing by 8% to 10% this year. But in coming years, we are very much confident that revenue will be increased, much, much higher. If you see in insurance broking, the revenue growth is — Insurance 25%, NBFC AUM has increased by revenue by 37%, broking 25% and so I can say that even our April numbers in one statement I can say that we will grow very good because this year we have invested in technology —
Kevin Shah — Individual Investor — Analyst
Absolutely. Sure. So sir, my follow-up question on the same is, sir when you say about the growth in the insurance business. But currently if I’m not wrong, we are primarily in the motor insurance. So are we planning to venture into life insurance business that could be a higher-margin business?
Subhash C. Aggarwal — Chairman and Managing Director
Yeah, we are [Speech Overlap] life as well general insurance business. Both we are in that.
Kevin Shah — Individual Investor — Analyst
Okay, both are there into that. Great. So any especial target margins for the insurance business. And what could be the sustainable for moving forward?
Subhash C. Aggarwal — Chairman and Managing Director
Okay, you ask regarding insurance business, Mr. Pravin Agarwal who is CEO of insurance business will answer you. Over to Mr. Pravin Agarwal.
Pravin Agarwal — Chief Executive Officer of Insurance Business
Yeah, yeah, thank you for question. Actually, the [indecipherable] report remarkable 30% growth in premium, for talking the industry’s average growth rate of 17%. That shows our growth in actually 26% growth in revenue, as your question is factor for growth in insurance and life insurance business. As we look ahead, there are 7 key sectors that we believe will contribute to the growth of our insurance business, but increasing awareness and understanding the importance of insurance coverage amongst individuals in life insurance —
Subhash C. Aggarwal — Chairman and Managing Director
Pravinji, you can tell life insurance [Speech Overlap] how much —
Pravin Agarwal — Chief Executive Officer of Insurance Business
Okay, so we are — we will sustain the growth at the same pace and roughly 25% of the company — and we are very confident to sustain with the same pace, the 25% or 26%.
Kevin Shah — Individual Investor — Analyst
Sure sir. Great. This was really helpful, thank you so much [Speech Overlap]
Pravin Agarwal — Chief Executive Officer of Insurance Business
We are in life insurance as well as, as Subhashji said, which is we are in motor, health, life and — we have achieved that I think 154% in life insurance this year growth.
Kevin Shah — Individual Investor — Analyst
Thank you so much for these data points, This was really helpful.
Pravin Agarwal — Chief Executive Officer of Insurance Business
Yeah.
Kevin Shah — Individual Investor — Analyst
Thank you.
Pravin Agarwal — Chief Executive Officer of Insurance Business
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Forum [Phonetic]. Individual Investor. Please go ahead.
Forum — Individual Investor — Analyst
Hello, good afternoon sir. I have couple of questions related to your apps, so has our new website and app for broking commenced as per time line planned?
Ajay Garg — Director and Chief Executive Officer of SMC Global
Very good afternoon. This is Ajay Garg, Director and CEO of SMC Global. So as Subhashji said like we have been investing much into technologies and very recently in our discount brokerage arm, we have launched the beta version of our in-house developed new app by the name of Superhero. in broking house, we have launched new app by the name of SMC Paid Online Next, and in coming quarters, one or two more apps are going to come and we’ll test the market, then we’ll make it publicly available. The beta version is already publicly available. And that’s why it is still under development for quarter two to be launched, so we are revamping the entire technology as Subhashji mentioned earlier that, whether it is back-office, front-office, we have set-up the DR site, we are revamping our CRM software focusing on low latency case trading and lot of fintech tie-ups.
Forum — Individual Investor — Analyst
Okay. Thank you. That was helpful. On the follow-up question I have regarding the Stoxkart also. So can you just tell me what was the stock performance, for Stoxkart and are we gaining like good traction over there. And what are the revenue contribution coming there during FY ’23 and what could be the expected profitability we could achieve in FY ’24 with respect to Stoxkart and since Stoxkart has broken even since we are seeing the breakeven in Stoxkart, so what will be the composition in the bottom-line for that in Q4?
Ajay Garg — Director and Chief Executive Officer of SMC Global
Stoxkart is also doing very well and our plans are very, very bullish about this discount brokerage arm and it has already breakeven and exact contribution I think Jamarji can say, but as compared to last year, our fees and commission income from Stoxkart was around INR10.54 crores and this year ’22-’23, it was INR15.21 crores, so there was a revenue improvement of more than 44%. So it is doing well and we are counting on the new technology, new app, after that, coming out with lot of digital campaigns and a lot of new things, we are planning to introduce which would outspend the market.
Subhash C. Aggarwal — Chairman and Managing Director
To add on what Ajay sir said, I would like to inform you that the bottom-line, I’m happy to inform you that Stoxkart has turned around. Last year, we had a marginal loss of INR35 lakh. And this year it has turned into profit of INR116.4 crores. Sorry, INR116.4 lakhs. And the revenue has increased by around 40%, 45%.
Forum — Individual Investor — Analyst
That was helpful. One last question I have regarding the what could be the sustainable margins for brokerage business and you know, since the margin seems to be volatile in that segment, can you guide us through that?
Subhash C. Aggarwal — Chairman and Managing Director
We think EBITDA margin from 22% to 27% is quite sustainable. So this can range in between this because of the market volatility and exchange turnovers. So, we think 22% is on lower side and 27%, 28% on the higher side.
Forum — Individual Investor — Analyst
Okay sir, that’s it from my side. Thank you for answering those.
Operator
Thank you. [Operator Instructions] The next question is from the line of Siddhant [Phonetic], Individual Investor. Please go ahead.
Siddhanth — Individual Investor — Analyst
Good afternoon everyone, and thank you for the opportunity. Also, my first question is that, the broking revenue has been declining and from the past two quarters, so any particular reason that there has been that and what is the outlook at least for the next couple of quarters, if you could guide us —
Ajay Garg — Director and Chief Executive Officer of SMC Global
Yeah, Ajay, this side. So, in past two quarters, like ideally even our broking revenue is also in line with the industry trend, market still sluggish, so there was a decline of around 5% to 6% in terms of broking revenue and there are actually some regulatory changes by SEBI the quarterly email policy has been changed, which is being done on a single day which the industry even got fit out of that, but if you see year-on year growth as compared to last year, we grew around 6% in terms of broking revenue, so I don’t foresee much of the pain and broking revenue as Jamarji said that maintain more than 25% growth in coming years.
Siddhanth — Individual Investor — Analyst
Okay sir, thank you. That helps. And sir, what would be the online and offline mix in broking business?
Ajay Garg — Director and Chief Executive Officer of SMC Global
See, in discount brokers, more than 98%, 99% is completely online but in broking house, the online participation is more than 50% and in coming years, we foresee the online penetration will increase, and we are targeting more than 75% from the online business even in full broking house.
Siddhanth — Individual Investor — Analyst
Okay sir, and so 75% is the target. Okay sir. And also sir, what would be the, I mean, if you could throw some light on the active client base number for the broking business?
Ajay Garg — Director and Chief Executive Officer of SMC Global
Active client base is around 2 lakhs [indecipherable] client base is including the discount brokerage, it is around more than 9 lakhs, and active client base is around 2 lakhs.
Siddhanth — Individual Investor — Analyst
Okay sir, that helps sir. Thank you. And sir, just one last question, if you could help me out sir. Average daily turnover in broking business doubled in the current year as compared to the last year. So what was the main driver for this growth and any particular trend or anything?
Ajay Garg — Director and Chief Executive Officer of SMC Global
So I think we are in line with the market, we are maintaining our market share of around 2%. So as market volume declined and F&O volume doubled, we are —
Siddhanth — Individual Investor — Analyst
Okay sir, thank you sir, that’s it from my side as of now.
Operator
Thank you. [Operator Instructions] The next question is from the line of Karan Sharma, Individual Investor. Please go ahead.
Karan Sharma — Individual Investor — Analyst
Good afternoon, everyone. Thank you for the opportunity. Actually I had questions on the NBFC side. So for the NBFC, we are looking at AUM income and PAT increase on a year-on-year basis. So can you please guide us for the future target as this segment looks very attractive?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
Yeah, very good afternoon, this is Himanshu Gupta. So in the last year, we actually grew the loan book from INR690 crores AUM to roughly INR901 crore of AUM. And we achieved a growth of 30%, so we are hopeful that in the next year or couple of years, we would be growing at similar time case and growing the AUM further. As of now, our equity is INR400 crores and we have sufficient headroom to take that to grow to achieve that kind of growth.
Karan Sharma — Individual Investor — Analyst
And sir, NIM has been increasing over the past couple of quarters. So can you comment on where we can see it to be sustainable in the coming quarters?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
See, with the increasing leverage, the NIM percentage is bound to come down and we believe on a long run — long-term basis, it would be at least minimum 4% once we achieve the full leverage, which we expect to be around 3.5 to 4 times.
Karan Sharma — Individual Investor — Analyst
Okay, and sir, I believe sir, how much of AUM is coming from the gold loan currently?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
See, gold loan is something that we started very recently, as of now, the gold loan AUM is about INR12 crores, which is roughly about 1.3% of the [Technical Issues].
Karan Sharma — Individual Investor — Analyst
Okay. Sir, how do you look at gold loan as an investor considering the competition there from the banks, as well as the Fintechs and already the bigger players are already they have a very good chunk into the gold loan. So how do you see the competition there?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
See, competition is there in all the products. So basically we are not competing with the banks and the customer is looking for the quick loan disbursement and proper servicing, so they are looking for the NBFCs. And we are opening our branches near to the hubs where the other NBFCs are present and we are getting good response from the market, even our teams are competitive with the other NBFCs. So as such, we are not facing any competition. It is a matter of time that we grow our loan book. So we are also increasing more number of branches, gradually.
Karan Sharma — Individual Investor — Analyst
So just a follow-up there. So what’s your target for branch expansion and what would be the breakeven for one particular branch from where you are disbursing gold?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
So one branch like the breakeven happens at an AUM of about INR3 crores, INR2.5 crores to INR3 crores, that is the typical like in the industry and the number of branches like for this year we might be opening another like total in total 20 branches we have already opened two branches in current year in the month of April. So total, we have three branches as of now.
Karan Sharma — Individual Investor — Analyst
Okay, sir, where are we targeting. Are we targeting the North and West or you have even plans to go towards South as well for expansion of sir — any clarity —
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
We are currently targeting Delhi NCR region. And once we have like sufficient branches there, then we might be planning for the other locations for the gold loan. But for the other product, we already have branches in North and West part of the country, we have about nine branches for the other product.
Karan Sharma — Individual Investor — Analyst
Okay and sir, how do you see — now, there are more people getting into gold loan, and into digital gold lending. So do we see entering that space as well?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
We are not entering into digital gold loan as of now, there are few fintechs which are there in the digital gold, but they have their own challenges in terms of the operational cost and things like that. So they are actually the fintech platforms which were providing gold loan, they have actually taken hit in last year and the beneficiaries have been traditional NBFCs who are doing gold loan in a traditional way. So our current focus is to grow through the brick and motor business through the branches.
Karan Sharma — Individual Investor — Analyst
Okay and sir, lastly, can we expect the lending focus to be — will it be continuing with the SME sector or there is a potential for diversification to plan this — secure the loan book?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
See, currently, about about 50% of the book is already secured. So SME is the customer segment we are lending both secured and unsecured product to the SME customers. So SME remains to be our focused customer segment, where we are targeting apart from the other than the gold loan.
So we will continue to grow in all products where we are lending to the SMEs, like, loan against property, equipment finance and the business loan.
Karan Sharma — Individual Investor — Analyst
Okay and sir, you know now many of the banks also entering into gold-lending partnerships. So do we have any gold lending partnership with any of the big banks. And if yes, then what is the ratio there currently?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
So we just had a co-lending tie-up with one of the public sector banks, Central Bank in the last quarter itself, so the AUM is still like it is very initial phase, there are no — like some of the files to them. It is just the beginning, but we expect this co-lending tie-up to like large AUM in coming times. And we are also looking for tie-up with more banks for the co-lending.
Karan Sharma — Individual Investor — Analyst
So sir, what’s the ratio between Central Bank and SMC?
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
It is 80-20 ratio, so 20% we keep on our book. And 80% is on bank book.
Karan Sharma — Individual Investor — Analyst
So we are doing the sourcing, servicing and —
Himanshu Gupta — Director, SMC Global Securities Limited and Director and CEO of Moneywise Financial Service Pvt Limi
Yes, so everything from sourcing, underwriting and after that disbursement entire collection and servicing we are looking at — we are dealing with the customers.
Karan Sharma — Individual Investor — Analyst
Okay sir, I’ll get back in the queue if I have other questions. Thank you. Thank you so much for answering the questions.
Operator
Thank you. [Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.
Mahesh Gupta — Vice Chairman and Managing Director
Yeah, myself Mahesh Gupta. Thank you all for participating in this earning con-call. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, please reach out to our investor relations manager at Valorem Advisors. Thank you very much and stay safe and healthy. Thank you very much.
Operator
[Operator Closing Remarks]