SMCGLOBAL - SMC Global Securities Limited Share Price

Management remains cautiously optimistic about long-term growth despite near-term regulatory challenges. The industry outlook highlights strong capital market growth driven by retail participation and regulatory stability, though SEBI's tightened derivative norms led to a 38% volume decline in Q3. These changes are seen as beneficial for long-term market stability. The Union Budget's focus on NBFCs/FinTechs aligns with SMC's digital expansion and financial inclusion goals.

Key Highlights:

• Financial Performance: Q3 FY25 consolidated revenue grew 6.5% YoY to Rs.455.5 crore; 9M FY25 revenue rose 20% YoY to Rs.1,354.3 crore. Net profit for 9M stood at Rs.142.7 crore (PAT margin: 10.5%).
• Segment Performance:
  • Broking/Distribution: Revenue up 2.3% YoY in Q3; network expanded to 2,270 APs across 437 cities.
  • Financing: AUM grew 20.9% YoY to Rs.1,285.8 crore; NPAs remain low (Gross NPA: 2.27%, Net NPA: 1.16%).
  • Insurance Broking: Revenue dipped due to slower vehicle sales, but distribution network remains robust (15,959 points of sale).
• Strategic Initiatives: Focus on technology upgrades, competitive pricing, and diversifying into secured lending (Micro LAP) to improve yields. NBFC leverage ratio (1.6x) is below target (3"“3.5x), offering room for AUM growth (15"“20% guidance).
• Regulatory Adaptation: Shift toward cash markets, margin funding, and monthly derivative contracts expected to mitigate recent volume declines.

Management anticipates gradual recovery in Q4 FY25, driven by investor adaptation to new norms and expanded product offerings.

Question 1:
"What I could see is that the AUM has not grown in the past three quarters or so. How do we expect the AUM to grow in the next 3 quarters? The leverage ratio currently stands at 1.6. Do we expect it to grow, and what are the targets? ROE for NBFC is mid-single digit. Do we have targets to increase ROE?"
Answer: AUM growth was impacted by tightened underwriting policies (due to sector-wide delinquencies) and a strategic shift to higher-yield Micro LAP from Prime LAP, causing slower disbursements. Leverage can increase to 3"“3.5x, enabling AUM growth without equity infusion. ROE (15% for 9M FY25) is expected to rise via higher-yield products and operational leverage.

Question 2:
"If leverage is low, can we double the loan book without new equity?"
Answer: Yes. Leveraging up to 3x (from 1.6x) using existing equity and internal accruals could grow AUM to Rs.2,400"“2,500 crores.

Question 3:
"Why has leverage remained low historically? Are there stress concerns, and will approval rates/disbursals rise?"
Answer: Leverage improved in prior years but was paused due to regulatory/economic caution. No significant stress observed; approval rates reduced proactively. Future growth will prioritize secured loans (target: 30% unsecured book).

Question 4:
"Guidance for AUM growth?"
Answer: Maintains 15"“20% YoY growth guidance, targeting ~Rs.1,500 crore by FY25-end, with Q4 typically strong.

Question 5:
"Why was Q3 growth hampered across segments?"
Answer: SEBI's derivative settlement changes reduced broking volumes, RBI's credit tightening slowed NBFC growth, and slower vehicle sales impacted insurance. Optimism for Q4 recovery as markets adapt.

Question 6:
"How will management tackle regulatory impacts?"
Answer: Focus on promoting cash market trading, new exchange derivatives, and margin funding. Expects investor adaptation to stabilize volumes.