Earnings Call Transcript Analysis Report #
Financial Performance Analysis: Q3 FY25 #
Key Financial Metrics (Q3 FY25 Consolidated) #
- Revenue: Rs. 342 crores
- Profit After Tax (PAT): Rs. 82 crores
- Earnings Per Share (EPS): Rs. 3.66 (for Rs. 2 paid-up share)
- Net Worth (Consolidated as of December): ~Rs. 2,300 crore
Key Financial Metrics (Q3 FY25 Standalone) #
- Revenue: Rs. 259 crores
- Profit After Tax (PAT): Rs. 60 crores
- Earnings Per Share (EPS): Rs. 2.67
Comparison with Previous Quarters (QoQ) #
- Consolidated Revenue: Decline of 24% (Q3 Rs. 342 cr vs Q2 Rs. 453 cr)
- Consolidated PAT: Decline of 34% (Q3 Rs. 82 cr vs Q2 implies PAT of ~Rs. 124 cr)
- Standalone Revenue: Decline of 29% (Q3 Rs. 259 cr vs Q2 Rs. 366 cr)
- Standalone PAT: Decline of 39% (Q3 Rs. 60 cr vs Q2 implies PAT of ~Rs. 98 cr)
Revised Guidance or Forecasts #
- Management expects a “consolidation for one or two quarters” due to regulatory changes.
- Optimistic that volumes will be absorbed and recover in the near future.
Areas of Growth and Decline #
- Decline: Overall broking turnover and profitability impacted by regulatory changes and market conditions. ADTO dropped from Rs. 10,400 crores in Q2 to Rs. 8,200 crores per day in Q3.
- Growth:
- MTF Book: Grew from Rs. 260 crores in Q2 to Rs. 360 crores in Q3.
- NBFC Loan Book (Share India Fincap): Grew from Rs. 195 crores in Q2 to Rs. 253 crores in Q3 (as of 9M FY25).
- Institutional Desk: Servicing ~115 institutional clients.
- Client Acquisition: Added 8,000-10,000 active clients from Q2 to Q3.
- Merchant Banking: Completed 16 SME IPOs.
- Dividend: Board approved a dividend of Rs. 0.2.
Strategic Initiatives & Business Updates #
Major Strategic Announcements #
- Investment in Metropolitan Stock Exchange of India (MSEI): Acquired ~5% equity at Rs. 2 per share.
- Venture into Wealth Management: Board approval received. Applied for PMS registration and in process of creating an AIF. A new wealth company, Share India Wealth Multiplier, has received Board approval.
- Focus on Retail Expansion & Customer-Facing Products: Shift from core products to customer-facing products.
New Products, Services, or Markets Discussed #
- Portfolio Management Services (PMS): Applied for SEBI license, expect approval in 2-3 months.
- Alternative Investment Fund (AIF): In the process of creation.
- Third-Party Distribution Products: Planning to launch through the Wealth Management Company in the next financial year.
Significant Operational Changes #
- Share India Fincap (NBFC): Successfully completed its first Non-Convertible Debenture issue. Loan book at Rs. 253 crore (9M FY25), net worth > Rs. 120 crore, 75 branches.
- Merchant Banking (Share India Capital Services): Signed MoU with CoE for Aspiring SMEs to support SME IPO listing. Completed 16 SME IPOs.
Ongoing or Completed Projects #
- UTrade Algos: Steadily progressing, aiming to empower retail with Algo trading.
- Silverleaf: Will provide assets for HFT and attracting FPI, HNI.
- Institutional Desk & MTF: Performing “extremely well.”
- Rights Issue (May 2023): Funds fully received by September 2024, strengthening capital base to ~Rs. 2,300 crore consolidated net worth.
Market & Competitive Landscape #
Insights about Industry Trends #
- Q3 FY25 was a “difficult quarter for the Company and the industry” due to regulatory changes impacting turnover.
- Retail participation, especially from young generation and Tier-2/Tier-3 cities, continues to grow.
- Demand for wealth management products (PMS, AIF) beyond traditional mutual funds is increasing.
- Shift in retail investor behavior: Rs. 4 lakh crores of FII selling absorbed by retail investors in the last year.
Competitive Positioning Statements #
- Performed “in line with our peers” despite a difficult quarter.
- Belief in outperforming the industry due to new product development and focus on growing segments.
- Investment in technology (UTrade, Algowire, Silverleaf) seen as a key differentiator.
Market Challenges and Opportunities #
- Challenges: Regulatory changes, low liquidity.
- Opportunities:
- Growth of a third exchange (MSEI).
- Increasing retail participation and demand for diversified financial products.
- Penetration of Algo trading among retail investors.
- Growth in wealth management for HNI and affluent segments.
Comments about Market Share or Positioning #
- Market share remained “more or less stable” on a QoQ basis.
- Aiming to be a “comprehensive financial service provider.”
Risk Factors & Challenges #
Concerns or Challenges Acknowledged by Management #
- Impact of regulatory changes on exchange turnover and company volumes.
- Low liquidity in the market.
- Unwarranted spikes in indices affecting turnover.
Regulatory Issues #
- Rollout of Phase 1 measures to strengthen equity derivative framework.
- Standardizing exchange charges regardless of turnover.
- Reduction in daily expiries.
- Increase in Extreme Risk Margin (ELM).
- Increase in Securities Transaction Tax (STT).
- Some regulations still in the pipeline.
Operational Constraints #
- MSEI facing tech challenges and development of cash/derivative segments.
Market Uncertainties #
- Time needed for the industry and investors to adapt to new regulations (1-2 quarters).
Forward-Looking Statements #
Outlook and Future Projections #
- Optimistic that regulatory impacts will be absorbed, and volumes will pick up.
- Expect consolidation for one or two quarters before a strong bounce back.
- MSEI expected to launch its cash market in Q1 FY25-26, followed by derivative products.
- Wealth division expected to “pick up very strongly” in the coming years.
- MTF as a revenue source would be a “great line item” in the long term.
Commitments or Targets Set by Management #
- Focus on retail expansion, Algo trading penetration, international operations, and diversification.
- Aggressive on MTF book growth, subject to market conditions.
- Aim to roll out wealth products by Q1/Q2 of the next financial year.
Planned Investments or Strategic Priorities #
- Continued investment in product innovation and technology.
- Building out wealth management capabilities.
- Expanding customer-facing products.
- Supporting the growth of MSEI.
Sentiment about Future Performance #
- Confident in bouncing back strongly after a brief consolidation period.
- Positive about the long-term growth trajectory driven by diversification and new initiatives.
- Belief that technology investments will yield “rich dividends” and enable outperformance.