Share India Securities Limited — Q2 FY25 earnings call

Call held 30 Oct 2024

Management summary

Share India Securities delivered a strong Q2 FY25, achieving record profitability despite a challenging regulatory environment. The company reported significant growth in both consolidated and standalone financials, driven by diversified product offerings and strategic focus on new verticals like MTF, Institutional Desk, and Merchant Banking. Management expressed confidence in adapting to regulatory changes and outlined clear targets for customer acquisition, MTF book growth, and revenue diversification, including a new wealth management subsidiary and international expansion.

Highlights

  • Consolidated Revenue from operations reached ₹453 crores, up 24% YoY and 9% QoQ.

  • Consolidated Profit After Tax (PAT) grew to ₹124 crores, an increase of 10% YoY and 21% QoQ.

  • Consolidated Net Profit Margin improved to 27.45% from 24.86% in the previous quarter.

  • Standalone Revenue was ₹366 crores, showing an increase of 32.68% YoY and 13% QoQ.

  • Standalone PAT was ₹98 crores, up 22.74% YoY and 34% QoQ.

  • Margin Trading Fund (MTF) book stood at ₹200 crores as of September 30, 2024, with a revised annual target of ₹300 crores for FY25.

  • Board approved ₹100 crores NCDs to primarily increase the MTF book.

  • Declared a dividend of ₹0.50 per ₹2 face value share.

Concerns

  • NBFC asset quality deterioration (MFI stress, higher Gross NPA)

Key financials

  1. Consolidated Revenue ₹453 Cr +24%YoY
  2. Consolidated PAT ₹124 Cr +10%YoY
  3. Consolidated Net Profit Margin 27.4% +10.4%QoQ
  4. Consolidated EPS ₹6.03
  5. Standalone Revenue ₹366 Cr +32.7%YoY
  6. Standalone PAT ₹98 Cr +22.7%YoY

What they filed

Q1 FY27: revenue up 31.4%, net profit up 47.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue453 342 239 341 341 −25%372 +9%416 +74%448 +31%
EBITDA186 131 52 138 159 −15%156 +19%117 +125%201 +46%
Net profit124 82 19 84 93 −25%89 +9%58 +205%124 +48%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Merchant Banking
    ₹13 Cr Revenue H1₹10 Cr Revenue Q2

Guidance & targets

Customer Acquisition

  • Active customers Customer Acquisition · next two years · Medium confidence 1 lakh customers
    our target is one lakh customers in the next two years for purely, purely retail purpose, not only for uTrade Algos, correct?

    — Sachin Gupta

MTF Book

  • MTF book size MTF Book · this year (FY25) · High confidence ₹300 crores

    Previously ₹250 crores → ₹300 crores

    the annual target was given by the team was Rs. 250 crores, which we have turned Rs. 210 crores by first half year only. So, now we have increased the annual target to Rs. 300 crores.

    — Sachin Gupta

  • MTF book size MTF Book · next year (FY26) · High confidence ₹550 odd crores
    Next year, we are not targeting less than Rs. 550 odd crores.

    — Abhinav Gupta

Revenue

  • Consolidated revenue from subsidiaries Revenue · going forward · High confidence at least 25%
    going forward, we expect at least 25% of the consolidated revenue to come from the subsidiaries, and in years to come, this may go up to 30%, 35%.

    — Kamlesh Vadilal Shah

Profitability

  • Profitability from subsidiaries Profitability · Fiscal Year '25 itself · High confidence 25%
    what Kamlesh sir, said about being 25% of the profitability coming from subsidiaries, the target is almost achieved and will be done by Fiscal Year '25 itself.

    — Abhinav Gupta

  • PAT margins Profitability · going forward · High confidence similar margins (around 27%)
    And going forward, we believe that the similar PAT margins would be sustainable. So, in terms of guidance, we would be able to maintain the similar margins that we would expect going forward as well.

    — Abhinav Gupta

Revenue Mix

  • Revenue from non-trading side (standalone) Revenue Mix · next years · High confidence 35% to 40%-odd
    In 65% also, I believe 35% to 40%-odd should be from the non-trading side. So, then if you see cumulatively trading should not be more than 35%, 40% odd in the total revenue in next years, this is our hard-core target.

    — Sachin Gupta

  • Trading revenue contribution to total revenue Revenue Mix · three years from here · High confidence not more than 40%
    cumulatively trading should not constitute more than 40% going three years from here.

    — Abhinav Gupta

Insurance Broking

  • Premium Insurance Broking · this year (FY25) · High confidence ₹75 crores

    From ₹50 crores today

    last year we touched premium of around Rs. 50 crores. This year we will be touching Rs. 75 crores and year after, we are targeting Rs. 100 crores.

    — Kamlesh Vadilal Shah

  • Premium Insurance Broking · next year (FY26) · High confidence ₹100 crores

    From ₹75 crores today

    This year we will be touching Rs. 75 crores and year after, we are targeting Rs. 100 crores.

    — Kamlesh Vadilal Shah

SME IPO

  • Market share in fund raise SME IPO · this year (FY25) · Medium confidence higher single-digit numbers

    From 3% today

    This year we are expecting that we will maintain our 3% market share in terms of the number of issues, but in terms of the total fund raise, we should achieve a higher number of higher single-digit numbers, because we are focusing on larger ticket size IPOs.

    — Abhinav Gupta

  • Number of IPOs to be completed SME IPO · before 31st March (FY25) · High confidence 18
    So, already DRHP has been filed, and nine we are planning to file by end of November. So, it is like 15, and 3 already IPOs have been launched. So, 18 number. So, the target is that we should be able to do all these IPOs finish before 31st March.

    — Sachin Gupta

Risks & concerns

  • NBFC asset quality deterioration (MFI stress, higher Gross NPA)

    high

    Management acknowledged industry-wide stress in MFI and rising NPAs, outlining a strategy to shift towards collateral-based lending and close branches in high-NPA regions.

    Both acknowledged

  • Regulatory changes by SEBI (increased lot size, reduced expiries)

    medium

    Management views recent SEBI measures as challenging but believes the company can adapt, expecting it to stabilize volatility and attract larger traders, leading to better revenue in the long run.

    Management acknowledged

  • Volatility in International Trading due to external market events

    low

    Management noted challenges in the last quarter due to large spikes in the Japanese market but expressed hope for better strategies and maturity in this segment.

    Management acknowledged

Q&A highlights

3 direct
Active client base and customer acquisition strategy Direct
as of right now, the active customer base is around 12,000... our target is one lakh customers in the next two years for purely, purely retail purpose, not only for uTrade Algos, correct?

Provides current client numbers and a specific growth target, outlining the strategy for retail expansion.

Asked by Bharani

NBFC Gross NPA trajectory and management strategy Direct
in NBFC business, primarily we were focusing on the MFI. And on that side, we have seen all the NBFCs in the country are feeling some stress, likewise with us... we are more focusing on collateral-based lending... 50% book will be collateral-based, 50% book will be unsecured.

Addresses a key sector-specific concern (asset quality) and outlines a strategic shift towards secured lending to mitigate risk.

Asked by Bharani

Revenue split between broking and subsidiaries/new verticals Direct
going forward, we expect at least 25% of the consolidated revenue to come from the subsidiaries, and in years to come, this may go up to 30%, 35%... trading should not constitute more than 40% going three years from here.

Gives a clear long-term vision for diversification away from pure broking, indicating a more sustainable business model.

Asked by Bharani

3 min read 7 chapters

Detailed narrative

Strong Q2 FY25 Performance Amidst Regulatory Shifts

Share India Securities reported a robust Q2 FY25, with consolidated revenue reaching ₹453 crores, marking a 24% YoY and 9% QoQ increase. Consolidated Profit After Tax (PAT) grew 10% YoY and 21% QoQ to ₹124 crores, with the net profit margin improving significantly to 27.45% from 24.86% in the previous quarter. Management highlighted this as one of the best quarters in the company's history, expressing confidence in adapting to recent SEBI regulatory reforms, despite acknowledging the challenging nature of the changes.

Strategic Diversification and New Verticals Driving Growth

The company is actively diversifying its revenue streams beyond traditional broking, with new verticals showing promising results. The Margin Trading Fund (MTF) book stood at ₹200 crores as of September 30, 2024, and the annual target for FY25 has been increased to ₹300 crores, with a further target of ₹550 odd crores for FY26. The Institutional Desk has successfully onboarded over 100 clients within a year, and the Merchant Banking division generated ₹10 crores in Q2 FY25, contributing to a more sustainable business model.

Expansion into Wealth Management and International Markets

Share India is venturing into wealth management with Board approval for a new subsidiary, 'Share India Wealth Multiplier,' which will focus on AIF and PMS. This move aims to strengthen fee-based income. Concurrently, the company is pursuing international expansion through Gift City and its Singapore subsidiary, despite experiencing some volatility in international trading in the last quarter due to external market spikes, particularly in the Japanese market.

NBFC Business Restructuring and Asset Quality Improvement

Acknowledging industry-wide stress in the MFI segment and rising Gross NPAs, Share India is strategically restructuring its NBFC business. The company is shifting its focus towards collateral-based lending, aiming for a 50% collateral-based and 50% unsecured book. Corrective actions include closing branches in high-NPA regions like Punjab and Haryana and focusing on more stable markets to improve asset quality.

Retail Client Acquisition and Digital Integration Initiatives

The active customer base is currently around 12,000, with an ambitious target to acquire 1 lakh retail customers in the next two years, primarily leveraging its uTrade Algos product. To support this growth, the company is opening new retail branches in Tier-3 cities and major metros like Calcutta and Mumbai. Furthermore, Share India plans to integrate its mutual fund platform with its retail IBT platform by Q3 FY25 to enhance cross-selling opportunities across its 319 branches.

SME IPO Business Targets and Credibility

In the SME IPO market, Share India aims to maintain its 3% market share in terms of the number of issues for FY25, while targeting a higher single-digit market share in terms of funds raised by focusing on larger ticket size IPOs. The company has 6 DRHPs already filed and plans to complete 18 IPOs before March 31, 2025. Management emphasized its strong institutional desk and net worth exceeding ₹2,000 crores as key factors for credibility and attracting quality companies.

Long-term Revenue Mix and Profitability Outlook

Management provided a clear long-term vision for revenue diversification, projecting that subsidiaries will contribute at least 25% of consolidated revenue, potentially rising to 30-35% in the coming years. Within the standalone entity, non-trading businesses are targeted to contribute 35-40% of revenue next year, with overall trading revenue not exceeding 40% of total revenue in three years. The company expects to maintain similar PAT margins (around 27%) going forward, reflecting confidence in its sustainable business model.

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