SMCGLOBAL - SMC Global Securities Limited Share Price

Here are the major questions and their detailed answers from the Q&A section of the earnings transcript:

Question 1: "Your EBITDA margins dropped from 19.2% to 26.4% year-on-year. What specific cost pressures or revenue mix changes contributed to this decline?"
Answer: The decline in EBITDA margins can be attributed to two main factors. Firstly, our exchange commission income decreased by Rs. 35 crores, reflecting the reduced exchange turnover. Secondly, fair value gains on investments dropped significantly, from around Rs. 25 crores last half-year to Rs. 7 crores this year. Together, these factors reduced our profit before tax, which impacted EBITDA.

Question 2: "Are these pressures expected to persist in H2?"
Answer: We anticipate an improvement in H2. The industry faced significant changes in the derivative segments last year, which affected market activities. As these pressures ease and market conditions stabilize, we expect a rebound in activity, leading to better performance in the upcoming quarters.

Question 3: "Your PAT fell 54% year-on-year in Q2. Could you elaborate on the key drivers behind the decline and when a rebound is expected?"
Answer: The main factors behind the decline in PAT are the same as those affecting EBITDA margins. We expect recovery in the subsequent quarters due to market stabilization and improved trading activity, so we foresee a potential rebound in profitability.

Question 4: "You mentioned borrowing rose from Rs. 1500 crore in March' 25 to Rs. 1700 crore as of now. What portion relates to NBFC operations? How is the cost of borrowing trending?"
Answer: The increase in borrowing is primarily due to raising Rs. 220 crores through two series of NCDs, which were essential for our working capital needs. The cost of borrowing remains stable, as anticipated, with no significant rise concerning NBFC operations.

Question 5: "Looking at the first half, do you think hitting 20% growth is achievable, or should guidance be revised?"
Answer: The industry has indeed faced turnover declines in both F&O and cash markets. However, we remain optimistic about the second half, expecting improved results that could align us closer to our initial guidance. We believe that proactive measures taken could facilitate better performance.

Question 6: "What is happening in the insurance industry? Why have margins come down, and do you expect them to improve?"
Answer: The insurance sector's performance remained steady, with PAT slightly above previous year levels. However, the market dynamics mean it's a low-margin business influenced by competitive pressure and regulatory changes. We anticipate improvements, especially in Q4, which traditionally performs better.

Question 7: "Could you explain the reasons for the slight rise in GNPA and NNPA?"
Answer: The slight rise in GNPA and NNPA is due to a few secured accounts facing recovery delays due to legal processes. We've made adequate provisions for these accounts and expect to recover effectively in due time.

Question 8: "Are you planning to rebalance your portfolio towards secured or short-tenure assets?"
Answer: We plan to reduce our exposure to unsecured business loans further, having already decreased it from over 50% to 35% of AUM. Our focus will remain on secured lending, aligning with tightened underwriting standards to support better asset quality in the future.