SWASTIKA - Swastika Investmart Ltd Share Price

Management Outlook:
Swastika Investmart's management is optimistic about sustained growth across its four core businesses (broking, merchant banking, depository services, and margin funding). They emphasized leveraging technology, expanding SME IPO services, and scaling MTF (margin trading facility) to drive profitability. Plans include doubling client acquisition via a product-led approach, exploring international markets (GIFT City), and sustaining EBITDA margins (~30%) through cost-efficient operations. The leadership highlighted confidence in India's retail investment boom and regulatory tailwinds.

Major Points:

1. Financial Performance:

   • Q1 FY25 revenue surged 75% YoY to Rs.38.56 Cr; PAT grew 265% YoY to Rs.6.27 Cr.
   • EBITDA margin improved to 30% (vs. 9% YoY) due to high-margin merchant banking (11% of revenue) and MTF interest income (17%).

2. Business Growth:

   • Broking: 412,000+ clients (64% of revenue); 11,000+ added in Q1. Tech investments (in-house app with 100k+ users) to boost scalability.
   • Merchant Banking: Completed 28 SME IPOs; closed Rs.72.5 Cr funding deals in Q1. Aggressive SME sector expansion planned.
   • MTF Facility: Focus on growing this segment, citing low risk and high demand.

3. Strategic Initiatives:

   • Transitioning to a tech-driven model (APIs, CRM tools) to enhance client retention and reduce acquisition costs.
   • Exploring GIFT City for global investor services.
   • Dividend Policy: Aim to maintain 20% payout ratio historically.

4. Cost Control:

   • Reduced employee headcount by 10% YoY; targeting productivity gains over linear expansion.

5. Regulatory Impact:

   • SEBI's potential F&O reforms seen as positive for long-term market health; no significant disruption expected.

6. Other Highlights:

   • Holds 4.75% stake in Ujaas Energy (Rs.125"“130 Cr value; locked in until 2025).
   • No plans for proprietary trading; focus remains on core businesses.

Question 1: So, I had the question on EBITDA margin. Your margins have substantially gone up. So, can you highlight?
Answer: The EBITDA margin for Q1FY25 was ~30%, driven by growth in low-cost merchant banking income and margin trading facility (MTF) interest income. Increased revenue from consultancy and interest-based streams, coupled with controlled operational expenses, contributed to higher margins. Management expects margins to sustain or improve as income scales without proportional cost increases.

Question 2: In terms of guidance, do you think 28%-30% margin band is sustainable or you have moved up from 17%-18% to this so it's kind of doubled in the past so many years. So, is this sustainable?
Answer: Management believes the 28"“30% EBITDA margin is sustainable due to a robust pipeline in merchant banking and MTF, which require minimal incremental costs. Existing infrastructure can support double the current business scale, ensuring margin stability.

Question 3: And one more question was with this whole SEBI talking about these options trading and they want to clamp down the options trading. So, how would that be for our business?
Answer: Regulatory changes (e.g., lot size adjustments) are viewed positively as they align with Swastika's shift toward long-term, delivery-based trading. The company has reduced focus on speculative F&O clients and prioritizes stable revenue streams, minimizing adverse impacts.

Question 4: Why is there a high amount of payables and cash on the books?
Answer: High payables reflect client margins held as liabilities. Cash equivalents include mandatory deposits (FDs) with exchanges and clearing corporations, ensuring regulatory compliance and liquidity for operations.

Question 5: What effect will the revised capital gain taxes have?
Answer: The increased short-term (5%) and long-term (2.5%) capital gain taxes are unlikely to significantly impact market participation due to India's growth-driven liquidity and investment opportunities.

Question 6: Which regions contribute most to Swastika's presence?
Answer: Strong presence in Central and North India (Hindi-speaking belts), particularly Tier-3/4 cities with lower tech adoption. Branches and sub-brokers cater to retail investors seeking personalized services.

Question 7: What is the long-term outlook and guidance?
Answer: Focus on technology (app, CRM) and transitioning to a product-led model to scale client base 2x with existing infrastructure. Investments in digital marketing and client retention aim for sustainable growth.

Question 8: Plans for monetizing Swastika's 4.75% stake in Ujaas Energy?
Answer: The stake is locked in for one year post-NCLT resolution. Management is monitoring price movements and regulatory conditions, with no immediate plans to sell.

Question 9: Any plans for technological tie-ups or international expansion?
Answer: APIs are free for integration; exploring GIFT City ventures for NRI/foreign investor services. No immediate acquisitions planned, but open to strategic tech partnerships.

Question 10: Breakdown of IB vs. broking income and employee cost strategy?
Answer: Q1 revenue: 64% broking, 11% investment banking, 17% MTF/interest. Employee costs reduced by 10% via tech-driven efficiency and productivity focus, targeting higher margins.

Question 11: Client acquisition strategy and active user trends?
Answer: Shift from sales-led to tech/product-led growth. ~30% of 412,000 clients are active, with 70% transacting online. Focus on quality clients (long-term investors) over speculative traders.

Question 12: Revenue growth plans for doubling from Rs.115 crore?
Answer: Broking (tech-driven client acquisition) and investment banking (SME IPO surge) to drive growth. Targets include scaling MTF, merchant banking pipelines, and leveraging trust/tech for 2"“3x expansion.