Let’s look at your numbers. The overall numbers for the second quarter were very strong on both a sequential and a year-over-year basis. What are the growth factors in Q2? Even intermediary customers grew by 35% quarter-on-quarter and tripled from Q2 FY24. What led to this?
Sachin Gupta: Many factors worked in our favor. One, overall market participation was definitely good. But on the Share India side, for the last two years, we have focused on the retail side where we have started offering MTF (merchandise trading facility) services to our clients. MTF has seen strong growth and strong demand, with Share India’s book balance reaching around Rs 250 crore by the end of September.
Secondly, we focused on the merchant banking side and helped some companies go public on the SME side, which also gave us good returns. Recently, we also launched an Institution Desk and have provided support to 113 institutions in the past approximately one and a half years. All these factors, focusing on fee-based business, helped us a lot. And going further, we’re focused on expanding our retail business overall.
After that, the profit margin was 42% versus 37%. It’s an increase of almost 500bps. What are the factors behind this growth? Also, in the long term, what is the overall outlook for profit growth going into the second half of FY25?
Sachin Gupta: Our EBITDA margin is approximately 42% and we believe we can maintain this margin going forward. On an annual basis, it has increased by 500 basis points. The reason is that we start some new verticals and for that we have to incur initial costs for infrastructure, personnel, everything, and now these verticals are starting to generate some revenue. It’s from. Profit margins were low in the last two quarters, but now they are back to basic profit margins. We hope to maintain this kind of margin in the future.
What are the company’s key growth drivers going forward and how do you expect the growth rate to be in Tier II and Tier III markets?
Sachin Gupta: In the future, we will focus more on paid business. We are very active in retail brokerage. We have just set up some of our own branches in major cities etc. and from those cities we are serving nearby tier 3 and tier 2 cities and we are getting a very good response. MTF is one of the products that people are really looking for and Share India is actively bringing that product to the market.
The second is merchant banking. This is a pan-India business and we are supporting companies and this year we expect many companies to take advantage of Share India’s services to get listed as SMEs. That’s another area of ​​focus. We’re very bullish on merchant banking over the next two to three years… Within the next five years, this could become a fully fledged independent sector. We just started the Institutional Desk. Although this is a very young department, we received 113 raises in one year alone and are very pleased to have such a great institution working with us. If we go further, we will see that this business will also grow and we will get good numbers on this front. Our board recently approved a wealth company that will focus on offering investment products such as AIS and PMS, which Share India currently does not offer. So from now on, the focus for the next five years will be on fee business and investment products. We will have a riches adventure in the next 6 months. We are in the incorporation stage and have just received approval from our board of directors. With all these new areas and initiatives, we believe that growth will come from all these sectors.
SEBI has imposed many restrictions on the F&O sector. What is the industry’s sales volume? Also, is there any possibility that participation from the retail industry will decline in any way against this backdrop? If so, what kind of growth numbers do you expect?
Sachin Gupta: SEBI is genuinely concerned about retailers who are incurring losses on the derivatives front. Recently, people have started making more speculative bets. SEBI’s role is to develop the market holistically in an appropriate manner to ensure long-term sustainability of its clients in the market.
To that end, they have some limitations that definitely slow down some volumes, but they can’t be quantified in percentages. But yes, there is an impact on volume. At Share India, we are not too focused or highly dependent on one department. That’s why we’re building a well-distributed and sustainable model. We believe that earnings will recover within one to two quarters. There will probably be a three-month correction, but the numbers will come back up in a quarter or two.
We’ll have to see how the industry reacts and how things are received. So, first of all, SEBI made the announcement from November 20, but the situation will essentially change in the second half of November. However, Indian markets and investors are very smart and adapt according to new circumstances. As long as retailers are in the market, the market will grow and if you look at India’s growth over the next five years, it will be politically stable.
If the geopolitical situation improves, India will be one of the best countries we can bet on and there is still huge potential on the table for retailer participation. We should not be surprised to see more retailer participation going forward in the coming years, but yes, we will be more cautious and this is what SEBI wants. I am very hopeful that India will grow and this industry will grow.
Your company has announced the formation of a subsidiary to provide CAT-III, AIF, and PMS services. Can you explain a little bit about this and what is the growth potential of the private wealth space and HNIs for your firm?
Sachin Gupta: This is one of the spaces left behind these days. We have identified 1.4-1.5 billion Demat accounts. Many people trade the options and derivatives side. As India grows, people have access to more money, increasing the demand for wealth management and wealth managers. You can quantify the number of companies offering AIF and PMS on your fingers.
There are far fewer people using asset management services than demat accounts. We believe that as countries grow, so will the demand for asset management. We believe in diverse industries. The Share India Board of Directors has approved an asset management company for which the Company will provide AIF, Category III, possibly Category I and PMS services to its clients.
This particular sector should do very well in the next 5-10 years. In a longer term vision, Share India will develop a complete financial company offering a variety of products to customers under one roof.
Your company has announced that it will raise up to Rs 15,000 crore through non-convertible debentures for its working capital needs. Are you looking to do more fundraising in the future, or is this all you have for now?
Sachin Gupta: Excuse me, it’s 5 billion yen. We are planning to get an NCD of Rs 5,000 crore. That would be 50 plus 50. The green shoe option will be worth Rs 50 billion. This is definitely for MTF because MTF is growing and we’re more focused on the MTF side. This money is mainly spent there. As I mentioned earlier, our MTF target for the next three years will not be less than Rs 1,000 crore in book size. This is a goal we have set internally. If MTF grows well, we may consider further NCDs. This is determined by the overall demand in the MTF sector.
