Geojit Financial Services Limited (532285) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Geojit Financial Services Q2 FY '22 Post Results Analyst Conference Call hosted by Ambit Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mitesh Gohil from Ambit Capital. Thank you, and over to you, sir.

Good afternoon, everyone. I welcome you all for the call. We have with us Mr. C.J. George, Managing Director; Mr. Satish Menon, Executive Director; Mr. A. Balakrishnan, Executive Director; Ms. Mini Nair, Chief Financial Officer; and Mr. Liju Johnson, Company Secretary. So I welcome the management team on this call. And without further ado, over to you, sir.

Thank you, Mitesh. Good afternoon to everybody. This is Satish Menon from Geojit, and thank you for joining this investor call for the second quarter earnings. I hope everybody would have got the time to go through our investor presentation. But for the benefit of people who have not been able to, I'll just run through the broad figures and give the key highlights of the second quarter, and then we can get into Q&A. In terms of operating income for the second quarter ended September, we had INR 127 crores, which is up 17% Y-on-Y. In terms of expenses, we were 14% up to INR 74.06 crores. PBT was at INR 53.18 crores, which is up 22% Y-on-Y and PAT at INR 40.47 crores, which is up 22%. In terms of split of income, brokerage and brokerage related was INR 90.3 crores, which is up 8% Y-o-Y. And if you split that into different areas, INR 74.63 crores from pure brokerage, which is up 4% Y-o-Y, though there is a dip of 14% in the cash market volumes, ADTO, but the yields have been better for us. The second component of the brokerage income is depository services, INR 6.95 crores for the September '21 ended, which is minus 2% Y-on-Y. And the third component is interest income from clients INR 8.72 crores, which is up 88% Y-o-Y. We added 20,000 new clients last quarter. In terms of SmartFolios, this curated portfolio, which we offer to the clients as a brokerage service. We have INR 200 crores of AUM now there compared to INR 50 crores in March. We offered 10 portfolios, and we have close to 6,200 clients who have taken such curated portfolios. In terms of active clients, growth compared to September of '20, we have 225,000 clients active as per NSE data, which is 26% up from last year. The second main product -- second main income is also from financial products, that is distribution of insurance and mutual funds. INR 19.71 crores for the last quarter, which is 45% up from the September '20 quarter. It is split into 2 major portions. One is mutual fund. Mutual fund is INR 15.25 crores of revenue for September quarter, up 47% from last year and up by 18% from the June quarter. Geojit Mutual fund AUM is 7%, INR 572 crores compared to 4%, INR 946 crores a year back, 53% growth in AUM. Mutual fund holding clients have also gone up; it is 219,000 clients. Gross inflow has been good for us in the last quarter, INR 535 crores of gross inflow and INR 144 crores of gross inflow in equities. Insurance also did well last year, INR 3.52 crores of income compared to INR 2.99 crores a year back and compared to INR 1.31 crores in the June quarter. So that is a broad -- software income has also seen growth compared to last year and compared to the June quarter, 3% growth. So overall, operational income INR 127 crores and PAT at INR 40.47 crores, which is 22% up from last year and 5% from the previous quarter. I hope these figures people have known. I have nothing more to say in terms of the opening remark. We will open it for Q&A, and then we can answer questions. Operator, over to you.

[Operator Instructions] We have the first question from the line of Vijay Karpe from Bryanston Investments.

I have a question at the company level. So we have seen Geojit evolved over the last 5 years from being a pure broker to going into...

Mr. Karpe, your audio is fluctuating. Could you...

Is this better?

Could you use the handset, sir?

I'm using [ Monty's ].

Management, are you able to hear the participant?

Not really.

No, Vijay, you are not clear, Vijay. We are not able to hear you.

I'll try. I'll try to reconnect.

[Operator Instructions] We have the next question from the line of Chander Bhatia from Seers Fund Management Limited.

Good evening, everybody, and many congratulations to the management for wonderful set of numbers during this slow quarter in terms of volumes. So I have a couple of questions. First question is regarding -- there is one other distribution income of INR 94 lakhs in this quarter. So can you give some color on that, what is it?

Okay. Mr. Bhatia, that is coming from -- so we have given 3 main products: one is mutual fund, other is insurance and other is other distribution income. This is coming from the income received from bonds, AIF and all those things, which is not coming under the first 2 categories.

Okay. Sir, how do you see it panning out in coming quarters and coming years?

Can I step in? We are seeing growth in terms of the number of clients, particularly for these bonds and AIF, if that is what your question is. The other side is it also depends on the market activity. Today, we are seeing a lot of interest from our clients, particularly from our natural markets. So we are seeing growth in that number, there is no doubt about it. And it is basically long-term investors who are coming and investing today, not the short-term flippers. So that is one good thing we are seeing in terms of the quality of the business that is happening today.

Okay, sir. Okay. And sir, there's one income of INR 2.99 crores, which is the dividend income. So what is all this income?

It is stand-alone books, you will see this income. This is the dividend received from our joint venture in Dubai Barjeel Geojit.

Okay, sir. Okay. And sir, one question is about the total overall volume. In terms of delivery volume, has increased tremendously from -- if I see from last year, it was 35%; last quarter, it is 40%, now it is 49%. So how do you see it is panning out because it, I think, is gaining higher yield? So therefore, yield is also going up. So if you can comment about the percentage, which is likely to be gained or it is likely to remain same in terms of delivery volume and yield?

Satish, I will just give the introduction, and then you could step in and reply this in detail. I must tell you this is also because of the deeper relationships that we have with our clients in the natural market where largely investors are our clients who -- that's why the delivery business is high. So the kind of clients that we get, although the number is relatively small compared to the market, these are basically long-term investors coming and investing. Of course, the market has also attracted them. And you know the alternate investments are today limited. So people are attracted to long-term investments in mutual funds as well as stocks. So this is why you are seeing some part of this increase in the delivery business. Satish, you could add.

Yes. That is absolutely true. It is also a function of the market. The market was quite active in the last quarter. And of course, it was a little bit similar when you look at this September quarter of last year. The September quarter of last year also had a slightly higher delivery absolute volumes compared to other quarters. But what we have seen in this financial year or post September quarter, the delivery volumes have continuously grown. I think it is more of a function of the market where many investors who are coming new to the market are doing delivery business and other clientele where people have started getting noticed in the market movement are trying to be active in the market. This is also a function of the SmartFolio product we have, where we have, like I said in my opening remark, the curated portfolio where people can buy any of these 10 portfolios, and we give suggestions on what is to be bought and sold. It's also a function of that. But it's primarily a market movement. When the market is active, delivery volumes, per say, become active.

[Operator Instructions] We have the next question from the line of Mitesh Gohil from Ambit Capital.

I just have one data-keeping question. So what percentage of brokerage revenue is coming from speculation and what percentage is coming from delivery business?

Okay. I'll take that, sir.

Yes, yes, please.

So out of INR 100 of brokerage revenue, INR 72 comes from delivery, INR 8 comes from day trading and INR 20 comes from futures and options.

And what is the percentage of delivery in the cash market?

Percentage delivery in the cash market to the total volume, in the last quarter was 49%.

In terms of the brokerage revenue, he is asking. That is roughly 80% of the brokerage.

Okay, sir. Got it, sir.

Yes, 72 plus INR 8. INR 72 is delivery brokerage, INR 8 is the day trading brokerage in the cash market and INR 20 is F&O.

Okay, sir. Got it, sir. And what percentage of brokerage is coming from the partnership, which we have done with [ Y-to-Y ]?

With whom?

With partners.

B2B.

B2B.

No, you're asking about B2B partners or franchisee business?

B2B partners.

B2B partners...

In terms of the professional partners -- your question is in terms of the total brokerage?

Yes, yes, total brokerage.

It is roughly coming to around 5% to 8%.

5% to 6% should be.

5% to 6%. Okay. Got it.