Let us look at your numbers. Your overall numbers in Q2 were pretty strong both on a sequential basis as well as year-on-year basis. What are the factors that led to the growth in Q2? Even your broking clients are up 35% sequentially which is marking a three-fold increase from Q2 of FY24. What led to that?
Sachin Gupta: A number of factors worked in our favour. One, definitely market participation was good overall. But on the Share India side, in the last two years, we focused more on the retail side for which we started providing MTF (margin trading facility) services to the clients. We saw a huge growth, huge demand in MTF and Share India book stands at around Rs 250 crore by the end of September.
Secondly, we focused on the merchant banking side, helping some companies to get listed on the SME side and that also gave us good revenues. Recently we also started the institutional desk where we empanelled 113 institutions with us in the last around one-and-a-half years. All these factors focusing on the fee-based businesses helped us a lot. And going further, our focus is in increasing the retail business overall.
Sequentially, margins have come in at 42% versus 37%. It is an uptick of almost 500 bps. What has led to this growth and on a long-term basis, what is your overall outlook when it comes to margins going even ahead of the second half of FY25?
Sachin Gupta: Our EBITDA margin is around 42% and we believe that we will be able to maintain these margins going further. It has gone up by 500 bps on a year-to-year basis. The reason is that we started some new verticals for which we have to incur some initial costs for infrastructure, manpower, for everything and now these verticals have started giving some revenues. In those particular two quarters, our margins were low, but now we are back to our basic margins. We are very hopeful of maintaining these kinds of margins going forward.
What would be the key growth drivers for the company going forward and how are your growth numbers looking for tier II, tier III markets?
Sachin Gupta: Going forward, our focus will be on the fee-based businesses more. We are going very aggressively on retail broking. We have just established some of our own branches like in main cities and from those cities, we are catering to the nearby tier III, tier II cities and we are getting very good response and MTF is one product people are really looking for and Share India is aggressively pushing that product into the market.
Second comes merchant banking. It is a pan-India business and we are helping companies and this year we see that a lot many companies will be listed in SME using Share India services. So that is another focus area. In the coming two-three years…, on merchant banking, we are very bullish. In the next five years, this can be a full-fledged independent division. We just started the institution desk. It is a very young division and we are very happy that in one year only we got 113 empanelments and very good institutions are working with us. Going further, this business will also grow and we can see good numbers coming from this side. Our board has recently approved of the wealth company where we will focus on providing investment products like AIS, PMS, all of which Share India is not providing now. So, going from here to next five years, fee-based businesses and investment products will be in focus. We will venture into wealth in the next six months. We are at the company formation stage and just got approval from the board. Putting all these new verticals and efforts, we believe that growth will come from all these divisions.
SEBI has imposed a lot of restrictions in the F&O segment. How are volume numbers looking like for the industry and on the back of this, will we see some kind of lower participation from the retail space and if yes, what kind of growth numbers are you looking at?
Sachin Gupta: SEBI is really concerned about the retailers who are making losses in the derivative side. People are taking more speculative bets these days. SEBI’s role is to overall develop the market in a right manner that they want to ensure the sustainability of the client for the longer period in the market.
For that, they have put some restrictions which will definitely slow down some volumes, but I cannot quantify in terms of percentage. But yes, there will be an impact on the volumes. At Share India, we do not have much concentration and much dependence on the one division. So, we are well spread out, and we have made a sustainable model. We believe we will revive our revenues in a quarter or two. There will be adjustment maybe for three months but in a quarter or two, we will be back with the numbers.
We have to see how the industry will react and how things will be accepted. So, first from 20th November, SEBI has announced, but effectively we will see later in November, things changing. But Indian markets and investors are very smart and they will adapt according to the new situation. As far as retailers are here in the market, the market will grow and if we look at India’s growth in next five years, politically we will be stabilised.
If the geopolitical situation improves, India will be one of the best countries we can bet on and we have huge potential still left on the table for the retailer’s participation. In the coming years, we should not be surprised that retailer participation will grow further from here 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 incorporating a subsidiary company offering CAT-III, AIF and PMS services. Could you shed some light on that and what is the growth potential for private wealth space and HNIs for the company?
Sachin Gupta: This is one space which is left out in the recent past. We have seen 14 or 15 odd crore Demat accounts. A lot of people are trading options or the derivatives side. As India is growing, as people have more money in their hands, wealth management or the demand for the wealth managers has gone up. If we quantify how many companies are giving the AIF and PMS, you can count on fingers.
The people who are taking the wealth management services are far lesser than the Demat accounts. We believe that with the growth of the country, the demand for wealth management will grow. We believe in diversified verticals. Share India board has approved of the wealth management company where we will be offering AIF, Category III, Category I maybe and PMS services to the client.
This particular division should be very good in the next 5 to 10 years. In a longer vision, Share India will develop a complete financial company where we will be offering different products to the clients under one roof.
Your company has announced raising up to Rs 150 crore via non-convertible debentures for working capital needs. Are we also going to be looking at further fundraisers going ahead or would this be all for the moment?
Sachin Gupta: Sorry, it is Rs 50 crore. We are planning to get a Rs 50-crore NCD. That will be 50 plus 50; the greenshoe option will be Rs 50 crore. Definitely this is for the MTF as MTF is growing and we are focusing more on the MTF side. This money will be consumed there primarily. As I said in the next three years, our MTF target is not less than Rs 1,000-crore book size. This is a target we have set internally. If the MTF grows good, then we might go for further NCDs. This depends on the overall demand in the MTF division.