Anand Rathi Share and Stock Brokers Limited (ARSSBL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Anandarati Share & Stock Brokers Limited Q2 NH1 FY27 earning conference call. As a reminder, all participant line will win the listen only more, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from ENY for the opening remarks. Thank you and over to you, sir. I am sorry to interrupt you, Mr. Pingli, but your voice is low. Thank you.

Such statements are based on management's current beliefs and assumptions and on information presently available to management. Participants with caution not to place undue reliance on the svolved-looking statements or making recent decisions. To take us through the results and answer your questions today, we have with us Mr. Pradeep Bhutta, Chairman and Managing Director, Mr. Roop Krishat Botham. Holton Director, Mr. Tarek Shah, Chief Financial Officer, and other members of the management team. I will now hand the call over to Mr. Gupta for his opening remarks. Thank you and over to you, sir.

Thank you, Devaka. Good evening to all, and a warm welcome to our Q2 and H1 financial year 27 earning call. We all are experiencing a certain environment of a capital market due to geopolitical tension, rising interest rates, As a result of this, market sentiment in our country has remained relatively subdued. Before discussing our performance for the period, the secondary markets continue to exhibit some turbulence during the reporting period. The Nifty 50 declined by 5.22% on a quarterly basis and 1.3% on a half-yearly basis, including a 6% correction in September. The weakness was more pronounced in several large-cap and sector indices, reflecting a more cautious risk environment and softer market sentiment. However, beneath this short-term volatility, the structural drivers of India's capital markets remain strongly inset. The quarter witnessed significant deepening of India's capital markets supported by rising investor participation across the primary market, direct equities, and mutual funds. IPO activity remained buoyant during the quarter, with 108 companies raising over 90,000 crores, reflecting stronger issuer confidence and healthy pipeline of business-seeking access to public markets. The mutual fund industry quarterly average asset under management increased by approximately 3.5% from 84.2 lakh crore in Q1.27 to 87 lakh crore in Q2.FI.27. While closing AUM moderated to 82.64 lakh growth in September, largely reflecting debt fund outflow and market movement, it remained to 9.3% higher year-on-year basis. Investor commitment through systematic investment plan, which is SIP, also remains exceptionally SIP contributing across the 10 crore milestone in August 26, with monthly SIP inflows reaching to 32,490 crore in September 26, extending the trade of sustained retail participation and reinforced the growing preference for long-term wealth creation through financial assets. The primary market presented an even stronger picture after a measured Q127, which witnessed 46 main board and SME IPO raising approximately 6,567 crore, active accelerated sharply in Q2 FY27, With as many as 108 IPOs, raising approximately 90,000 crores during the second quarter. Consequently, first half of 2017 recorded 154 main board IPOs, which raised almost 96,585 crores, which is compared with 186 IPOs raising 71,000 approximately crore in first half, representing almost 36% growth and capital raising. Finally, it is encouraging to see that entail investor participation in capital markets continue to strengthen, which is net addition to 31.1 lakh demet account during September 26, with overall demet account based in India nearly about 24 crores versus 22.5 crores at the beginning of the year, which represents almost 7% growth in the interim period. This broadening investment base is also driving increased adoption of financing-led investment solutions, with industry margin trading facilities, both growing by almost 41% year-on-year to 1,056,261 crores as on 12 October 26. Together, these trends underscore the growing maturity of India's capital markets. These developments reinforce the long-term opportunities for Anandrati share and stock broking companies as investors increasingly seek integrated broking finance and distribution solutions. During the quarter, our MTS book grew by 38% year-on-year basis to 1,499 crore asset under management, which has increased by almost 29% year-on-year. However, our asset management has grown by 29% to $99,990 million, while assets under custody grew by almost 13% year-on-year to almost $1.15 trillion. This metric reflects deeper client engagement and continued trust in our platform. We also continue to witness a gradual evaluation in our revenue mix, while broking and related services remain a significant contributor to overall revenue. Non-broking business has steadily increased in their contribution over the years, improving the diversification and resilience of our earning profile. Our investment in technology and digital capabilities continue to deliver strong outcomes. Digital platform contributed 36% of brokerage income. In first half of 2017, reflecting continuous focus on building a seamless, scalable digital ecosystem. Looking ahead, we remain focused on scaling our financing and distribution business, increasing engagement with existing clients, and further strengthening the contribution of recurring revenue streams. We continue to target margin trading book size for approximately 1,750 to 1,800 crore by the year, financial year 27, and there is going to be a growth of about 40% in allium of our distribution business by the end of the current financial year. With that, I would now hand over the call to Mr. Roop Uthra, full-time director, who will take you through all the detailed financial and operating performance of the company. Thank you. Over to Mr. Roop.

Thank you, Pradeep. Good evening. Building on the healthy business movement, some highlighted earlier, our company delivered a steady financial performance during the quarter. Revenue from operations increased 20% year-on-year to $2,732 million in Q2 of financial year 27, while the first half revenue from operations grew 21% year-on-year to $5,193 million. PED grew 50% year-on-year to $419 million in Q2 of 27, with a margin of 15%. For first half, paid before exceptional items increased 60% year-on-year to 810 million, while profit after tax after exceptional items stood at 653 million, representing growth of 29% year-on-year. The growth came from continued momentum across our broking and non-broking businesses. Broking and related services revenue increased to 1,551 million during the quarter from 1,158 million in quarter to financial year 26, reflecting a YOY growth of 34%. While first half broking and related services income grew to $2,831 million from $2,267 million in first half of 2016, reflecting a 25% worldwide growth. Equity cash continued to account for a majority 52% share of broking revenues during the quarter and half-year period, reflecting our focus on delivery-led and client-centric participation. Within the non-brooking segment, interest income from margin trading facility increased 36% year-on-year to 496 million during Q2 of 27, while first half of 27, MTF interest grew 43% year-on-year to 924 million. Distribution income stood at 327 million during the Q2 of financial year 27 and 603 million in first half of 27 respectively. Further, our distribution income has increased to 99,990 million with an YOY rise of 29%. The continued expansion of these businesses is improving earnings visibility and strengthening the quality of our revenue profile. As of 30th September 26, we have achieved an MTF book value of 14,993 million against our year-end guidance of 17,500 to 18,000 million. So, on overall basis, we have already achieved almost 57% of our target in the first half of the financial year. Further, our distribution AUM grew by 29% as of September 26, compared to, again, the March 26 overall guidance 40%. So, in both these segments, we were able to do better than the target whatever we have set for ourselves. Client engagement remained healthy during the period. Total clients increased to approximately 10.5 lakhs as of September 26. Around 55% of our clients have been associated with us for more than 3 years. Reflecting the strength of our relationships and the trust reforts in the Anurati brand. Additionally, 71% of our active clients are located across Tier 2 and Tier 3 cities, providing us with a broad and diversified franchise. As of September 30, 2026, our Pan-Ninja network comprises 99 branches and 1071 authorized persons across 314 cities. This extensive distribution network continues to support client acquisition, engagement, and servicing across geographies. We remain focused on maintaining a prudent risk management framework while supporting business growth. Our debt equity ratio stood at 1.02 as of September 30th, 26th, and we continue to maintain decent leverage and adequate liquidity as we scale our MTF and other growth initiatives. Going forward, our priorities remain clear, deepen client relationships, increase product penetration, strengthening technology-led services delivery, and maintain a balanced mix of broking and non-broking revenues. I am happy to share with all of you that the last quarter, we have achieved our highest ever revenue as well as highest ever profitability. Thank you. And now we can open the floor for the host channel.

Thank you so much. Ladies and gentlemen, we will now begin with a question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may I press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question assembles. First question comes from the line of Sarket Kapoor from Kapoor and Company. Please go ahead.

Yeah. Namaskar, sir. I hope I am audible. Yeah, yeah, Mr. Sarket, go ahead, please. So, firstly, with the hardening of the bond yield in the government securities market, what exactly is our book and the thought process being debt market participants, our participation in the debt market, and any timeline you want to share or any idea of how we are going to take advantage of, since the yields are very attractive and there are a good set of investors that have, Thank you, Saket.

Saket, as you know, our company is largely driven towards equity and equity-related products. A very smaller amount of investment towards debt is being recommended or probably being invested by various investors into debt and debt product. So in a segment of customer debt is where we are talking about asset allocation. Debt is one of the parts for those customers, and within that, you know, in these kind of debt instruments, the investment of those customers are very, very municipal. So it doesn't matter to us, number one. But number two, having said that in terms of market scenarios, since interest rates are on a rising trend, markets are uncertain, and overall global scenarios suggest that in In future also, due to inflationary pressure, I think interest rates are further going to strengthen, probably you may see certain interest rate hike scenario globally as well as probably as a result in our country also. So I think investing in government security, allocation towards the government security from a one-year perspective by getting that interest yield benefit is good. But in a short term, from next three to six months, one has to constantly watch what is going to happen because if the interest rates are going to rise, your yields are not going to be that much. So I think this is a catch-23 situation. And based on that, I think I would ideally suggest on a short-term period, one has to invest or one want to invest, can look at it. But from a long-term perspective, they have to still wait and watch. It's something from a debt perspective. However, our always advice is going to be, from a long-term perspective, mid-to-long-term perspective, one should look at equity, because equity is something that is going to grow, and we believe the kind of growth which is happening in our country, I think the returns in equity, investment in equity is going to yield much better return than that. And post-tax return on equity side It's always going to be better. Thank you.

Yes, sir, the prerogative is correct, but on the longer part of the aid curve and investors having four, five years horizon, and particularly, as you alluded to the allocation part, I think these are very good times for investing community to allocate money also to the debt market. Secondly, when we see that our booking firm has organized, I think, various events, I think the G200 was the last one that was held in the month of September. So just a small request on the part of being an investor in the analysis community, if some further details could be shared or uploaded through your website in terms of the participating company, Our coverage is on the same, and some synopsis of the same, of the G20, G200, that would suffice. A lot of interest, and that will give us more color and more thought process to review our investment. I think that was a very strong gathering that happened sometimes in the month of September last week. So if we can provide further updates through our website or through the exchanges medium, that will create the interest for the investing community and your clientele at large.

Thank you for bringing to our notice. I believe a note on the G200 summit has already been shared. We keep on doing lots of investor seminar, investor education program, and these kind of meetings. So surely we will, if not available, then I will surely make it a point that we should share after completion whatever of our inputs which we are getting, and definitely inform to you guys.

Thank you.

Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Rajesh Mantri with Fortune X. Please go ahead.

Hello. Thank you for the opportunity. Also, I had two basic questions. Mainly, I wanted to understand that the distribution income has just grown by 4%, whereas our AUM has been growing at around 29%. So, I just wanted to understand what's the reason for this divergence and how should we see it going forward?

Yeah, Mr. Rajesh, since you are seeing and comparing this on a buy-on-buy basis, you know, last year, there are certain revenue which is coming from an upfront commission or upfront revenue perspective, right, where probably we have done certain businesses where we got an upfront businesses and trail incomes were not happening. We are moving towards trail businesses or trail income constantly, and that's the reason there is an aberration of kind of a thing which you have noticed in terms of revenue size. This is not going to be a continuous phenomenon over a period of time. As you have seen, our AUM is constantly increasing. And second, another factor which one should consider, whenever you see there is a growth in AUM, the impact of growth is coming over a period of time. So constantly you will see the revenue will start trickling in, because we are generating revenue based on trail income on a trail basis. I am happy to share one more data point that as on today, our distribution income, our trail income, which is coming, which is a non-broking, coming from a non-broking businesses, has already started covering our 75% of, you know, salaries as of now. Our endeavor is constantly how we can see that our revenue stream should be static, our revenue stream do not have any kind of a volatility of market, and to do that, we are constantly looking at it that our trail income should constantly cover first to our salary and then post that how we can start generating that revenue, You expand that revenue to cover our overall cost of the company. Once it will start happening automatically, our dependency or our volatility of revenue on the market process is going to reduce to a greater level.

Just to add to this, in mutual fund side, actually the regulator has changed the rule in last financial year, where earlier for any year So, transfer of the mutual fund from any other, the income rate was not available for six months earlier, and rule has got changed, now the cooling period is 12 months. So, that has also impacted because our collection is comparatively better, and out of that particular collection, whatever the ARN transfer is taking place, naturally sometimes the time period which has increased, and because of that also the commission has reduced on a partial basis. But now since that particular policy is on since last, I can say almost a full year, so automatically the revenue has started further increasing in terms of that trail revenue going forward.

Okay, sir, that was quite helpful. I just wanted another, like, understanding on, like, employee expenses have increased by around 31% in this quarter. Like, can you, like, let us know, like, what are the drivers for the increase, and was it, like, just, like, one time, such as increasing salaries, results, or something like that, or there is, like, this was the relatively higher compared to going forward?

Yeah, so there are two things which are happening. One side, naturally, we are expanding our RM base on a continued basis at one side. Second side, we are strengthening our product team also because we are keep on adding the multiple products. But one important change which took place in last quarter where few of the employees where the services were obtained from the I can say outsourcing. So those employees also we have taken at our own payroll. And because of that in last quarter you find in number terms a major change. But on overall basis we are keep on adding almost I can say 150 employees almost we are keep on adding on continued basis. So that to grow over this particular business going forward also.

So, in this, you know, the change in, you know, salary side, which you are seeing, is largely one-time kind of impact which is happening over here. Over a period of time, it will subsidize. But as Mr. Bhutra said, constantly we are increasing our RM base, constantly we are increasing our employee base. So, that impact will constantly come in, which is to grow our businesses largely.

Okay, sir. Thank you so much. That's it from my end.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question, may press star and one. Our next question comes from the line of Chuhi with Arihan Capital.

Hello, sir. Sir, am I clearly audible to you?

Yeah, you are audible, Julie. Please go ahead.

Okay. So, congratulations on number five. I have a couple of questions. Sir, first question is that October has seen an improvement in margin sentiment. So, have trading volumes recovered versus quarter two levels?

Yes. So far, equity market, cash market related volumes are concerned. You see there is a constant, consistent growth. So for derivative capital market-related volume, if you really see, they are static or lower than earlier times. So obviously, our company is more tuned towards cash market volumes, and as and when these cash market volumes are better and doing good, our broking revenues are also improving constantly, and that's what is happening in our side.

The other side, one more important part is there. On Efrindo side, at exchange level, the volumes fall was comparatively higher because of the changes in RBI circular towards the capital market exposure. Many proprietary brookings of usage volumes got reduced. But overall, since we don't have any proprietary related volumes, so we were able to actually improve in terms of our total volume versus the exchange on the Efrindo side also. Other than the cash market. So, in fact, last quarter, if I will say, on a worldwide basis, as well as from the previous quarter, on the broken side, comparatively better, as compared to the industry, we were able to do that better.

Okay, sir. So, thank you. So, I have another question, which is that any new business segment that management is looking forward to the next two to three years?

I think so far new business segment is concerned. I think we are constantly strengthening and consolidating our existing business line. As we have disclosed in the past that we have started insurance, that's what we are stabilizing and strengthening that. In distribution side, we are constantly bringing products. So, you know, we are already there in mutual fund and PMS, and now we have started looking at AIF as a product. So we keep on looking at product, but not a business segment. So far, business segment is concerned. Another area which we are looking at, we have already and we were working on that particular business side is an NRI kind of a business. And that is the segment we are constantly strengthening at our end. So this is a game plan. Till the time we reach to a specific level, these segments we are growing continuously and constantly.

Okay, sir. So, got it. I'm following up on the saying that if you're saying that on product part, you are diverging. So, at the same time, can you give me a guideline about the segment mix for next two to three years?

Segment mix, you're saying? I didn't follow. Can you just repeat it again?

Yeah, whatever you mentioned, the products you are trying to diverge and bring that into scale. So what is your guideline for that product mix by next two to three years? How much share for how much on what product you are?

Okay, okay, okay. So to be really frank with you, I think we are constantly looking at broking and non-broking side of our business. You know, largely we have divided two different business verticals, broking and non-broking, and whatever products which are being added, largely being added towards non-broking side, right, and that is becoming larger and larger. And as we have said, that we are going to grow our broking business by about 15% to 20%, and we are going to grow by about 30% to 35%, and in certain cases, 40% in our non-broking segment side. So that's what our broader understanding and broader criteria, which we have set for ourselves, and we are working towards it. And non-broking businesses consist of distribution business as well as margin trading facility businesses.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. The question comes from the line of Diwakar Pinghle from EY. Please go ahead.

I think I'll kind of focus a little on the area that we did well this time around in NGS business for good action.

Thank you, Devakar. Typically, the MTF business is largely to our existing clients only. It's not that we are bringing and capturing new clients when it started MTF from Bay first because of MTF region. Lots of inherent in-house demand is available. We are a little bit choosy in terms of providing MTF facilities because largely we are seeing those clients, those customer base who are active in cash market segment who wants to avail this facility and wants to expand their return on investment to those clients. Selectively, we are going ahead and providing this facility. That's how we are doing. So, there are lots of inherent strength or inherent demand is already available. Having said that, if any new customer coming with larger portfolio investing with us and wants this flexibility, we are looking at that also, but based on internal guidelines which we are seeing. So, our own inherent demand is already there with us, and we are constantly feeding that demand to those customers.

Thank you, sir. Maybe I'll just have one follow-up for that. What's the current borrowing cost in NPS book versus a lending deal, and how has this spread evolved during the quarter? Have you seen changes in that kind?

So, in terms of our borrowing cost, it's there around 9.5%. And the positive part, even after this, like I mentioned, because of the RBI circular, almost 300 crore collected impact was here to the company. Then also we were able to maintain our cost at this kind of level. And gradually we are reducing that particular cost. In terms of name side, we are able to generate almost 4.5% kind of name in terms of our MTF book. And in conclusion of your earlier question, I would like to highlight one more important data point. Our average book size per customer is below 17 lakhs. So our book is very well diversified. We are actually choosing in terms of selecting the client base and in terms of also giving a particular client a particular value and all things are linked with the network and other things. And considering all those FEPs or NPA into MTA book is zero, we have started this activity eight years back, and so far in the last eight years, we are able to maintain it at zero, and we will be able to continue the manage that is related to this.

Thank you. Are there any other questions, Dhanesh?

Sure. Thank you. Ladies and gentlemen, anyone who wishes to ask a question, may press star and one. Our next question comes from the line of Auneesh Tiwari with Vaikaria. Please go ahead.

Hi. In your MPF business, can you articulate any changes you would have made over last quarter, either in terms of margins or kind of security selections or kind of client selection or any other change you would have made over last quarter?

As such, we have not done changes in terms of our policy which was there. The important thing which is there, in terms of a client limit side, earlier also we were selecting and we were keeping a particular limit for a single client along with their network. The same thing, I can say, still continues. The second important part which is there earlier, like total from regulator side, it was almost 2,000 stocks were allowed, whereas from the company side, we are keeping restrictions and we are not allowing all the stocks, almost 1,000 stocks are allowed. So those things are still continued. The important part which is there, in some of the customers, they are comparatively much high value needed and customers are giving comparatively better yield at those customers' base. So we are able to have some sort of relaxation in terms of rates or other things. Otherwise, we are continuing with the same scheme. And along with that, as I have mentioned, we are able to continue with the yield whatever we were generating earlier in terms of name.

So, Minister, to answer your question, we haven't changed our policy. The policy remains the same. We are constantly looking at it, and we are constantly working on it. As you know, as and when this empty book of stocks being added into the kitty, we evaluate, and until our team is not really confident, they do not add those stocks in the book.

Okay. And does it bring any strategic benefit apart from the income, P&L income, It brings to you. Does it also brings any benefit, strategic benefit of customer level, more stickiness, or they do more business on other side of your P&L?

Yeah, it's a good question, Avneesh. See, basically, as you know, by philosophy, we always encourage investment and investment-driven approach for most of our customers. The idea is pretty simple. Customer should earn, and based on that, customer's earning as well as continuity of that customer, we should be able to generate our business, right? So based on that, most of the thing or most of the advice which is going, most of the suggestion which is going towards the customer side is for investment, and that is the reason when a customer starts investing in equity market, capital market, whenever he needs or wants to leverage to a limited purpose, for a limited purpose, and wants to increase his ROI, return on investment, We are providing the support of this MTF group. So this is for existing customers, for cash market-related activities on their investments, and to leverage so that they can increase their return on investment at their level. And similarly, we are also, in turn, we are also generating certain amount of, you know, Alpha on interest side, as well as our broking is something which we are generating.

Can I ask one more question? Like, which part of market is largely deployed to, like large cap, mid cap, small cap, or micro cap, if you look at your own book overall basis?

There is no fixed criteria of large, mid, and small. As I said, there are about more than 2,000 companies being registered and given by stock exchange side. We have our own criteria to evaluate, and based on our evaluation, wherever we find that the stock makes sense for providing that, you know, margin trading funding requirement, we consider that. So there is a committee who looks into those parameters which are being set, and then they are evaluating if they find, based on liquidity, based on profitability, based on continuous performance of that particular company, and various other parameters where we see the risks are low, where we see the investor can and is not going to make losses at their own book. So, we provide this facility to them and add them for an MTM book.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question, my press star and one. The next question comes from the line of Praveena M. Dali with Mutilal Oswal Financial Service Limited. Please go ahead.

Hello, sir. So, I just wanted to know about the net cash position. Like, it has declined significantly from approximately 2,700 crore to around 900 crore. If you could elaborate on the key reasons for the decline, or maybe provide a breakup for the major factors.

Can you just repeat the question? You are talking about which figure?

Net cash positions, sir.

Net cash positions. Okay.

Yeah, yeah. So I would like to highlight here that the clients' margins which are there with us, naturally we are deploying the same with the stock exchange in turn. So as you know that with the changes in the RBI post that, few of the clients who were keeping money with us and deploying in form of MD, few of the HNI clients had converted those, I can say, cash deposit into GSAC form. And with that particular thing, naturally, the FD portion with the bank balances will also be down simultaneously. But otherwise, if you will say on our own book side, actually the bank balances has increased and our FDs has actually increased. And if you will see our income on the interest side, the cost has reduced simultaneously because a few of those high-value customers, we were receiving the interest and in turn the same was given. So both the side, the interest income related to those portions are down, but overall this is actually our income has increased because of this MTF book and our own FD book. But other side, the cost of interest actually has reduced.

Okay, so you are saying the clients which were keeping money with you have taken it out.

Yeah, yeah, yeah, you are absolutely clear. Those clients who are keeping their margins in cash format with us for creating a bank guarantee or giving them limits, They withdraw the money, they converted that cash money into a government security and provided security, a margin to us. So, obviously, that cash outflow has happened and still we are managing, maintaining the, you know, customer's margin in by way of dominant security, right?

Yeah. So, effectively, their cash margin forms have changed and because of that, our balance has changed. But overall, the business-wise, it's in fact.

But business-wise, business is intact, and cash flow-wise, I mean, it's a change, format change in cash flow. And that's the reason you are seeing cash outflow and converting it to a security side, right?

Okay. Thank you.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. As there's no further question from the participant, I know in the conference, over to the management for the closing remarks. Thank you, and over to you, team.

Thank you, investor. Thanks a lot for your participation and the questions being asked. The company is constantly and continuously working towards the growth path, and main theme is how this growth is and should be achieved without having the volatility of capital market. And we are working towards it, and I'm sure the whole team of Anandrati Share and Stoke Broking Limited is committed the growth of about 15% to 20% on top line and about 25% to 30% on the bottom line. My best wishes to all of you for that thing. Thank you.

Thank you, sir. Thank you so much, sir. Ladies and gentlemen, on behalf of Anand Rathi, Sharon's stockbrokers, that concludes today's call. Thank you for joining us, and you may now disconnect your lines.