IIFL Capital Services Limited (IIFLCAPS) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to IAFL Capital Services Ltd. Q4 FY26 Earnings Conference Call. As a reminder, all principal lines will be in the lesson-only mode, 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to the Managing Director of IFL Capital, R. Venkataraman. Thank you, and over to you, sir.

Thank you. Good afternoon, and welcome to the Q4 FI26 analyst call of IFL Capital. I am accompanied with my colleague, Ronak, who is our CFO. Recent geopolitical events have triggered a sharp rise in volatility. They have disrupted energy supplies, they have pushed oil prices above $100, and both these have directly impacted inflation and inflation expectations. This has resulted in increased volatility, especially in Indian capital markets, and we saw record SPI outflows in the month of March, and the The trend seems to continue. Despite these pressures, India shows relative resilience and we have strong domestic flows which cushion the foreign selling. As we speak, growth outlook remains relatively strong. And I just want to give a caveat. As of now, we have to wait and watch for the monsoon progress to take a full year's GDP growth estimates and call. On a lighter note, the new definition of EBITDA seems to be earnings before Iran and Trump's daily announcement. Coming to full year number are consolidated results for FI26. Operational revenue for the full year stood at 2,439 crores, virtually flat. On a year-on-year basis. Retail revenues for equities were 1,121 crores, which is down 9%, majorly due to the impact of regulatory changes announced by SEBI, which came into effect in the first quarter of last calendar, and hence we had the full-year impact. Institutional and investment banking revenues have increased 11%, 712 crores versus 639 crores. Financial product distribution income has increased by 16%, which is now standing at almost 590 crores, close to 600 crores. Employee cost, we have seen a steep increase in employee cost to 687 crores, and that is basically a combination of both headcount, variable pay provisioning, as well as a one-time charge of 7 crores due to change in labor loss. Finance cost has increased 17% to 210 crores because of increased working capital requirements and that is directly linked to the growth in our MTF book. Depreciation increased 20% on account of investment in branches and technology. Fees and commission expenses increased 8% that is because of partner payout. Admin expenses were up 9% due to branding and technology. Operational PBT was down 22% and that is basically primarily driven by increase in employee expenses. Other income was about 164 crores, that includes the gain of almost 90 crores on account of sale of real estate, which was held in IFL facilities, a subsidiary of the holding company. We also saw NTM due to right movement in BST shares. Coming to quarter 4 FI 26 versus quarter 4 FI 25, which is a quarter on quarter, year on year for the last quarter number. Operational revenues was 644 crores versus 537 crores up 20%. Retail revenues was up 22% at 298 crores. Institution and IB revenues was about 162 crores versus 97 crores. And primarily because of both increase in investment banking as well as broking income. HPD income was 182 crores, which is down 4% because last quarter in Q4, FY25, we had increased brokerage due to certain transactions on NSD share. Employee cost increased 12% to 183 crores, again because of Headcount increase and variable pay increases. Finance cost increase 45 percent. Steep increase to 63 crores because of MTR book increase. Depreciation was up 6 percent. And because of commissioning of new branch and again technology costs have gone up. Fees and commission expenses are increased by 40 percent because of sub-record payouts. And admin expenses was 8% increase, again due to branding and marketing expenses. Operational PBT, before NTM changes have was up 14% on a near-end basis. If you compare quarter-on-quarter, which is Q4-FI26 versus Q3-FI26, operational revenue was up 10%. Retail revenues was up 3%, which is virtually flat. Including institutional broking was virtually flat at about 160 and 162 crores, which is virtually unchanged. MPD increase was up 36% to 182 crores. Employee cost was flat, roughly increase of 4%, 183 versus 175. Finance cost again increased 18% because of growth in MPF book and working capital requirement. Flat depreciation, fees and commission expenses increased because of higher subbroker payout. Admin expense reduced. Now coming for some housekeeping numbers, average turnover was about 3,22,886 crores, which is roughly 3,20,000 crores in F&O, and cash was 2,875 crores, and which was 3,14,660 crores. In Q3, again a split of 3,12,000 pros in F&O, and cash was about 2,6 to 8,5 pros, which is basically 3% growth, which is virtually flat. We also, as I mentioned earlier, we have also started getting into manufacturing. We closed our capital credit opportunities fund. We raised about $100. And this is basically a risk-adjusted, high-end kind of fund. Coming to income tax notices, I just wanted to give all of you a heads up. The Income Tax Department has conducted a search under Section 132 of the Income Tax Act. And, basically, what had happened was, I think, we've also, from our own side, because of the block assessment, we had ad hoc amount of 27 crores approximately was paid, was paid in last water. Now, what has happened is that we have got a notice. Which for roughly, for both IFL management and IFL facilities for roughly about 56 crores combined. For the block period from April 1, 2018 to April up to February 3, 2025, the respective companies are in the process of filing appeal against the same order. In case of the holding company, the assessment proceedings are still in progress and we have not got any orders or demand notice till date. We believe, after considering all available facts and records and also consulting with our advisor, there won't be any material adverse impact on the financial position of the group, and hence we have not made any adjustments. With this, I come to the end of my talk. Thank you so much, and we are open to answering any questions that you may have.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of K. Chef Carva from White Pine and Rossman. Please go ahead.

Thank you for the opportunity.

I had two, three questions.

One is on the underlying growth for SPD-AOM, which looks strong, and what is driving this growth?

See, we have seen a growth in our SPD assets, because it was about 31,000 crores, and it has now become about 52,000 crores. And we have seen all-around growth, both in mutual fund and other assets also, and including fixed income assets. Yeah, mutual fund assets have grown from 14,000 to about close to 21,000 crores. So I think basically all products, AIS, AMS, mutual funds, and also fixed income products have seen some growth.

Okay, sir. My second question was, could you please provide how many RMs do you have added this quarter and overall RM count in FY26? And incrementally, how many RMs do you plan on adding for FY27? And any EM target for FY27?

See, we have currently about 50 wealth RMs and we are close to about 300 old affluent or BCD broking RMs. Our focus is that we should increase the headcount for wealth RMs this year. I don't have a specific number in mind because last year has been a difficult year for recruitment. But our aim is to add to our wealth, the cohort of Wealth Rx. And coming to asset growth, I think we are close to about 52,000 growth. And I don't have a number in mind, but we have to increase it.

Okay, so my third was that we have seen a sequential decline in the MTF book. What led to the decline and going forward, how are you planning to improve the book? Also, could you please provide me the breakup for institutional equities and investment banking revenues for this quarter?

See, the basic, broad reason for the decline of the NPM group is primarily because of the last quarter, increased market volatility in the last quarter due to which NPM impact was also there. And coming to the other question about institutional broking, investment banking, roughly, I am giving you a rough number, roughly, this is about, roughly about 700 crores is there, and out of which, roughly, it will be about 450 and 250, a split between broking and banking.

Okay, sir.

And, sir, you are doing a fundraise,

sir, can you throw some light on your plans to use those funds?

See, actually, you know, at this point in time, I just want to say that as a company, the board continuously evaluates opportunities to enhance shareholder value, whether it's in terms of potential acquisition, new projects, and other such combinations. So at this point in time, I can't share more with you because there's no event that requires disclosure, let's say we have no DR regulations. As and when they have something very definitive, we will make all appropriate disclosures to the soft exchange as per regulatory guidelines.

Okay, sir. Thank you so much. Thank you so much.

Thank you. Next question is from the line of Klayesh Jain from Motila, Loswal. Please go ahead.

Yeah, hi, sir. Sir, first... Dr. Klayesh, how are you? I am very good, sir. How are you? All well. So just, you know, there is this RBI regulations getting implemented from 1st of July, right? What do you see the impact of that on your broking business in any form? And also, if you could throw some night if not so much for us, how much, what would be the kind of impact for the industry per se?

See, actually, you know what, my view is that there will be a short-term impact for sure because of increased working capital requirements and margin requirements. And then over a period of time, the market finds its own level and goes back to that trend. So short-term impact will be there for sure. For us also, there will be marginal impact because we don't do top trading ourselves, so there is no impact. And so for clients, clients will have to, I would say the cost of overall trade in F&O will increase.

Okay, got that. And secondly, sir, from 1st of April, again, on the institutional equity side, there has been a reset of yields that has come in because of the SEBI regulations. So what kind of impact do you see on your realizations on the institutional equity side? See, actually, you're talking about the domestic mutual fund yield, right?

Yeah, yeah, yeah. So my opinion is that we... Okay, our opinion or our learning is that the impact will be marginal because already effective yield was plus minus as suggested by the regulator. Okay.

Okay. Got it. And secondly, sir, when you kind of give that distribution assets is about 52,000-odd crores, this would include all your customer base today, but would it be appropriate to kind of segregate this into the Ultra-HNI wealth management that you would be setting up and you are in process of setting up? What would be kind of AUM that you would have got from those kind of customers?

To answer your question about the HNI segment, which is the new channel which we have set up, that will be roughly about 12,000 crores, if my memory is correct. Got that.

And the product mix will be similar to what you have shared? Got that. Thank you. I will come back in the queue if I have more questions. Thanks.

Thank you. Next question is from the line-up. Neha asked from Abecus Asset Manager. Please go ahead.

Thank you for the opportunity. So, my question is on the NTF income. So, out of the FY26 income of 439 rules, can you give a split of how much of that is the interest on the NTF book and how much is the interest on depository banks?

See, roughly income, roughly, it will be more, roughly 50-50. 50% is MTF and 50% is something, whatever that exchange deposit.

Okay, okay. And so, last year, our net interest margin almost came to about 18-19%. So, what sort of music do we expect to make on a sustainable basis? I mean, how do we see that going, the net interest margin?

Can you repeat the question, please? Your voice is not clear. You are talking about net interest margin.

Yes, sir. The net interest margin, I think last year in 25, the total net interest margin for 25 was about 18-19%. So, is it lower this year, and how do we see that going on a sustainable basis? What sort of margins are we expecting to do on a sustainable basis? Net interest margin, 18%.

No, 18, 19 percent, I think the interest rate will be, net interest rate is roughly about 4 percent. 4 to 5 percent.

So it's 173 crews of interest on the MTS were done last year.

Last year was 200 plus, I thought. You are trying to deduct interest cost from interest expense.

No, sir. I was talking about the interest earned on the MTF, on the margin book, which is about 173 crores. Sir, this is part of the 419 crores of total interest which we did last year.

Last year, we had approximately 420 crores of income, and the MTF book interest was slightly higher. It will be about 160, 170, 160 times. And the interest expense we paid out was about 180 crores. But this interest is very difficult to attribute how much of that is attributable to MTF and how much of that to other things. That's the reason I'm not able to give a precise answer as to how much of this is interest and how much of that is non-interest.

Okay. Okay, sir. And so, just lastly, on the distribution income, so, sir, our assets have grown, but the income has grown relatively higher to 122 crores for the quarter. So, sir, is it largely insurance-related revenues or any other products that have also contributed? Because, sir, the AUM mix largely remains the same for us. So, what exactly has led to this jump?

Basically, there's some component of insurance, some component because of placement of NCDs and fixed income, so that's the reason why we had a disproportionate increase in last quarter.

Thank you. Thank you so much.

Thank you. Actually, you know, maybe we should meet face-to-face, then I'll be able to answer your other question on interest correctly, because I'm not able to hear you, or maybe it's better if you meet and clarify. No, sir.

I'll connect with you. That's helpful. I'll definitely connect with you for this.

Thank you so much.

Thank you.

Thank you. Next question is from the line of Apekshaya Bajaj from AV Sink of Private Limited. Please go ahead.

Yeah, hi. Thank you for the opportunity. Any color on further acquisition by Fairfax? There was a news around that it is going to increase stake by 10%.

I can't offer any comments on this. Thank you. So as and when there is something definitive, we will surely make appropriate disclosures as per listing guidelines to the exchanges.

Okay.

Thank you.

Thank you.

Thank you. Next question is from the line of Abhijit Sakhare from Kotick Securities. Please go ahead.

Good afternoon, sir. Thanks for taking my question. Sir, a slightly hypothetical question. Looking at our net worth of close to 3,000 crores, how do

you see it in terms of, you know, supporting our growth ambitions over the next three years on the broking side and potentially on the wealth management side as well? See, actually, we think that we are well capitalized and we have enough drive power to growth. So, I don't know how to answer your question.

Thank

you. And basically, all of the equipment are accruals. So, I think we are running a profitable franchise, and we have enough, we are, all the cash has been used to reinvest in the business. So, we think that we have enough ammunition to grow.

Understood, sir. Sir, initially, you had given a comment around the, in terms of the breakup between IB and IE revenues. That was, I think, close to about 700 crore. That was for the full-year FY26, right? I'm just reconfirming that one.

Yes, yes, yes, it was correct. The full-year revenue was about 712 crore.

Understood. Okay, that makes sense. Got it, sir.

That'll be all. Thank you so much. Thank you so much.

Thank you. Next question is from the line of Preyash Jain from Motilalus 1. Please go ahead.

Yes, sir, just an extension of the previous question, the current net worth of 3,000 odd crores, how is that utilized across say broking, wealth management, and you know, alternates that you're setting up, that would also need to advance. So, how has been the utilization of this net worth currently across the business lines? Actually, the bulk of the business has been put in broking, MTF, and exchange margin.

So, that has been a big consequence to allocation of capital.

So, you know, with this current network and the borrowing limits that we can still have, you know, do you think that we have enough capital or headroom to grow another 20% in the next couple of years or we would need more capital?

I think we have enough to grow by 20% in the next.

Got that, got that. And, sir, you know, with respect to the, you know, any plans on new other categories, like, you know, full-fledged AMC or any plans there, any thoughts with respect to new product categories that we want to get onto?

I think as of now, we think that we have all the elements that can help us to succeed in our businesses, which is investment banking, insurance equity, and I would say wealth management. As you know, in the earlier slide also, we have said that we have started manufacturing, in-house manufacturing, both on the PMS platform and the AIF platform, including early stage, late stage, as well as a credit fund. We will evaluate opportunities to enhance certain value and improve our competitive positioning. So as and when something happens, we will make all the necessary declosures.

Got that, sir. Thank you.

Thank you so much.

Thank you. A reminder to all the participants, anyone who wishes to ask a question, please press star and 1. Participants, you may please press star and 1 to ask a question.

Thank you for joining us on the call. Thank you so much. And should you have any further questions, please feel free to reach out to either me or Ronak, and we'll be more than glad to answer all your questions. Thank you so much, and have a nice day.

Thank you very much. On behalf of IFL Capital Services Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.

Thank you.