IIFL Capital Services Limited (IIFLCAPS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the IFL Capital Services Limited Q1 FY27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star than zero on your touch-tone telephone. Please note that this conference has been recorded. I now hand the conference over to the management for the opening remarks. Thank you and over to you, sir.

Thank you. Good afternoon, and welcome to the first quarter FI27 analyst call of IFL Capital. This is R. Venkatraman. I am the co-promoter and managing director. Along with me is Rana Gandhi, who is our CFO. We are living in interesting times. The global environment remains uncertain. Geopolitical developments, commodity price volatility continue to influence investor sentiment and capital flows. With crude touching $100 a barrel, it is to be seen how India is affected in the days to come. Coming to our results, consolidated operational revenue for the quarter was 631 crores, virtually flat, quarter-on-quarter and year-on-year basis. On a quarter-on-quarter basis, that is this quarter Q1 FI27 versus Q4 FI26, retail broking revenue was 297 crores, virtually flat. Institutional and investment banking revenue was up 27%, 207 crores versus 162 crores in the fourth quarter of last year. Financial product distribution income stood at 125 crores versus 182 crores in the fourth quarter, which is down on 31%, primarily because of two reasons. One is about the fourth quarter peak of insurance income, which is typically a fourth quarter effect, and the other is because of lumpy transactional income, which was booked in the previous quarter. Employee cost decreased almost flat at 139 crores versus 183 crores. Finance cost decreased 5% to 60 crores. Depreciation flat at 17 crores. Fees and commission income decreased to 139 crores by 8%, primarily because of decrease in variable payout, again linked to the seasonal insurance business. Administrative income was again flat. Operational PBT, 149 crores, was up 4% on a quarter-on-quarter basis. Other income was high, steeply, by 90 crores, and that is primarily because of the mark-to-market gains on BSE shares. This is something, the BSE shares is something which we have discussed in the previous quarter also. Coming to year-on-year basis, retail revenues was 297 crores versus 264 crores, which is up 13%. Institutional broking, investment banking income was flat, 207 crores versus 204 crores for the last year, first quarter. Distribution income again was down 14% as I mentioned earlier because of certain transaction income which was big in the previous year. Employee cost flat 179 crores. The finance cost decreased 48% to 60 crores because Sorry, finance cost increased to 60 crores from 40 crores because of increase in MTF hope. Depreciation flat. Fees and commission income increased 4%. Admin income was again flat. Operational PBT 149 crores was down approximately 9%. Other income again 90 crores mainly because of the gain in BSc share. Some housekeeping number. Average yearly turnover was 315,000. 1,000, 780 crores, of which F&O was 3,12,480 crores, and cash was 3,300 crores. In Q4, which was 3,22,886 crores, of which F&O was 3,20,011 crores, and cash was 2,875 crores, which was down almost 2%, and Other updates, I wanted to give an update on the Fairfax investment. During the quarter, Fairfax India Holdings Corporation through FIH, Mauritius, and its affiliate proposed to increase the shareholding in the company to at least 51% through a combination of prep issuance of, prep investment of equity of about 2,000 crores at 350 per share and the mandatory open offer. which is subject to all customary, regulatory, and other approvals. These shareholders approved the preferential issue of equity shares at the EGM held on June 1st, 2026. We are at various stages of approvals from various regulators, including SEMI, NSE, BSE, and IRDA. Upon completion of the proposed transaction, Fairfax will become the promoter, along with the existing promoters, Nirmal and myself. They will also have a right to nominate two directors to We believe that this investment will strengthen our company's capital base, support growth across capital markets, wealth management, asset management, institutional equities, and further enhance our credibility and brand through fair fractures, global reach, brand, and financial strength. Coming to the income tax note, income tax department, as you are aware, conducted a search under section 132. Which was done in January 2025. The holding company and the subsidies have received a demand of 124 crores. Their respective companies have filed appeal already against the said orders with relevant authority under the applicable laws. With this, I have come to the end of my statement, and I will be more than happy to answer any questions that you may have. Thank you.

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 touch-tone 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 a moment while the question queue assembles. The first question is from the line of Keshav Karma from White Pine, IVM Capital Limited. Please go ahead.

Hi, sir. Thank you for the opportunity. Sir, I have a few questions. First was, how much of the EUM growth was organic? And if you see, our EUM has always grown faster than the peers for many quarters, but this quarter, it was relatively slower. And why is that? This is my first question.

See, if you look at our EUM growth, net collections were roughly about 4,000 crores. I think 3,675 crores to be very precise. And I'm assuming you're talking about the FED growth, right? So that we have collected about 3,600 crores. And so we have been growing faster. So maybe this is a one-off. And from next quarter, we'll start, we'll catch up.

Okay, and my second question was on the Fairfax transaction. Have you received a fund yet, or are they yet to be received, and how do you intend to deploy the funds, and if the transaction does not get completed, what would be the next step?

So, we have not received the funds. As I mentioned in my opening remarks, this is subject to all regulatory approvals, and at this point in time, the company has applied to various authorities for approvals, and the approvals are in process. So, we think that maybe in the next two to three months, we'll get all the approvals, and once the approvals come, only then the preferential allotment can take place. So, to answer your question, at this point in time, the inflow of 2,000 crores has not happened.

Okay, sir. And, sir, in this quarter, how many RMs did we add?

I think we added a few, I think less, single digit number of RMs.

Sir, sorry, can you just speak?

I think, I don't know exact headcount which has added in RMs, but it will be very few, it's single digit.

Okay, and sir, can you please provide me with a breakup for institutional broking and investment banking revenue?

I think institutional equities in this quarter were roughly about 200 crores.

Okay, sir.

Thank you. I'm giving you a rough number. It'll be in the ballpark 200 crores.

Okay, okay. Thank you.

Thank you.

Participants who wish to ask questions may press star in 1 at this time. Ladies and gentlemen, in order to ask a question, you may press start in one now.

The next question is from the line of Lalit Mohan Deo from Iquira Securities. Please go ahead.

Yeah, hi, sir. So, just one question. So, like, in the presentation, we have a slide which mentions about the AIF and PMS, AEM of around, roughly, around 4,400 euros. So, do we have an income amidst the payment, and where does it get highlighted in the PNL?

So, we have, of course, income for this, and I think this is booked in the financial product distribution.

For sure, sir. And, like, what are our plans to grow this?

I think that's a good question that you raised. Historically, we have, in the last one year, if you remember my earlier calls also, I was saying that we are going to strengthen and start up our manufacturing. So, this is a part of our... Overall manufacturing plant. So we have started DIF, we have started TMS, we have a credit fund, we have a late-stage fund. So we will continue to, without losing the overall character of open architecture, we want to invest and grow this business.

Sure, sure. Yep. Thank you, sir. Yep. Thanks. Thank you.

Participants who wish to ask questions, may press the R&1 now. The next question is from the line of Neha from Apakas Investment Managers. Please go ahead.

Hi, so thank you for taking my question. It's only the implementation of the SEBI regulations from 1st July. So are we seeing any impact from that on the broking business in any way?

You are talking about the margin, the RBI guidelines on the margin requirement, right?

Right, right, sir.

Yeah, so as of now, we have seen marginal impact because we are not top traders ourselves and we didn't have a large number of that kind of customers. So, we are not seeing big impact. But my guess is, it is still too early to comment. So, over a period of time, maybe we will see some impact.

Okay, so we do expect to see some impact on the volumes or the turnover in this quarter.

No, unlikely in this quarter.

Okay, okay. And the implied yield on the distribution is declined to about 0.87 basis points, and it was higher in the previous quarter. So, what would be the reason for that?

The FED income has fallen because of last quarter we had insurance income booked in that, and again in the first quarter also we had seen some amount of brokerage income was there. So because of that only the income has fallen. And hence the yield, that has a resultant impact on yield. Overall, I think product-wise yield has not changed, but because of this non-EAR income, it has affected.

But the mixes largely remained the same, right, with mutual funds?

No, the mix, last quarter, non-EI had a lot of insurance.

Okay, got it, sir. Okay, thank you, sir.

Thank you. Before we take the next question, we would like to remind participants that you may press the R1 now.

Participants who wish to ask questions may press star and word at this time. Participants who wish to ask questions may press Charan 1 now.

Actually, if there are no further questions now, we can stop. And, you know, all people can ask questions to me and Rana directly because we have email ID as well as we can reach out to us directly.

Sure, sir. We have a question. Do you want me to take that up?

Yes, yes, of course.

Sure. The next question is from the line of Palash from 361 Capital. Please go ahead.

Hello, sir. Thank you for taking the question. I just wanted to ask if you can provide some colour on the break-up of the income between the institutional brookie side and the IB side. That will be helpful, sir. Thank you.

See, roughly we have about 200 crore of income on the investment banking initial brookie, and it will be roughly 50-50 or 60-40. That will be the broad number.

Thank you, sir. That's helpful.

Thank you, Bilas.

Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you so much for participating and feel free to reach out to either me or Ronald if you have any more follow-on questions. Thank you so much and have a nice day.

Thank you. On behalf of IFL Capital Limited that includes this conference, thank you for joining us and you may now disconnect your lines.