Q1 25/26

Jul 29, 2025

Summary

Q1 FY26 revenue rose 6% YoY to INR 680 crore, while PAT fell 4% to INR 176 crore. Wealth expansion is underway, with FY26 costs expected to stay elevated and deal activity exposed to volatility.

Ladies and gentlemen, good day and welcome to IIFL Capital Services Limited Q1 FY26 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 then zero on your touchtone phone. Please note that this call is being recorded. With this, I now hand the conference over to Mr. R. Venkataraman, Managing Director, IIFL Capital Services. Thank you, and over to you, sir. Thank you and good afternoon, everyone. Welcome to the Q1 FY26 analyst call of IIFL Capital. I am accompanied with Ronak Gandhi, who is our CFO. India's macroeconomic outlook remains strong, which is supported by easing inflation, which has resulted in a lower interest rate scenario, healthy monsoon, and benign oil prices. Our economy is showing signs of improving consumption once the interest rate benefits start trickling down. As you might be aware, we have two broad segments, institutional equities and investment banking and the legacy retail broking segment. We are trying and transforming our retail broking segment into a full wealth management and financial planning practice. We believe that we are well placed to succeed in this transformation given the fact that we have a suitable network, we have a pan-India distribution reach, a critical mass of customers, technology, as well as research credentials. Coming to the first quarter results. Revenue for the quarter consolidated was INR 680 crores, up 19% quarter-on-quarter, up 6% YOY. Let me give you the colors of the quarter-on-quarter analysis. Institutional investment banking revenue virtually doubled from previous quarter, which is Q4 FY25 versus first quarter of FY26. Retail brokerage has also increased 15%. Distribution income which is financial product distribution income has decreased 24% because of the insurance effect, which sees a spike in the last quarter of year because of March effect. Other income has increased 73%, INR 63 crores in this quarter versus INR 36 crores in the previous quarter. That is mainly due to mark-to-market on investments, especially the BSE shares which we have. Employee costs increased from INR 163 crores to INR 176 crores from the first quarter FY26, mainly because of increase in headcount and some provisions for variable pay. Our depreciation has increased marginally. Fees and commission income on expense side has increased 24% because of payouts. Admin expense has increased marginally by 7% to INR 80 crores from INR 86 crores. As a result, PAT has increased 37% from INR 128 crores in the previous quarter to INR 176 crores in this quarter. Coming to year-on-year analysis. We have seen a virtual flat impact on institutional and banking income, which is virtually flat from Q1 of FY25 to Q1 on FY26. The retail brokerage has declined 28%, and that is mainly because of regulatory changes which came into effect on December 2024, and that is primarily to do with the reduction in number of expiry days. Distribution income. FPD distribution income has increased 37% to INR 145 crores in this quarter, basically because of increased focus on asset gathering. Other income has increased dramatically from virtually INR 4 crores to INR 63 crores, again because of mark-to-market gains on investment, especially BSE shares. Employee cost has increased 36%, from INR 130 crores to INR 170 crores, basically due to increase in headcount and also because of wealth build-up. As you know that we have started building out a wealth franchise and have recruited wealth RMs. Depreciation has increased 40% from INR 12 crores to INR 16 crores because of the increase in investments in technology as well as office. Our fees and commission income has increased 5% from INR 128 crores to INR 134 crores. Admin expense is flat, virtually the same, INR 83-86 crore range. As a result, PAT has fallen 4% from INR 182 crores in the first quarter to INR 176 crores in the current quarter. Some housekeeping numbers. Average daily turnover was INR 2,23,232 crores, which was broken down into INR 2,20,263 crores in derivatives and cash was INR 2,968 crores in this quarter which was in the previous Q4 FY25 was INR 1,92,871 crores, which was broken into INR 1,90,336 crores in derivatives and cash was INR 2,535 crores. If you remember the first quarter of FY25, which was a bumper quarter, which was INR 3,22,782 crores broken into derivatives of INR 3,19,455 crores and cash of INR 3,327 crores, which was down almost 30%. As I mentioned earlier, because of changes in this regulatory norms because of fall and declines in the number of expiry days we have. Consequently, I think people ask about market share. On a full market share basis, we are virtually Sorry, one second. So on a consolidated basis, overall market share, we have taken the full extended denominator. We are at an F&O market share of 0.62%, which is broadly in the same range. For cash market share, it's 2.57%, which was in the previous quarter 2.51%. Again, that is broadly hovering around the same range. With this, I have come to the end of my comments and we are open to answer any questions that you may have. Thank you so much. 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 one on the touchtone telephone. If you wish to remove yourself from the question queue, you may 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 queue assembles. The first question comes from the line of Prayesh Jain from Motilal Oswal. Please go ahead. Yeah, good afternoon, sir. How are you? All well, Prayesh. How are you? I am good, sir. Just on this approach towards wealth management, right? Firstly, can you detail as to how many RMs we have added and whether the quality of RMs would be like the ultra HNI RMs, which would have average salaries of INR 50 lakhs and above? Or what are the kind of RMs that we have hired for the wealth management business? Okay, as I mentioned earlier also, we have broadly added about 50 RMs, and they are a mix of both HNI, ultra HNI, as well as mass affluent RMs. Broadly speaking, the salary range will be in the number which you have said. Okay. We have a higher proportion of HNI, ultra HNI RMs, but the entire build-out is happening as we speak. Okay. Sir, as this kind of scales up, would you segment your customers into two different buckets and the wealth management would be reported separately with respect to clients, AUM base, everything? How would the business shape up from here on? See, as you rightly pointed out and you're rightly articulating, we have to segment our customers because we have a large base of customers with less than one crore net worth, and the segment which we're targeting will be, say, maybe in the INR 5 crore-INR 25 crore, and greater than INR 25 crores. So we have to differentiate, but as we speak, the business is in build-out phase. As business reaches a critical mass and we will be inclined to report and whatever feedback people like you who track markets closely give, we'll listen and report accordingly. Sure. Sir, generally, to scale up wealth management practices, you need people, you need products, and you need processes, right? People you are hiring, what are the kind of products that we are getting into? Are we getting into manufacturing of PMS, AIFs? In terms of processes, how would be the approach, whether a digital approach or what kind of approach we will have in terms of processes as well? See, that's a very valid point you have made because it's a combination of all three: product, process, people. At this point in time, the people part of it is being built out. On the process part of it, obviously, if you know, we have been doing broking and distribution for a very long time, so we believe that we have the necessary processes and technology in place. Having said that, we have also recruited specialists for wealth because the entire business is more distribution and less broking. We have invested in the necessary software as well as people for support for the operations part of it. Coming to products, as of now, we are depending a lot on our external manufacturers because the bulk of the new asset which we have gathered has come on the mutual fund side and the AIF and PMS we are distributing. Having said that, we are also trying to build our own manufacturing practice. If you remember, we have a small AIF and PMS business and which we have recruited people to scale it up. So we will be manufacturing also. Having said that, we believe that manufacturing is one of the products we have. As a house, genetically and generically speaking, we are more open for an open architecture model. Okay. Sir, my last question would be on your cost to income. How should we see your cost to income, at least for this year and possibly as you build out wealth and the basic themes of investments on AIFs and PMS? Should we think that the cost to income will be elevated this year and then only probably from next year onwards some benefits will start trickling down? How should we think about cost to income? Yes. If you look at our business, we have two broad segments. One is institutional equities and investment banking, and the other is the legacy broking, which we are transferring to wealth, including the build-out of wealth teams. If you look at the business which we call as for the transformation of the business which was the erstwhile retail, we will see an elevated cost to income ratio for sure. I will just give you some broad numbers, in the sense that basically as we speak, I think the broad cost to income ratio for the retail or the non-institutional side will be in the range of 95%. I think this year it will be elevated and we hope to see benefits of scale trickling in next year. This year we will be seeing elevated numbers. All right, sir. Wish you all the best. I will come back in the queue. Thanks. Thank you so much, Prayesh. Thank you. The next question comes from the line of Chetan from Mahindra Manulife Mutual Fund. Please go ahead. Yeah. Hi. Just wanted to understand the revenue breakups. We have INR 617 crores of revenue this quarter. Out of which our retail institutional broking and the financial product distribution is roughly INR 483 crores. This other segment that remains is INR 134 crores, I think roughly. What all is included in this? I think this segment has declined for us on a YOY basis. Can you explain that? Because if I see your the rest of the segments are doing well, but still revenue trajectory compared to the first half of last year is a decline. If you can please explain this. I think there's a big component of interest income, which is broadly about INR 100 crores, and that has been the same because previous year quarter also it was on the same ballpark number. I don't have the exact numbers in front of me, but they were in the INR 100 crore range. Correct me if I'm wrong. INR 100- INR 100 crore range interest income is there. Okay. Secondly, this wealth management business that we are building out. What sort of, say, revenue contribution has started coming in from specifically this new wealth business that we are building in? What sort of costs are associated directly with this? If you can quantify both the revenue and the cost on that. I will give you just broad numbers. Revenues have started coming in. If you see, I will give you some broad estimates, because last year we had a revenue of roughly about INR 40 crore and cost was about INR 70 crore. We had a hit of about INR 30 crore. This year we are roughly in the revenue of this quarter we have made revenues of about INR 8 crore. The cost data I do not have right now because we look at this on a full year basis. Okay. So you said INR 40 crore and INR 70 crore. That is for the previous quarter. No. First quarter? No. For the full year? Yeah. Full year. Okay. Yeah. Okay. Got it. Thank you. And all the best. Thank you. The next question comes from the line of Keshav from Whitespace Alpha. Please go ahead. My first question is, how many new RMs you have hired this quarter in wealth management, and what is your strategy of building the wealth management going forward? My second question is, could you please provide the breakup of investment banking revenue and institutional equities revenue? See, basically, as you know, this quarter we are. I do not have quarter-on-quarter admission of exact admission of the people, but we are broadly at about 50 RMs as we speak. We hope to increase this. If not double, then definitely say 50%-60% increase in the number of RMs in this space for the full year. Coming to institutional. One second. See, we have roughly about INR 200 crores of investment banking and institutional equities income. Rough numbers will be about INR 150 and INR 50. So INR 150 brokerage and INR 150 is banking. Okay. Thank you. Yeah. Thank you. The next question comes from the line of Aditya Bhatia from Electrum Capital. Please go ahead. Yeah. Hi. Thank you for the opportunity. Number one is, how should we see employee costs going up for the current year? Can you please guide us for how many more RMs that you're planning to add for the current year? See, basically we are looking to have. As of now we have about 50. The 50 can go up to any number between 75, 100 in the full year. I do not have an exact number on that, and I do not want to talk about precisely employee costs, but it is better to look at the cost to income ratio. The cost to income ratio on a consolidated non-institutional business will be in the range of 75%. Okay. Sure. There might be some elevation if the manpower addition is high, but I think that is a broad range. Okay. Do we have any internal targets for how the distribution AUM is going? We've crossed INR 357 as of this quarter. Let's say FY 2027, 2028. Yeah. We are. Actually, I have a number, but unfortunately I can't make any forward-looking statements. That is one segment which is, I think, a focus area. We are roughly at about INR 35,700 crores, and that is the number which we are targeting to grow. Sure. Finally, can you talk about how your deal pipeline is shaping up for Q2 and for the rest of the year? Yeah. Investment banking pipeline is quite strong. If you remember, first quarter of this year, which is Q4 FY 2025, was a lackluster quarter. Now when the market survived, it picked up. Maybe given the current volatility, deal pipeline might again witness some slowdown, but the full year, I'm quite optimistic about our deal pipeline and closure. Sure. Okay. Can you speak a little on your insurance business? Yeah. I think there's been- Yes. I'll just give you some numbers. If you see, we do both life and non-life and total premium collected for this first year for Q1 was about INR 10 crores, which was for the previous Quarter was INR 23 crores and first quarter of FY 2020 was INR 14 crores. There has been some dip in this and for general insurance was also in the rough range of INR 30 crores. Apart from these two insurance, we also have investment in Livlong 365, which is like a wellness and affiliate business. That business is also doing well. I don't have the exact figure right in front of me. These are the three components of our insurance business. Sure. In your next presentations, would you be more open to do a more segmental split of this revenue mix, especially when it comes to IEIB? No. See, IEIB, the numbers we have given, so we have been disclosing IEIB numbers. I will do one thing. Priyesh also has raised some issues of disclosure. Maybe I will take feedback from all of you and then decide what to show. Only point is that our retail business is going through a transformation, so once it reaches scale, then maybe we can show some meaningful numbers. Okay. Is there any guidance for the rest of the year for FY 2026? No, unfortunately we have not given any guidance. I am sorry. Okay. Sure. All right. That will be all. Thank you. Thank you so much. Thank you. A reminder to all participants, you may press star and one to ask a question. Thank you so much for giving us a patient hearing and please feel free to reach out to us if you have any other questions or if you want any other data, and we will look forward to interacting with you so that our disclosures improve. Thank you so much, and all of you have a nice day. Thank you. Thank you. On behalf of IIFL Capital Services Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines. Thank you.