IIFL Capital Services (NSE:IIFLCAPS) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the IIFL Capital Services Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation Please note that this conference is being 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 FY twenty seven analyst call of IIFL Capital. This is Arvinka Truman. I am the co promoter and managing director. Along with me is Ronak Gandhi, who's our CFO. We are living in interesting times. The global environment remains uncertain.

0:45 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 FY 'twenty seven versus Q4 FY 'twenty six, retail broking revenue was INR $2.97 crores, virtually flat. Institution and investment banking revenue was up 27%, 207 crores versus $1.62 crores in the fourth quarter of last year.

1:36 Financial product distribution income stood at $1.25 crores versus $1.82 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 moved in the previous quarter. Employee cost decreased. Is almost flat at $1.39 crores versus $1.83 crores. Finance cost decreased 5% to 60 crores. Depreciation flat at 17 crores. Fees and commission income decreased to $1.39 crores by 8%, right, very primarily because of decrease in variable payout, again, linked to the seasonal insurance business.

2:24 Administrative income was again flat. Operational PBT, $1.49 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 BSC shares. This is something... This is... The BSC shares is something which we have discussed in the previous quarter also. Coming to year on year basis, retail broking... Retail revenues was INR $2.97 crores versus INR $2.64 crores, which is up 13%. Institutional bank... Institutional Broking Investment Banking income was flat, $20.07 crores versus INR $20.04 crores for the last year first quarter. Distribution income, again, was down 14%, as I mentioned earlier, because of certain transaction income which was booked...

3:13 Which was which was big in the previous year. Employee cost flat, $1.79 crores. The finance cost decreased 48% to 60 crores because... Sorry. Finance cost increased to 60 crores from 40 crores because of increase in NPL book. Depreciation flat. Fees and commission income increased 4%. Admin income was again flat. Operational PBT, $1.49 crores, was down approximately 9%. Other income, again, 90 per... 90 crores, mainly because of the gain in BSC shares. Come... Some housekeeping numbers. Average daily turnover was 303 lakh $15,007.80 crores, of which f and o was 303 lakh $12.03 lakh 12,480 crores, and cash was 3,300 crores in q four, which was 3 lakh 22,886 crores, of which f and o was 3 lakh 20,011 crores, and cash was 2,875 crores, which was down almost 2%.

4:17 And other updates, I wanted to give you update on the Fairfax investment. During the quarter, Fairfax India Holdings Corporation through IIFLCAPS Monishes and is a plead... Proposed to increase the shareholding in the company to at least 51% through a combination of through a combination of press a lot... Press issuance of... Press investment of equity of above about 2,000 crores at 350 per share and 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 EGML on 06/01/2026.

5:04 This... We are we are at various stages of approval from various regulators, including semi, LSE, BSE, and IIFL. Upon completion of the proposed transaction, Fairfax will become the promoter along with the existing promoters, Neiman and myself. They will also have a right to nominate two directors to the board. We believe that this investment will will strengthen our company's capital base, support growth across in capital markets, wealth management, asset management, insurance equities, and further enhance our... Introduce our credibility and brand through Fairfax's global reach brand and financial strength. Coming to the income tax note, income tax department, as you are aware, conducted a search under section one thirty two, which wasn't done in January 2025.

5:54 The holding company and the subsidiaries have received a demand of $1.24 crores. The respective companies have filed appeal already against the same order with the relevant authority under the applicable laws. With this, I've come to the end of my statement, and I'll 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'll wait a moment while the question queue is assembled. The first question is from the line of Keshav Karma from White Pine, IBM Capital Limited.

6:51 Hi, sir. Thank you for the opportunity. Sir, I have few questions. First was, how much of the AUM growth was organic? And if you see, our AUM 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 region growth, net collections are 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 INR 3,600 crores. And so we have been going faster. So maybe this is one off. And from next quarter, we'll start, we'll catch up. Okay. And my second question was on the transaction.

7:40 Have you received the funds yet, or are they yet to be received? And how do you intend to defer 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 we are... At this point in time, we... The company has applied to various authorities for approvals, and the approvals are in process. So we think that maybe in the next two two to three months, we'll get all the approvals. And once the approvals come, only then the preference will not... Can take place. So as as... 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 did we add?

8:28 I think we we added few hours. I think that single digit number of. So sorry. Can you just speak? Think the... I don't know exactly the headphone which has added in, but it's... It will be very true. It's single digit. Okay. And, sir, can you please provide me with the breakup for institution and investment banking revenue? I think institutional equities in this quarter were roughly about 200 crores. Okay, sir. Thank you. I'll give you a rough number. I don't... It'll be in the ballpark 200 crores. Okay. Okay. No issue. Thank you. Thank you. Participants who wish to ask questions may press star and 1 at this time. Ladies and gentlemen, in order to ask a question, you may press 1 now.

9:33 The next question is from the line of Lalit Mohan Deo from Equator Securities. Yeah. Hi, sir. Sir, just one question. So, like, in the presentation, we have a slide which mentions about the AIF and PMS AUM of around roughly around 4,400. So do do we have any income against the payment then? And where is it in the... Where does it show highlight... Get highlighted in the clearance? Right? So this... Yep. Of course, income for this, and I think this is booked under booked in the financial product distribution. 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 start up our manufacturing. So this is a part of our overall manufacturing plan. So we have started IIF.

10:27 We have started IIFL. We have a credit fund. We have a late stage fund. So we'll continue to... Without losing the... Our overall character character of open architecture, we want to invest and grow this business. Sure. Sure. Yep. Right. Thank you, sir. Yep. Thanks. Thank you. Participants who wish to ask a question may press star and one now. The next question is from the line of from APACAS Investment Managers. Please go ahead. Hi. Thank you for taking my question. It's only the implementation of the debit regulations from July 1. So are we seeing any impact from that on the broking business like, in any way?

11:15 You are talking about the margin... The the RBI guidelines on the margin requirement. Right? Right. Right, sir. Yeah. So as of now, we have seen marginal impact because the... We because we didn't have large number of... We are not proctored as 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'll see some impact. Okay. So so we do expect to see some impact on the volumes or the turnover in the... In this quarter? No. Unlikely in this quarter. Okay. Okay. Actually, implied here on the distribution is declined to about point eighty eighty seven basis points, and it was higher in the previous quarter.

12:07 So so what would be the reason for that? The... If you didn't come with... Has fallen because of last last year... Last quarter, we had insurance income booked in that. And in the... 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 result in the impact of yield. Overall, I think product wise yield has not changed, but because of this, the non non income, it has affected. But, sir, the mix is largely remain the same, right, with mutual funds or No. The mix may... Last quarter is all non or insurance. Okay. Got it, sir. Okay. Thank you, sir.

12:54 Thank you. Before we take the next question, we would like to remind participants that you may press 1 now. Participants who wish to ask questions may press 1 at this time. Participants who wish to ask questions may press star and 1 now. Actually, if there are no further questions now, we can stop and, you know, they... All quest... All people can ask questions to me and Rohdev directly because we have email ID as well as we can reach out to us directly.

13:42 Sure, sir. We have a question. Do want me to take that up? Yes. Yes. Of course. Sure. The next question is from the line of Palash from 361 Please go ahead. Hello, sir. Thank you for the... Thank you for taking my question. I just wanted to ask if you can provide some color on the breakup of the income between the institutional, the brokerage side and the IT side. That will be the help, sir. Thank you. See, roughly, we are roughly, we have about 200 crore of income on the investment banking initial brokerage, and it will be roughly $50.50 or $60.40. That will be the broad numbers. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

14:28 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 IIFL Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.