ANANDRATHI - Anand Rathi Wealth Limited Share Price

During the Q2 and H1 FY2026 earnings conference call, management provided an optimistic outlook, highlighting strong performance despite a challenging market environment. Key forward-looking points include:

1. AUM Growth: The company reported a significant increase in Assets Under Management (AUM), reaching INR 91,568 crores, up from INR 30,200 crores since the IPO four years ago. They aim for an aspirational AUM of INR 1 lakh crores by March 2026, although they don't intend to increase this guidance despite positive trends.

2. Net Flows: In Q2 FY26, equity mutual fund net flows increased by 101% year-on-year to INR 2,062 crores (compared to INR 1,025 crores in the same quarter last year). Total net flows for the quarter rose by 28% to INR 3,302 crores, with H1 FY26 flows reaching INR 6,827 crores, a 20% increase from INR 5,700 crores year-on-year.

3. Market Share: The company's market share in equity mutual funds net inflows stood at 2.33%, an increase from 0.16% in FY20, indicating successful penetration in the market.

4. Profitability Metrics: For Q2 FY26, total consolidated revenue grew to INR 307 crores, up 23% from INR 250 crores in the same quarter last year, and profit after tax increased by 31% to INR 99.89 crores, with a profit margin improving to 32.5%. For H1 FY26, total revenue reached INR 591 crores, a 19% increase, and PAT was INR 194 crores, up 29% year-on-year.

5. Return on Equity: The company reported an impressive return on equity of 45.5% on an annualized basis for H1 FY26.

6. Dividend: The board declared a 120% interim dividend translating to INR 6 per equity share, which reflects management's commitment to returning value to shareholders.

7. Client Growth: The flagship private wealth business added over 1,800 families in the last year, bringing the total to 12,781 clients, with low client attrition rates of 0.09% for Q2 FY26 and 0.18% for H1 FY26.

Management remains focused on sustainable growth through client-centric strategies while leveraging existing relationships without overextending expectations for new acquisitions or lower margins.

1. Question: "What client retention control do we have in place that helps us minimize the risk of AUM loss?" Answer: Our RM attrition is relatively low, primarily due to cultural adjustments in specific locations. When an RM leaves, we ensure our client-centric approach demonstrates higher value to clients. We retain approximately 79% of the assets managed by departing RMs, resulting in client attrition of just 0.09% for Q2 FY'26 and 0.18% for H1 FY'26. Our published Jensen's alpha aids in retaining clients by showcasing our risk-adjusted returns.

2. Question: "Can we increase the AUM guidance of INR One lakh crores?" Answer: We will not increase our AUM guidance of INR One lakh crores as it remains an aspirational target. Market conditions can fluctuate, making it difficult to predict AUM on a specific date. We prefer to under-commit and over-deliver to ensure stability and credibility in our projections while considering market growth estimates of 9% to 10%.

3. Question: "How do we view future growth with base effect considerations when crossing INR One lakh crores and beyond?" Answer: You're right; critical mass is essential. We believe that as we cross INR One lakh crores, our growth rate will remain sustainable but may normalize from past highs. We aim for continued growth by attracting like-minded clients and enhancing our value proposition. We will not increase growth guidance but focus on improving chances for fulfilling our existing targets as we reach significant milestones.

4. Question: "What is our outlook on the market considering recent consumption trends?" Answer: We believe the Nifty will exceed median returns with a high probability over the next 3 years, estimating a 90% chance to outperform. Structural stability exists since FIIs are light on margin books, and DII inflows remain strong. We foresee minimal risk of catastrophic market falls and are positioned to deliver 13% to 15% returns for clients with a beta of 0.6 based on this market assessment.

5. Question: "What is the expected revenue mix and outlook for structured products?" Answer: We aim for a balanced revenue mix of 50% between mutual funds and structured products, currently at approximately 43% in structured products. Despite high skepticism, we maintain strong performance with structured products designed through rigorous analysis. In five years, we plan for healthy growth in structured products while ensuring client portfolios are managed securely.

6. Question: "What improvements led to the significant reduction in GNPA to 0.61%?" Answer: The reduction in GNPA reflects meticulous credit management and our strategy focused on secured lending primarily against mutual funds. Our assessment incorporates Alteman's Z-score to quantify credit risk, which ensures that our portfolio remains secure. Stability in our lending practices across a disciplined credit evaluation framework is integral to maintaining low NPA ratios.

7. Question: "What guidance can we expect regarding cost and margins going forward?" Answer: Employee costs are stable and critical for our operational strategy, with margins long-preferred around 30%. As we reinvest, we expect PAT margins to hold steady around this figure while aiming to enhance operational efficiency. We will continue to monitor costs closely and ensure that our mandate for profitability remains intact moving forward.

8. Question: "Is there any seasonality observed in revenue performance?" Answer: We have not identified a distinct seasonality pattern in revenue. Variations may arise from RMs' energy and focus levels. Our shift from 3-year to 5-year structured products has led to temporary fluctuations in maturities. Market conditions and RM strategies can significantly influence inflows, particularly as we adapt our approaches to market sentiment and client's needs throughout the fiscal year.