IIFLCAPS - IIFL CAPITAL SERVICES LIMITED Share Price

Management's outlook for IIFL Capital Services is cautiously optimistic, highlighting both opportunities and challenges. The Managing Director, R. Venkataraman, emphasized the company's transition from a retail brokerage to a wealth management focus, driven by the need to adapt in a volatile macroeconomic environment. He noted that while India remains on a strong footing, geopolitical tensions present a near-term risk.

Key forward-looking points include:

1. Transformation Focus: The company is committed to transforming its legacy broking business into a wealth management practice, prioritizing asset accumulation over transactional income.
2. Personnel Changes: The recent hiring of two joint CEOs, Raghav Gupta and Prakash Bulusu, aims to bolster growth in wealth management. The appointment of Ms. Rekha Warriar as Chairperson of the Board is seen as an enhancement of corporate governance.
3. Financial Targets: For FY '25, IIFL Capital reported revenues of Rs. 2,567 crores, up 15% year-over-year, with other income significantly increasing by 132% to Rs. 162 crores. However, institutional broking revenue was flat at Rs. 640 crores.
4. Expectations on Growth: Employee expenses have risen by 29%, mainly due to increased headcount, which is expected to continue impacting the cost-income ratio in the short term.
5. Asset Management Goals: The goal is to reach approximately Rs. 800-900 crores in assets under management (AUM) and to double this figure within the next year, primarily through strategic hiring and enhanced service offerings tailored to HNI and Ultra-HNI clients.

Management refrained from providing specific guidance on the cost-to-income ratio for FY '26 but noted that initial investments in personnel would precede long-term financial gains.

1. Question: "Can you share some trends on the retail ADTO market share for us in FY '25 over FY '24 last two to three year trends?"

   Answer: "Overall market share for Q4 FY '25 was about 0.96%. The exchange volume was 2.62% in cash and 0.96% in F&O, remaining flat from Q3 FY '25, where cash was around 2.61% and F&O 0.87%. We see this as stable over the last few quarters. Cash participation was roughly around 2.6-2.7% and F&O around 0.86% to 0.96%."

2. Question: "How will the approach towards business change as we move towards wealth management?"

   Answer: "Our approach will shift focus to asset gathering rather than transaction-based income. Historically, we emphasized transaction income, but now the aim is to enhance relationships with clients across different offerings, promoting products like mutual funds and AIFs. This change will require a shift in mindset, focusing on long-term relationships and client servicing."

3. Question: "Will this have an impact on the cost to income ratio for us?"

   Answer: "Yes, there will be some impact on the cost to income ratio, particularly in the short term. As we build out our manpower to support this transition, costs will increase. We've already observed a rise in manpower costs due to new hiring, but we see this as necessary for long-term growth."

4. Question: "Can you share the data in terms of institutional revenue breakup for the full year?"

   Answer: "The full-year income for institutional broking was roughly Rs. 640 crores, which is a combination of both institutional broking and banking. The income is approximately allocated at a 60-40 ratio between broking and banking segments."

5. Question: "Can you explain the significant jump in distribution income from Rs. 100 crores to Rs. 257 crores?"

   Answer: "The jump in distribution income was partly due to transactional income from unlisted share distributions, particularly in NSE shares. This also reflects our growing focus on the distribution of financial products, which contributed to these revenue increase."

6. Question: "What is the current AUM distribution for mutual funds and PMS/AIF?"

   Answer: "Our current distribution of assets includes about Rs. 14,500 crores in mutual funds and roughly Rs. 7,000 to 8,000 crores in PMS and AIF, amounting to around Rs. 31,300 crores in total distribution assets."

7. Question: "What is your guidance for life insurance renewal premiums?"

   Answer: "Currently, the reported figure is for the first-year premium, which stands at Rs. 73 crores. I don't have immediate figures for renewal premiums but can follow up via email for detailed numbers."

8. Question: "What will be the cost-to-income ratio for FY '25, and what is the guidance for FY '26?"

   Answer: "We are not providing forward-looking statements on the cost-to-income ratio for FY '26. For FY '25, detailed numbers for the cost-to-income ratio will be shared post analysis, as our focus remains on growth."

9. Question: "How many affluent RMs do you have currently targeting ultra-HNI?"

   Answer: "Currently, we have about 450 affluent RMs and around 50 dedicated to the ultra-HNI segment. We plan to increase this number to about 100-120 within the next year, to strengthen our wealth management capacity."

10. Question: "How much of the IB business was driven organically versus through 360 One relationships?"

    Answer: "It's challenging to quantify the organic vs. relationship-driven components of our IB business. Our strong capabilities and research have been pivotal in earning trust and executing deals, making it hard to specify exact percentages for each source."