Summary
IIFL Capital Services Limited - Q3 FY 2026 Earnings Call Summary Wednesday, February 11, 2026, 4:00 PM IST
Event Participants
Executives 2 Ronak Gandhi (CFO), R. Venkataraman (Managing Director)
Analysts 2 Aditya Bhatia (Electron Capital), Keshav Kanwa (White Pine Investment)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Operational Revenue | ₹586 crores | Flat YoY/QoQ; resilience in retail offset by lower investment banking. |
| Retail Broking Income | ₹288 crores | +6% QoQ; driven by increased trading volumes. |
| Institutional & Investment Banking | ₹160 crores | -14% QoQ and -6% YoY; reflective of market volatility and deal cycles. |
| Financial Product Distribution (FPD) | ₹134 crores | +25% YoY; reflects strategic shift toward distribution income. |
| Employee Costs | ₹175 crores | +14% QoQ and +17% YoY; driven by headcount increase, variable pay provisions, and ₹7 crore labor law charge. |
| Other Income | ₹135 crores | Includes ₹90 crore gain from real estate sale and MTM gains on BSE shares. |
| Operational PBT | ₹119 crores | -27% QoQ and -36% YoY; impacted by higher tech, branding, and employee expenses. |
| Average Daily Turnover (ADTO) | ₹3,14,660 crores | +19.4% QoQ; primarily driven by F&O volumes. |
| Cash ADTO | ₹2,685 crores | +2.8% QoQ; relatively stagnant compared to derivatives growth. |
Geographic & Segment Commentary
- Retail Broking & PCG: Segment saw revenue of ₹288 crores, up 6% QoQ despite losing some Relationship Managers (RMs). Management is navigating a highly competitive recruitment landscape, focusing on volume growth to offset margin pressures.
- Institutional Equities & Investment Banking: Revenue stood at ₹160 crores, with institutional broking contributing approximately ₹100 crores. The segment faced a 14% sequential decline, attributed to the timing of investment banking deal closures.
- Wealth Management: Currently loss-making as the company continues to invest in the practice. Management added 2-3 RMs this quarter, bringing the total combined RM count (Wealth + PCG) to 470.
Company-Specific & Strategic Commentary
- Human Capital: Management noted significant recruitment challenges in the wealth space; total RM count stands at 470, with plans to add only 10-15 more by the end of FY26.
- Asset Mix Shift: Distribution assets are seeing a temporary tilt toward Transaction-Based Revenue (TBR) due to high allocations in NCDs and fixed income, though the long-term target remains a 60:40 TBR to ARR split.
- Infrastructure & Tech: Depreciation rose 21% YoY to ₹17 crores, reflecting aggressive investment in new branches and technology stacks to support digital distribution.
- Regulatory/Tax Matter: Paid ₹27 crores in ad hoc taxes following a Section 132 search from January 2025; management maintains this is a prudential measure with no material impact on financial position.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Wealth Management Profitability | Break-even by FY27 | Continued investment phase currently; efficiency expected to improve over the next 12 months. |
| RM Headcount | 480-485 by March 2026 | Expecting modest addition of 10-15 RMs in the final quarter of FY26. |
| Revenue Mix (TBR:ARR) | 60:40 range | Management aims to maintain this split despite recent spikes in transaction-based fixed income products. |
Risks & Constraints
| Risk | Context |
|---|---|
| Talent Acquisition | Management cited “recruitment challenges” and intense competition for RMs, leading to slower-than-planned headcount growth. |
| Operational De-leverage | Expenses (Employee + Admin) grew significantly faster than flat revenues, leading to a 36% YoY drop in operational PBT. |
| Tax Litigation | Ongoing post-search assessment proceedings from the Income Tax Department; while ₹27 crores was paid ad hoc, final liability remains unascertainable. |
Q&A Highlights
Wealth Management & RM Growth
- Question: When will the wealth management business break even and what is the RM addition plan? (Keshav Kanwa)
- Answer: The business is currently loss-making but is expected to reach break-even by next year. Total RMs stand at 470, with plans to add only 10-15 more by FY26 end due to competitive hiring pressures (R. Venkataraman).
Distribution Asset Mix
- Question: Why is the mix shifting toward TBR (Transaction-Based Revenue) over ARR (Annuity)? (Aditya Bhatia)
- Answer: Recent increase in TBR is due to higher client allocations to NCDs and fixed income products. The long-term steady-state target remains a 60/40 or 65/35 split between TBR and ARR (R. Venkataraman).
Institutional Business Split
- Question: What is the split between Institutional Equities (IE) and Investment Banking (IB)? (Aditya Bhatia)
- Answer: Of the ₹160 crores in the segment, institutional broking accounted for approximately ₹100 crores (R. Venkataraman/Ronak Gandhi).
Key Takeaway
IIFL Capital Services reported a stagnant top-line quarter with consolidated operational revenues at ₹586 crores, as growth in Retail Broking (+6% QoQ) and Financial Product Distribution (+25% YoY) was offset by a 14% sequential decline in Investment Banking. Profitability was significantly pressured by a 17% YoY surge in employee costs and higher technology spending, leading to a 36% YoY decline in operational PBT to ₹119 crores. Strategically, the firm is pivoting toward distribution and wealth management, though the latter remains in an investment phase with break-even projected for FY27. Management is navigating a difficult talent market, moderating RM hiring targets while dealing with a ₹27 crore ad hoc tax settlement following previous regulatory searches. The company remains focused on achieving a 60:40 revenue mix in distribution and leveraging its ₹3.14 lakh crore ADTO scale, though rising overheads and competitive hiring remains a key monitorable for the coming fiscal.
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