IIFL Capital Services Limited — Q2 FY26 earnings call

Call held 10 Nov 2025

Management summary

IIFL Capital reported a mixed Q2 FY26, with consolidated revenue declining QoQ and YoY, primarily due to sequential drops in institutional and financial product distribution income, coupled with MTM losses. However, Retail Equities showed marginal QoQ growth, and cross-sell assets continued to expand. The company remains optimistic about the second half of FY26 and the long-term growth of the Indian equities market, despite regulatory uncertainties and competitive pressures in wealth management.

Highlights

  • Retail Equities revenue grew 3% QoQ to ₹271 crores, indicating resilience in the segment.

  • Institutional income increased 5% YoY to ₹186 crores, demonstrating growth in this core area.

  • Financial Product Distribution income increased 22% YoY to ₹130 crores, reflecting increased focus on distribution products.

  • Cross-sell assets expanded to ₹44,000 crores, with a significant portion (₹27,000 crores) being recurring revenue (ARR) assets.

  • Average daily turnover increased QoQ to ₹2,63,568 crores, primarily driven by F&O, showing improved market activity.

Concerns

  • Consolidated revenue declined 4% QoQ and 8% YoY to ₹592 crores.

  • Institutional income decreased 9% QoQ to ₹186 crores, indicating sequential weakness.

  • Financial Product Distribution income decreased 10% QoQ to ₹130 crores due to lower transaction income.

  • Operating PBT declined almost 20% YoY to ₹164 crores, impacting overall profitability.

  • Reported MTM investment loss of ₹44 crores, primarily from price reduction on BSE and NSE shares.

Key financials

  1. Consolidated Revenue ₹592 Cr -8%YoY
  2. Retail Equities Income ₹271 Cr -24%YoY
  3. Institutional Income ₹186 Cr +5%YoY
  4. Financial Product Distribution Income ₹130 Cr +22%YoY
  5. Employee Cost ₹154 Cr
  6. Operational PBT ₹164 Cr -20%YoY
  7. Cross-sell Assets ₹44,000 Cr
  8. ARR Assets (MF, PMS, AI) ₹27,000 Cr
  9. Total Net Worth ₹2,800 Cr
  10. Margin Funding Book ₹1,500 Cr
  11. MTM Investment Loss ₹-44 Cr

What they filed

Q1 FY27: revenue up 2.3%, net profit up 4.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue645 583 537 617 572 −11%586 +1%644 +20%631 +2%
EBITDA266 245 186 221 213 −20%190 −22%224 +20%226 +2%
Net profit205 197 128 176 85 −59%188 −5%115 −10%184 +5%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹587 Cr Total
  • Retail Equities ₹271 Cr 46.2%
  • Institutional Income ₹186 Cr 31.7%
  • Financial Product Distribution ₹130 Cr 22.1%

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Total net worth is ₹2,800 crores, with a margin funding book of ₹1,500 crores, providing headroom to add another ₹1,000-2,000 crores easily.
    our total net worth is about Rs. 2,800 crores... our margin funding book is only Rs. 1,500 crores. So, we think that there is enough scope for us to do... I think another Rs. 1,000 crores can be added very easily.

Guidance & targets

Profitability

  • Wealth Management Business Profitability Profitability · next two to three years · Medium confidence Profitable
    See, we hope that over the next maybe two years to three years, this business will become profitable.

    — R. Venkataraman

  • Cost-to-Income Ratio Profitability · second half · Medium confidence See some benefits
    See, actually, my view is that hopefully from second half, as you pointed out earlier also, exchange volume is big. So, we should see some benefits in the cost to income ratio.

    — R. Venkataraman

Market Volume

  • Indian Equities Volumes Market Volume · next 10-15 years · High confidence Secular increase
    So, we think that as the Indian economy goes from 4 trillion to maybe 6 trillion, 8 trillion in the next 10 years - 15 years, so there will be a secular increase in equities volumes.

    — R. Venkataraman

Assets Under Management

  • ARR Assets Growth Assets Under Management · Ongoing · High confidence Grow that component
    And our aim is to grow that component [ARR assets].

    — R. Venkataraman

What to watch in Q3 FY26

Wealth Management Business Profitability

Next 2-3 years
Current Loss of ₹20-25 crores for H1 FY26
Target Progress towards profitability

Why it matters

Key indicator of the success and scaling of the new wealth management segment.

See, we hope that over the next maybe two years to three years, this business will become profitable. As of now, we have to continue to invest and build this up.

Risks & concerns

  • Potential impact of SEBI's proposed brokerage reduction

    medium

    SEBI consultation paper proposes reducing brokerage from 12 bps to 2 bps, which could impact income, especially from mutual funds, though FIIs are exempt.

    Analyst acknowledged

  • Competitive intensity in RM hiring for wealth management

    medium

    High competition makes recruiting new RMs challenging and costly, impacting the pace of wealth business expansion, leading to a strategy of upgrading existing RMs.

    Management acknowledged

  • MTM losses on equity investments

    low

    The company incurred an MTM loss of ₹44 crores, primarily from holdings in BSE and NSE shares due to price reductions.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Impact of SEBI's proposed brokerage reduction on institutional income. Partial
So in the institutional segment, a bulk of our brokerage comes from foreign institutional investors and where the capping is not applicable. Mutual funds, however, are still a significant player on this. So, if there is a reduction in the brokerage charge, then there will be an impact on our income. But at this point in time, it is very difficult to ascertain exactly what will be the impact.

Addresses a significant regulatory risk that could impact institutional brokerage revenue, though management notes uncertainty and FII exemption.

Asked by Prayesh Jain

Share of domestic mutual funds in Institutional Equities revenue. Evasive
Unfortunately, I am not able to share that details with you.

Lack of transparency on a key revenue component, especially relevant given potential SEBI brokerage caps.

Asked by Prayesh Jain

Wealth management business growth and RM hiring strategy. Direct
As of now, we are roughly about 50 RMs - 55 RMs in that range. This quarter, we have not seen a significant increase in the RMs, but it is virtually flat. And the business is shaping up well and we are seeing some assets coming, relationships happening... there is a huge competitive intensity in the recruitment of RMs. So, basically, as a part of our prudent strategy, we decided that it is better to upgrade our existing RMs train them and empower them instead of going out and acquiring RMs at any cost.

Details the company's approach to scaling its wealth management business amidst high competition for talent, focusing on internal upgrades for cost efficiency.

Asked by Prayesh Jain

Sustainability of broking volumes and long-term market outlook. Direct
I think one should not look at on a quarter-on-quarter basis on etc because India is still an under-precedented market. So, we think that as the Indian economy goes from 4 trillion to maybe 6 trillion, 8 trillion in the next 10 years - 15 years, so there will be a secular increase in equities volumes. So, if you have a long term perspective, then the trend is clearly upward sloping.

Provides management's long-term bullish view on the Indian equities market, underpinning the broking business despite short-term volatility and regulatory signals.

Asked by Prayesh Jain

Investment in wealth management business and current losses. Direct
In this financial, if you look at investment, basically, manpower cost is the biggest investment. So, as of now, last year we incurred, we made a loss of about Rs. 20 crores - Rs. 24 crores. And this year for the first half, we would have lost about Rs. 20 crores - Rs. 25 crores.

Quantifies the current investment and losses in the nascent wealth management segment, indicating it's still in a build-out phase.

Asked by Harsh Shah

MTM investment losses and their source. Direct
It is pertaining to both BSE shares and NSE shares. We have bought some NSE shares for down selling. So, on that we have taken some risk.

Clarifies the source of the reported MTM losses, attributing them to specific equity holdings.

Asked by Prayesh Jain

Headroom for scaling margin trade funding book. Direct
our total net worth is about Rs. 2,800 crores... our margin funding book is only Rs. 1,500 crores. So, we think that there is enough scope for us to do... another Rs. 1,000 crores can be added very easily.

Indicates the company's capacity to expand its margin funding business, a key revenue driver, supported by its net worth.

Asked by Prayesh Jain

Wealth management technology readiness. Partial
Yes, from the back-end perspective, I think we have done quite a lot of work. So, we have implemented wealth spectrum software. We have invested in a lot of reporting software. We have upgraded our training software to omni cell. So, we have done a lot of work. But the most difficult thing is going out and getting access... I think platform tech, I would say, not everything, maybe 80% will be there.

Provides an update on the technological infrastructure for the wealth management business, suggesting good progress but acknowledging the challenge of client acquisition.

Asked by Harsh Shah

3 min read 6 chapters

Detailed narrative

Overall Financial Performance in Q2 FY26

IIFL Capital reported a consolidated revenue from operations of ₹592 crores for Q2 FY26, marking a 4% sequential decline and an 8% year-on-year decrease. This performance was influenced by a 9% QoQ drop in institutional income and a 10% QoQ reduction in financial product distribution income. Despite these headwinds, the company's operational PBT remained flat QoQ at ₹164 crores, though it saw a nearly 20% YoY decline. Employee costs decreased from ₹176 crores to ₹154 crores QoQ due to lower variable pay provisions.

Segmental Revenue Dynamics

Retail Equities demonstrated resilience, growing marginally by 3% QoQ to ₹271 crores, though it was down 24% YoY due to new F&O regulatory norms. Institutional income, comprising broking and investment banking, stood at ₹186 crores, a 9% QoQ decrease but a 5% YoY increase, with a rough 60-40 split between Institutional Equities and Investment Banking. Financial product distribution income was ₹130 crores, down 10% QoQ but up 22% YoY, attributed to an increased focus on distribution products, with 60% being recurring revenue (ARR).

Wealth Management Business Development and Strategy

The wealth management segment is in an investment phase, incurring losses of ₹20-25 crores in H1 FY26, similar to ₹20-24 crores in the previous year. The company maintains 50-55 RMs and is focusing on upgrading its existing 450 retail RMs to wealth RMs, a prudent strategy given the high competitive intensity in external RM recruitment. Cross-sell assets have grown to ₹44,000 crores, with ₹27,000 crores (60%) being recurring revenue (ARR) assets from mutual funds, PMS, and alternative investments. The company aims for this business to become profitable in the next two to three years.

Broking Volumes and Market Share

Average daily turnover increased QoQ to ₹2,63,568 crores in Q2 FY26, primarily driven by F&O volumes (₹2,60,956 crores), while cash volumes were ₹2,612 crores. However, this was a 21% YoY decline from Q2 FY25. The company's overall market share remained stable at approximately 0.64%. In the non-Prop segment, market share was higher at 3.87% for cash and 2.65% for F&O, indicating a focus on client-driven business, with broking revenue roughly split 60% F&O and 40% cash.

Regulatory Environment and MTM Losses

Management acknowledged the ongoing SEBI consultation paper proposing a significant reduction in brokerage charges (from 12 bps to 2 bps), noting potential impacts on income, particularly from mutual funds, though FIIs are exempt. The company also reported an MTM investment loss of ₹44 crores, primarily due to price reductions in BSE and NSE shares, where some risk was taken for down selling. This MTM loss contributed to the overall financial performance.

Capital Position and Growth Outlook

IIFL Capital's total net worth stands at ₹2,800 crores, supporting a margin funding book of ₹1,500 crores. Management indicated significant headroom, with the ability to add another ₹1,000-2,000 crores to the margin funding book. The company expressed optimism for a better H2 FY26, supported by policy stability and demand growth, and a long-term bullish view on the Indian equities market, expecting secular volume growth over the next 10-15 years as the economy expands from $4 trillion to $8 trillion.

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