IIFL Capital Services Limited

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.

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).

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.

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.

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.

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.