IIFL Capital Services Limited

IIFL Capital reported flat consolidated operational revenues of INR 586 crores for Q3 FY26, both on a quarter-on-quarter and year-on-year basis. Operational profit before tax (PBT) stood at INR 119 crores, marking a 27% QoQ and 36% YoY decline, primarily due to increased expenses. Despite a challenging global environment, the Indian economy demonstrated resilience with low inflation and strengthening financial buffers, leading the RBI to raise its real GDP growth projection to 7.4%.

Retail Broking income increased 6% QoQ to INR 288 crores, driven by higher volumes, though it was down 3% YoY. In contrast, Institutional and Investment Banking revenues decreased 14% QoQ and 6% YoY, reaching INR 160 crores. The Financial Product Distribution segment showed positive momentum, growing 3% QoQ to INR 134 crores and a robust 25% YoY, reflecting a strategic focus on this income stream.

Employee costs rose significantly by 13.6% QoQ and 16.7% YoY to INR 175 crores, attributed to variable pay provisioning and a one-time^📎 charge of INR 7 crores due to labor law changes. Depreciation increased 13% QoQ and 21% YoY to INR 17 crores, reflecting investments in new branches and technology. Fees and commissioning expenses increased 10% QoQ and YoY to INR 130 crores, while administrative expenses were up 5% QoQ and 30% YoY to INR 91 crores. Other income for the quarter was INR 135 crores, including a notable INR 90 crores gain from the sale of real estate property.

The company disclosed an Income Tax Department search conducted in January 2025. Post-search assessment proceedings are ongoing, and IIFL Capital has paid an ad hoc tax of INR 27 crores, accounted for in this quarter. Management stated full cooperation with the department and believes that, based on available facts, there will be no material adverse effect on the financial position or need for material adjustments to financial statements.

IIFL Capital continues to invest in its wealth management practice, which is currently loss-making but is targeted to be closer to break-even by next year. The company added 2-3 Relationship Managers (RMs) in the wealth space this quarter and plans to add another 10-15 RMs in the next two months. Management acknowledged the increasing competitiveness and recruitment challenges in this segment, leading to a cautious approach in hiring.

The company's distribution assets mix between Transaction-Based Revenue (TBR) and Asset-Based Revenue (ARR) has been broadly in the 60/40 range. In the last quarter, there was an increase in the fixed income space due to higher allocation to products like NCDs, which contributed to TBR. Management expects this mix to continue in the 60/40 to 65/35 range going forward^⏳.