IIFL Capital Services Limited — Q4 FY25 earnings call

Call held 29 Apr 2025

Management summary

IIFL Capital reported a robust 15% YoY revenue growth to ₹2,567 crores and a 40% YoY PAT increase to ₹713 crores for the full year FY25, primarily driven by strong distribution income. However, Q4 FY25 saw a 20% YoY revenue decline to ₹573 crores and a PAT drop to ₹128 crores, impacted by regulatory changes affecting derivatives and muted market conditions. The company is strategically pivoting towards wealth management, with new leadership and ambitious AUM growth targets, while acknowledging short-term cost implications and market headwinds.

Highlights

  • Full-year FY25 consolidated revenues reached ₹2,567 crores, up 15% year-on-year.

  • Full-year FY25 Profit After Tax (PAT) increased by 40% to ₹713 crores from ₹513 crores.

  • Full-year distribution income grew 32% to ₹509 crores, driven by increased focus on asset allocation.

  • The company is actively transforming into a wealth management practice, supported by new leadership hires and a strong balance sheet.

  • Asset management AUM, currently at ₹800-900 crores, is targeted to double in the next year.

Concerns

  • Q4 FY25 total revenue decreased 20% YoY to ₹573 crores, primarily due to falling exchange volumes and muted primary market conditions.

  • Q4 FY25 PAT declined from ₹181 crores in Q4 FY24 to ₹128 crores in Q4 FY25.

  • Retail brokerage was down in Q4 FY25 from ₹194 crores to ₹117 crores, impacted by regulatory changes and market volatility.

  • Geopolitical tensions and market volatility are identified as significant near-term risks.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹573 Cr
    YoY -20% QoQ -11%
  • PAT
    ₹128 Cr
    YoY -29.3% QoQ -35%
  • Distribution Income
    ₹190 Cr
    YoY +62%

FY25

  • Revenue
    ₹2,567 Cr
    YoY +15%
  • PAT
    ₹713 Cr
    YoY +40%
  • Distribution Income
    ₹509 Cr
    YoY +32%

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
₹1,504 Cr Total
  • Retail Brokerage (Full Year) ₹650 Cr 43.2%
  • Institutional Broking and Banking (Full Year) ₹640 Cr 42.6%
  • Retail Brokerage (Q4 FY25) ₹117 Cr 7.8%
  • Institutional Broking and Banking (Q4 FY25) ₹97 Cr 6.4%

Capital allocation

high confidence
  • Dividend ₹3/share (final)
    Dividend, the Board of Directors on February 11 declared a dividend of Rs. 3 per share. And this has been already paid and the same was considered as the final.

Guidance & targets

Other (AUM)

  • Wealth Management AUM Other (AUM) · next one year · Medium confidence ₹1600-1800 crores (doubling from ₹800-900 crores)
    So, at this point in time, I would say that we are roughly close to about Rs. 800 crores -Rs. 900 crores of assets under management and this we think should easily double in the next one year.

    — R. Venkataraman

Headcount

  • HNI/Ultra-HNI RM Headcount Headcount · next one year · High confidence 100-120

    From 50 today

    I think in the next one year, the headcount will go from 50 to about 100 or 120.

    — R. Venkataraman

Other (Life Insurance Premium)

  • Life Insurance Premium Growth Other (Life Insurance Premium) · Low confidence slowly upper sloping graph in the mid-teens
    See, actually we think that this business will not show a big spike, but it should get back to a slowly upper sloping graph in the mid-teens.

    — R. Venkataraman

What to watch in Q1 FY26

Wealth Management AUM Growth

Next year (check progress next quarter)
Current ₹800-900 crores
Target Doubling to ₹1600-1800 crores

Why it matters

This is a key indicator of the success and execution of the strategic pivot to wealth management.

So, at this point in time, I would say that we are roughly close to about Rs. 800 crores -Rs. 900 crores of assets under management and this we think should easily double in the next one year.

Risks & concerns

  • Geopolitical Tensions and Market Volatility

    high

    Volatile times and heightened geopolitical tensions continue to be a significant near-term risk, impacting market conditions.

    Management acknowledged

  • Regulatory Changes Impacting Derivatives Business

    medium

    Retail broking was impacted in Q4 FY25 due to regulatory changes related to the expiry of derivatives, affecting the F&O business.

    Management acknowledged

  • Muted Primary Market Conditions

    medium

    Total revenue decreased in Q4 FY25 partly due to muted primary market conditions, alongside tightening norms for derivatives expiry.

    Management acknowledged

  • Outcome of Income Tax Search Activity

    medium

    Income tax authorities conducted a search in January 2025; the company has not received communication on the outcome, so financial impact is not determinable.

    Management not addressed

  • Short-term Headwinds in Broking Industry

    medium

    Management expects some recalibration and headwinds in the broking industry in the next one or two quarters due to volatility.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Retail ADTO Market Share Trends Partial
overall market share for Q4 FY '25 was about 0.96%. Overall total on the exchange NSE volume and which was about 2.62% in cash and 0.96% in F&O.

Analyst sought specific retail market share data, but management provided overall figures and promised retail-specific data later, indicating a potential gap in immediate disclosure.

Asked by Nidhesh

Strategic Shift to Wealth Management Direct
the big shift I would say in the mindset is that the focus will be more on asset gathering, focus will be more on selling, I would say, annuity products like mutual funds, AIF and PMF.

Clarifies the core strategic pivot of the company towards asset gathering and annuity products, moving away from purely transactional income.

Asked by Nidhesh

Impact of Strategy Shift on Cost-to-Income Ratio Direct
Yes, of course, it will have some impact on the cost to income ratio in the short term simply because as the build-out is happening, there will be an increase in manpower cost and that has been evident because our manpower cost has risen.

Management acknowledges that the strategic transformation will lead to increased manpower costs and a short-term impact on profitability metrics like the cost-to-income ratio.

Asked by Nidhesh

Reasons for Distribution Income Jump Direct
Yes, that is because we also had some amount of transactional income booked in that because we had distributed certain shares of unlisted, certain unlisted shares, especially NSE. So that gain has been booked there.

Explains a significant increase in distribution income, clarifying that it was partly due to one-time transactional gains from unlisted shares rather than solely organic AUM growth.

Asked by Pavan Kumar

Yield on MF/PMS/AIF Assets Direct
Actually, on a blended basis, I think the yield will be about 0.75, 0.8, 0.9x.

Provides a key profitability metric for the wealth management business, indicating the blended yield on various asset classes.

Asked by Pavan Kumar

HNI/Ultra-HNI RM Headcount and Growth Plans Direct
as of now, we have about 450 of the affluent RMs and roughly about 50, I would say, HNI or Ultra-HNI RMs... I think in the next one year, the headcount will go from 50 to about 100 or 120.

Gives specific current numbers and ambitious growth targets for specialized RMs, which are critical for scaling the high-net-worth wealth business.

Asked by Prayesh Jain

Asset Management Growth Plans Direct
So, at this point in time, I would say that we are roughly close to about Rs. 800 crores -Rs. 900 crores of assets under management and this we think should easily double in the next one year.

Provides current AUM and a clear target for doubling the asset management business within the next year, signaling strong growth ambitions.

Asked by Kshitij Taraf

Investment in Avanti Feeds Evasive
No, no, this is a wrong information. It was taken for selling purposes, and this is already off our books.

Management corrected a potential misunderstanding regarding a significant investment, clarifying that the company no longer holds shares in Avanti Feeds.

Asked by Pranay

3 min read 6 chapters

Detailed narrative

Strategic Pivot to Wealth Management

IIFL Capital is undergoing a significant transformation from a legacy retail broking business to a wealth management practice, with a primary focus on asset accumulation over transactional income. This strategic shift is bolstered by new leadership, including Raghav Gupta and Prakash Bulusu as joint CEOs, leveraging the company's brand equity, ₹2,500 crores net worth, and extensive distribution network. The new approach emphasizes asset gathering and the sale of annuity products such as mutual funds, AIF, and PMF, redefining the role of relationship managers towards client acquisition, servicing, and asset gathering.

Full Year FY25 Financial Performance Highlights

For the full fiscal year 2025, IIFL Capital reported consolidated revenues of ₹2,567 crores, marking a 15% year-on-year increase. Profit After Tax (PAT) demonstrated robust growth, surging by 40% to ₹713 crores from ₹513 crores in the prior year. Distribution income was a significant contributor, growing 32% to ₹509 crores, while other income saw a substantial 132% increase to ₹162 crores, partly driven by mark-to-market gains and real estate property sales.

Q4 FY25 Performance and Market Headwinds

The fourth quarter of FY25 presented challenges, with total revenue decreasing 20% year-on-year to ₹573 crores, down from ₹704 crores in Q4 FY24. This decline was primarily attributed to reduced exchange volumes resulting from stricter derivatives expiry norms and subdued primary market conditions. Consequently, PAT for the quarter fell from ₹181 crores in Q4 FY24 to ₹128 crores in Q4 FY25. Retail brokerage also experienced a notable drop from ₹194 crores to ₹117 crores during this period.

Cost Structure and Manpower Investments

Manpower costs for the full year FY25 increased by 29% to ₹591 crores, a deliberate investment driven by the hiring of new wealth RMs and ESOP grants totaling approximately ₹90 crores to senior management. This increase is expected to impact the cost-to-income ratio in the short term, but is viewed as a necessary cost for long-term gains from the wealth management transformation. Conversely, depreciation declined sharply by 52% to ₹55 crores, primarily due to the write-off of the Karvy acquisition investment in the previous fiscal year.

Wealth and Asset Management Growth Targets

IIFL Capital has set ambitious growth targets for its wealth and asset management segments. The current Asset Under Management (AUM) for asset management stands at approximately ₹800-900 crores, with a clear objective to 'easily double' this amount within the next year. Furthermore, the headcount for HNI/Ultra-HNI Relationship Managers, currently at 50, is planned to increase significantly to 100-120 within the same one-year timeframe, underscoring the company's commitment to expanding its high-net-worth client services.

Income Tax Search and Regulatory Environment

In January 2025, income tax authorities conducted search activity at the company's registered office and other premises. IIFL Capital fully cooperated, providing all requested details and documents. As of the earnings call, no subsequent communication regarding the outcome has been received, rendering any potential financial impact 'not determinable.' The company also highlighted that regulatory changes, particularly concerning derivatives, have impacted the F&O business, contributing to the decline in retail brokerage.

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