IIFL Capital Services Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Flat quarter, costs bite: Consolidated operational revenue was virtually flat QoQ and YoY at ₹586 crores, while a jump in employee costs and fees drove operational PBT down 27% QoQ.
• Retail broking the lone bright spot: Retail broking revenue rose 6% QoQ to ₹288 crores on increased volumes, even as Institutional & IB fell 14% QoQ.
• One-off gains mask operational dip: Other income of ₹135 crores included a ~₹90 crore gain on a real estate sale and mark-to-market gains on BSE shares, cushioning the reported bottom line.
• Wealth management still a drag: The wealth business remains loss-making, with management targeting break-even only by next year, while competitive hiring pressures slow RM additions.
• What to watch next quarter: Whether the retail broking momentum holds, any clarity from the ongoing income tax assessment proceedings, and the pace of expense growth relative to revenue.

Revenue Drivers

• Retail broking up on volumes: Revenue rose 6% QoQ to ₹288 crores, driven by a 19% QoQ jump in average daily turnover to ₹3,14,660 crores, though it remains down 3% YoY.
• Institutional & IB declined sharply: Revenue fell 14% QoQ to ₹160 crores, with the institutional piece contributing roughly ₹100 crores of that total per an analyst's math.
• FPD steady growth: Revenue up 3% QoQ and 25% YoY to ₹134 crores, attributed to an increased focus on distribution income.
• Revenue mix stable: The split between trail-based revenue (TBR) and upfront (ARR) stayed broadly in the 60/40 range, with management expecting this to persist or tilt slightly to 65/35.

Cost Structure & Margin Pressure

• Employee costs surged: Up 14% QoQ to ₹175 crores, driven by variable pay provisioning and a one-time ₹7 crore charge from labour law changes; up 17% YoY on headcount additions.
• Fees and commissions climbed: Up 10% QoQ to ₹130 crores on higher payouts, and up 10% YoY.
• Admin and depreciation rising: Admin expenses up 5% QoQ and 30% YoY on technology, branding and marketing spend; depreciation up 13% QoQ and 21% YoY on branch and tech investments.
• Operational PBT squeezed: Down 27% QoQ and 36% YoY to ₹119 crores before mark-to-market gains, as the expense build-out outpaced a flat top line.

Regulatory & Strategic Updates

• Income tax search ongoing: The IT Department conducted a search under Section 132 in January 2025; the company co-operated fully and paid ad hoc taxes of ~₹27 crores on a consolidated basis, accounted this quarter. Post-search assessment proceedings are in progress with no order, demand or notice yet; management believes there is no material adverse effect on the financial position.
• Strategic opportunities explored: Management acknowledged it constantly explores strategic and other opportunities to enhance shareholder value, responding to media reports on investments, but stated any disclosure will be made only if and when required under SEBI LODR regulations.

Venkataraman: "We constantly explore strategic and other opportunities to enhance shareholder value. If and when there is a development that requires any disclosure in the SEBI's LODR regulations, we will make it."

Wealth Management & Hiring

• Wealth business still loss-making: The segment is currently in the red, with management hoping to get closer to break-even only by next year.
• RM hiring slowed by competition: The company expects to add only 10-15 relationship managers in the next two months, citing an increasingly competitive recruitment landscape that is forcing a slower pace.

Venkataraman: "I hope that at this point in time we are loss making, but by next year we should be closer to break even."

Venkataraman: "this space is becoming increasingly competitive and recruitment we have faced, I think everybody is facing recruitment challenges, and hence we are going slow in the way we are recruiting."

Guidance & Commitments

Key Metrics