IIFL Capital Services Limited (IIFLCAPS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the IIFL Securities Q3 FY '23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you.

Thank you, and good afternoon, friends. Thank you for joining the conference call for Q3 FY '23 results of IIFL Securities. I'm R Venkataraman, Chairman and Managing Director of IIFL Securities, and I'm accompanied with Ronak Gandhi, our CFO. At the outset, I want to take this opportunity to wish all of you a very happy and prosperous New Year. Amid continued tensions between Ukraine and Russia and driving inflation across the globe, central banks are rising interest rates. The war against rising interest rates has led to recession risks across several economies, developed and not so developed. A survey conducted by World Economic Forum in the last quarter of '22 indicated that global recession is likely sometime in '23. Indian economy fortunately will continue to grow fast and World Bank is forecasting almost 6.9% growth. Our country has relatively lesser dependence on exports, a large domestic market is a positive. This will cast its shadow on the capital markets, along with other events in the global space. Research-based content, proprietary technology and talent pool remain the strategic pillars for growth of IIFL Securities. And our focus remains on becoming a truly digital organization and with an objective of providing customers with superior research and superior transaction experience when they engage with us. During the quarter, as you might be aware, we have undertaken a strategic reorganization of our business to maximize synergies across IIFL Securities and our sister company 5paisa Capital. Our Board of Directors have approved the transfer of our online retail trading business to 5paisa Capital. We are sharpening our focus on private client growth, primarily targeting clients with the financial assets of more than [ 10 million ]. Our institutional broking continues to remain on strong footing, where we are the port of first call for all many domestic and foreign institutions and that is primarily driven by research and our ability to execute significant [ long deals ]. In International Banking, where our focus is on ECM, we are uniquely placed because of our ability to fill all the 3 buckets of the QIB -- of the IPO and QIB construct. Coming to the results for December 31, 2022. Consolidated revenues for the quarter came at INR 347 crores, which is up 7% quarter-on-quarter, down 6% year-on-year. The reason for the quarter-on-quarter variance is because of brokerage income, which has decreased 5%, INR 155 crores in this quarter versus INR 163 crores in the previous quarter. That is mainly because of a decline in institutional broking. Equity income was flat, INR 53 crores versus INR 54 crores. Investment banking has increased significantly on a quarter-on-quarter basis, INR 42 crores versus INR 25 crores, and that is primarily because of a significant amount of these closures that happened in the [ O&D quarter ]. For a year-on-year basis, brokerage income has increased 6%. Equity income has fallen 5%, which was INR 56 crores to INR 53 crores, again marginal and investment banking has [ decreased ] 27%, INR 42 crores to INR 33 crores, which happened in the last year. Other income was about INR 4.97 crores, which decreased [ 27% ] quarter-on-quarter and 85% on a year-on-year basis and that was primarily because of mark-to-market on certain investments. Then coming to expenses, employee cost was up 2% on a quarter-on-quarter basis, up 6% on a year-on-year basis because of 2 reasons; one is because of increase in headcount as well as increase in variable pay. Average for employee count for the previous year, this quarter was 2,429, which was last year at about 2,381 and finance cost was INR 18 crores, reduced 4% quarter-on-quarter, has reduced significantly by 53% on a year-on-year basis because of the decline in IPO funding. Since the new guidelines for IPO funding has kicked in, IPO funding income has fallen sharply. Admin cost is INR 136 crores, increased 10% quarter-on-quarter and 20% year-on-year, basically due to increase in technology and marketing costs as well as some brokerage payoffs because that is accounted under this head. Coming to other housekeeping numbers; assets under management and custody stood at INR 1,24,000 crores, of which about INR 20,000 crores is third party or financial products cross-selling assets and the rest INR 103,000 is custody assets or demat asset. Average daily turnover for Q3 was INR 156,000 crores, which was INR 1,569 crores in cash and INR 155,187 crores in the derivative segment. Corresponding figures for Q2 was INR 135,000 crores which was INR 1,702 crores in cash and INR 133,000 crores in derivative segment. As you can see, the fastest growing segment in this entire [ game ] is derivative. So with this, I come to the end of my talk, and we are happy to answer any questions that you might have.

Thank you. Ladies and gentleman, we will now begin the question-and-answer session. [Operator Instructions]

Since nobody has any questions, shall we end it, or because we are always available to answer questions, me and Ronak are there? So they can send an email to us directly if they have any questions.

Thank you, sir. Would you like to add any closing remarks?

No. Thank you for joining. And if you have any further add-on questions, please feel free to ask, either me or Ronak or Veenashree at ir@iifl.com and we'll be more than glad to answer any questions.

Thank you, members of the management team. Ladies and gentlemen, on behalf of IIFL Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.