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MOSL: IIFL WEALTH (Buy)-Strong net inflows; healthy beat on profitability

IIFL WEALTH: Strong net inflows; healthy beat on profitability

(IIFLWAM IN, Mkt Cap USD1.8b, CMP INR1534, TP INR1775, 16% Upside, Buy)

 

• PAT grew 13% QoQ and 42% YoY to INR1.17b (14% beat) in 1QFY22. The beat on profitability was driven by: a) a 12% beat on net revenue (+7 QoQ and 43% YoY to INR2.8b) owing to both Annual Recurring Revenue (ARR, 10% beat) and Transactional/Brokerage Revenue (TBR, -16% beat), b) better operating efficiency (CIR of 54% v/s our estimate of 56.5%), and c) a lower tax rate of 22.6% (est. 24%).
• 1QFY22 saw strong net inflows of INR143b (including corporate treasury inflows of INR52b), of which INR97b/INR46b belonged to ARR/TBR. Net inflows were strong across ARR assets – INR14b/INR46b/INR36b for IIFL ONE/AMC/third-party assets. Unlike 4QFY21, net inflows were more granular in 1QFY22.
• Gross AUM (excluding custody assets) grew 14% QoQ and 33% YoY, with a continued shift in the mix towards ARR assets. ARR’s share rose 75bp QoQ to 50% (v/s 41% YoY). The share of ARR in overall revenue stood at 67%, reaching targeted levels of 70-75%. Within ARR assets, AMC and Distribution AUM grew 19% QoQ. 1QFY22 also witnessed an increase in the share of high-yielding DPMS assets within IIFL ONE assets.

 

Gross AUM reaches INR2.35t; shift in mix favors ARR assets

• ARR assets rose 15% QoQ and 61% YoY to INR1.18t. TBR assets were up 12% QoQ and 14% YoY to INR1.18t.
• While IIFL ONE continued to gain traction, with AUM up 9% QoQ and 52% YoY to ~INR305b, other segments within ARR (AMC/Distribution) outpaced growth with 19% QoQ growth. The share of the Discretionary portfolio (the highest yielding portfolio) in IIFL ONE improved to 35% v/s 31% in 4QFY21.