EUR 120.00 For Business Accounts Only

MOSL: IIFL WEALTH: Strong operational performance (IIFLWAM IN, Mkt Cap USD1.8b, CMP INR1640, TP INR2200, 34% Upside, Buy)

• IIFLWAM's PAT declined 5% QoQ, but grew 34% YoY to INR1.6b (4% beat) in 1QFY23. The beat on profitability was driven by a 5% beat on net revenue (down 11% QoQ but up 32% YoY to INR3.8b) owing to a 34% beat on Transaction/Brokerage Revenue (TBR), whereas Annual Recurring Revenue (ARR) was 4% lower than our estimate.
• Opex stood at INR1.7b, a decline of 29% QoQ / 9% YoY growth and 7% below our estimate. The sequential decline was mainly attributable to a sharp fall of 68% in variable employee expenses. Admin costs also declined 24% QoQ.
• The cost/income ratio came in at 44.5% (est. 50.4%), down 1,100bp QoQ, and 950bp YoY.
• Sequentially, net inflows moderated slightly to INR60.8b in 1QFY23 (excluding custody) from INR70.4b in 4QFY22.
• Gross closing AUM (excluding custody assets) dropped QoQ but posted 7% YoY growth, with a continued shift in the mix towards ARR assets. ARR's share stood at 57% v/s 55% in 4QFY22. The share of ARR in overall revenue stood at 68% v/s 60% last quarter, with normalization of TBR revenue. Within ARR assets, IIFL One AUM saw a marginal dip of 1% QoQ.

 

Gross AUM declines QoQ to INR2.5t; shift in mix favors ARR assets

• On a closing AUM basis, ARR assets dipped 1% QoQ but grew 22% YoY to INR1.4t. TBR assets declined 7% both YoY/QoQ to INR1.1t.
• AUM for IIFL ONE was down 1% QoQ but rose 6% YoY. The sequential decline was led by a 5% drop in non-discretionary PMS assets, whereas advisory assets grew 4%. MTM hit on ARR assets was INR60b, while in TBR assets the hit was INR98b.

 

Marginal contraction in yields with normalization of TBR yields

• ARR grew 32% YoY and 1% QoQ to INR2.6b, while TBR declined 30% QoQ but jumped 32% YoY to INR1.2b.
• ARR yield remained flat QoQ at 71bp, whereas TBR yield contracted to 42bp QoQ (-15bp). Resultantly, net operational yield declined QoQ to 58bp. Within the ARR segment, the net yield for IIFL ONE saw slight moderation QoQ to 32bp (from 33bp).