4 February2021
3QFY21 Results Update | Sector: Financials
IIFL Wealth
Buy
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
IIFLWAM IN
87
93.8 / 1.3
1600 / 685
-3/-27/-44
49
CMP: INR1,070
A mixed quarter
TP: INR1,250 (+17%)
Financials & Valuations (INR b)
2020 2021E
Y/E March
9.2
9.0
Net Revenues
5.7
5.6
Opex
3.6
3.4
Core PBT
2.0
3.6
PAT
Ratios
PBT margin (bp)
PAT margin (bp)
RoE (%)
Div. Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
26
15
6.8
100
46.3
3.1
1.9
21
22
13.2
241
25.8
3.8
9.3
2022E
11.2
6.5
4.7
4.3
24
22
19.1
207
21.7
4.6
9.5
IIFL Wealth Management (IIFLWAM)’s 3QFY21 PAT grew 32% YoY to
INR966m. The 21% beat was driven by healthy revenue and higher other
income, partially offset by an increase in operating expenses.
In 9MFY21, core revenue (excluding other income) was largely flat at
INR6.5b, while PAT was up ~30% YoY to INR2.7b. Excluding the impact of
other income, core operating profit was down 10% YoY to INR2.3b. Our
earnings estimates remain largely unchanged for FY22/FY23E. We expect a
19% core PBT CAGR over FY20–23E. Reiterate
Buy, with TP of INR1,250
(20x FY23E EPS).
After a strong performance in 2QFY21 (INR60b), net new flows declined
sharply to INR20b.
This was driven by sharp net outflows in Distribution as
well as in the RIA/Estate Planning segment.
Driven by MTM gains,
total gross AUM increased 7% to INR2t from
INR1.87t sequentially.
Notably, the company has changed its classification
of AUM to include AMC assets sourced by its own team.
Annual Recurring Revenue (ARR) assets continue to drive AUM growth –
ARR assets grew 14% QoQ to INR905b v/s 2% growth reported in
Transactional/Brokerage Revenue (TBR) assets.
Note that in 9MFY21, the
share of ARR assets in total AUM increased 400bp to 45%.
IIFL ONE continues to gain traction, with AUM up 17% QoQ / 61% YoY to
~INR260b.
The share of the Discretionary portfolio (this portfolio is the
highest yielding) in IIFL ONE increased to 32% from 22% sequentially.
ARR yield was intact at 73bp.
In the AMC segment, yield continues to
expand (up to 77bp from 63bp over the past two quarters).
TBR yield was
also largely stable at ~30bp.
Total opex grew 15% QoQ to INR1.53b – 20% above our estimates. This
was driven by 12%/23% QoQ growth in employee expenses / opex to
INR1.1b/INR430m.
We await clarity from the management on the same.
The NBFC’s loan book remains largely range-bound at ~INR30b. With lower
cost of funds, spreads improved 40bp QoQ to 2.5%.
The company announced an interim dividend of INR30/share. Total
dividend in FY21 amounts to INR70/share.
RM count declined to 205 from 231 QoQ and 288 YoY.
It is on course to achieve INR110–120b net inflows in FY21. It targets
INR120–150b net new flows on a run-rate annual basis.
It is projecting lower retention yield for FY22 due to the assumption of
lower TBR revenue from slower capital market activity and on account of
lower other income.
Net flows down QoQ; AUM reaches INR2t
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
22.9
23.0
DII
1.9
1.7
FII
21.9
21.1
Others
53.3
54.3
FII Includes depository receipts
Dec-19
24.1
0.4
18.8
56.6
Segmental yield intact; opex disappoints
Other highlights
Key concall takeaways
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)