20 May 2021
4QFY21 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
96.6 / 1.3
1358 / 782
-4/-2/-30
47
CMP: INR1,099
A mixed quarter
TP: INR1,500 (+37%)
Flows rebound due to a large institutional mandate
PAT grew 7% QoQ to INR1.03b (8% beat) in 4QFY21. The beat was driven
largely by higher-than-expected TBR income.
Core revenue (excluding other income) was largely flat at INR9.2b and PAT
was up ~87% YoY to INR3.7b in FY21. Excluding the impact of other income,
core operating profit was also flat YoY at INR3.5b.
Following the sharp decline in 3QFY21, net new flows rebounded to
INR58b. This was aided by one large portfolio management mandate of
INR35b.
Net flows in FY21 were INR142b.
The company has guided at flows
improving to INR200b/INR250b in FY22/FY23.
Annual Recurring Revenue (ARR) assets have continued to drive AUM
growth. AUM rose 3.3% QoQ/32% YoY to INR2.07t, of which ARR assets
grew 13% QoQ/63% YoY to INR1.02t. Transactional/Brokerage Revenue
(TBR) assets declined 4% QoQ, but grew 11% YoY to INR1.05t.
IIFL-ONE continued to gain traction, with AUM up 8% QoQ/58% YoY to
~INR280b. However, the share of discretionary assets (which are high
yielding) declined to 31% from 35% QoQ.
ARR revenue (up 4% QoQ/13% YoY) missed our estimate by 7%. This was
due to a 100bp QoQ decline in NIM on loans as well as a 6bp QoQ decline
in AMC yields.
Yields in IIFL-ONE remains stable at 28bp.
Strong transactional revenue (36% beat) aided overall operational revenue
beat.
The surprise on TBR revenue came from IB/syndication-related fees
of INR600m v/s INR442m in 3QFY21.
The management guided at a 5bp reduction in overall yields to 52bp over
FY21-23E.
Total opex remained flat QoQ and was down 6% YoY to INR1.5b.
The company is looking to increase ARR share to 70-75% over the next 12-
18 months from ~50% currently. IIFL-ONE share will rise to 50-55% of ARR
by the end of FY22.
Third-party products of INR227b, wherein commissions were received
upfront (under TBR), are likely to mature in the proportion of
50%/35%/15% in FY22/FY23/FY24.
Financials & Valuations (INR b)
Y/E March
2021 2022E 2023E
Net Revenues
9.2
11.0
12.9
Opex
5.7
6.2
6.7
Core PBT
3.5
4.8
6.2
PAT
3.7
4.4
5.3
Ratios
PBT margin (bp)
22
25
28
PAT margin (bp)
23
23
24
RoE (%)
12.7
16.3
19.9
Div. Payout (%)
167
150
80.0
Valuations
P/E (x)
26.2
21.9
18.2
P/BV (x)
3.4
3.7
3.6
Div. Yield (%)
6.4
6.9
4.4
Strong transactional revenue; opex flat
Shareholding pattern (%)
As On
Mar-21 Dec-20 Mar-20
Promoter
22.9
23.0
22.9
DII
2.0
1.9
1.3
FII
24.2
21.9
20.1
Others
50.8
53.3
55.7
FII Includes depository receipts
Highlights from the management commentary
Valuation and view
Over the past decade, IIFLWAM has evolved into one of the leading wealth
management franchises in India. It has also become one of the largest alternate
asset managers, with unique product offerings. The AMC business has been
scaling up fast and now comprises 18% of total AUM. Traction in IIFL-ONE
remains healthy. However, yields are still sub-par. In 4QFY21, net flows have
been encouraging. We keep our estimates largely unchanged. Buy with a TP of
INR1,500/share (25x FY23E EPS).
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)
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.