Strong revenue growth, margin compression — Fairfax deal masks earnings decline QoQ

Reported revenue ₹714.4 Cr, up 24.9% YoY

After ₹32 Cr MTM loss (BSE), underlying PBT gains masked by financing costs

Delivered 13.1% QoQ growth

Management disclosed ₹450 Cr institutional revenues (broking + IB combined)

Finance costs up 40% YoY, dragging margins despite revenue lift

Prior call expected 2–3 month RBI approval; now regulatory clearances received, pref allotment & open offer under implementation, 51% control imminent.

Q1 called out 'increased borrowings'; Q2 shows 40% YoY finance cost growth and margin-funding book expansion. Borrowed funds being deployed to margin lending, structurally raising carry costs.

Management now says insurance 'marginal,' will 'focus on capital markets distribution.' Implicit shift away from multi-product wealth toward broking/AIF/PMS, de-rating the insurance component.

In-house manufacturing AUM ₹4,500 Cr, investing heavily, break-even 'longer' (12–24m+). New, material drag on near-term profitability, not flagged before.

RM additions marginal/single digits. Institutional revenues ₹450 Cr (₹250 Cr broking, ₹200 Cr IB).

Bulk for margin funding & repayment of borrowing. Details in open offer document.

Outflows in NDPMS; expecting recovery soon.

ARR income growth (AIF, PMS, mutual fund). Insurance underperformed. Next 2 quarters should see insurance uptick.

Marginal impact. No prop book, so no exposure.

Headcount in AMC (wealth), modest. ~5% headcount increase YoY + variable pay + wage inflation.

In-house equity ~2–2.5%; third-party ~1.5% (50% of in-house).

Target 6–18 months. In-house manufacturing ₹4,500 Cr investing; that takes longer.

I'll call you separately, don't have figure now.

Insurance marginal now. Will focus more on capital markets distribution long-term. Open to discussions on insurance divestment.

Fairfax press release mentions both Go Digit and IIFL Capital interests may subume into bank as subsidiary long-term. Better answered by Fairfax.

Promoter group will not offer; will sell only if needed to make Fairfax 51%. Structure keeps promoter control.

Prior call indicated ~20% multi-year growth target; Q2 delivered 24.9% YoY, but no new FY27 numeric revenue target stated.

Operational PBT expansion masked by ₹32 Cr MTM loss and 40% YoY finance cost growth. No guidance on near-term NPM or OPM levels.

No formal capex guidance, but technology and branch investments driving depreciation +16% YoY; NBFC subsidiary and wealth platform ramp will require continued capex.

Finance costs surge 40% YoY to ₹75 Cr as margin-funding book grows via Fairfax capital infusion. If market corrects, margin calls & credit losses could spike, compressing margin-funded revenues.

Wealth/FPD business is unprofitable with 6–18 month break-even target. In-house AUM manufacturing ₹4,500 Cr is multi-year investment. Losses unquantified but analyst had to press for disclosure.

Insurance revenue underperformed, described as 'marginal.' Management now prioritizes capital markets distribution and is 'open to discussions' on insurance divestment, signaling portfolio exit.

PMS AUM declined QoQ due to NDPMS outflows; management expects recovery but did not quantify or explain root cause. Suggests client churn risk in high-conviction portfolios.

Management cited geopolitical tensions, elevated oil prices, high interest rates, currency pressure, and outgoing foreign flows as near-term drags. Retail/institutional client activity could weaken, compressing broking spreads.