IIFL Securities Ltd

Established in 1996 as a subsidiary of the IIFL Group, IIFL Securities Limited is a comprehensive financial services provider, catering to both retail and institutional clients across India. The company specializes in retail and institutional equities, financial products distribution, commodity broking, currency broking, investment banking, financial planning, and wealth management services.

Key Offerings:

  1. Retail Broking: Services include equities, commodities and currency broking, financial planning, depository participant services, distribution of mutual funds and bonds, portfolio management services (PMS), alternative investment funds (AIF), retirement planning, and estate planning.
  2. Institutional Broking: Provides broking services, corporate access, and research support to institutional clients.
  3. Investment Banking: Engages in activities such as Initial Public Offerings (IPOs), Qualified Institutional Placement, Rights Issues, Preferential Placement, Follow-on Public Offer, mergers and acquisitions, share buybacks, tender offers, and delisting. Additionally, the company offers advisory services.

Revenue Split (FY22):

  • Capital Market Activity: 81%
  • Insurance Broking: 4%
  • Facilities & Ancillary: 15%

Pan-India Presence:
IIFL Securities has a widespread presence, serving over 3.5 lakh active clients and reaching more than 2.4 million customers through a network of 2,500 points of contact across 500 cities in India.

Institutional Broking Franchise:
The company holds a prominent position in the industry with offices in Mumbai, New York, and London. It serves 770+ institutional clients, both domestic and foreign, covering a wide range of stocks, accounting for over 80% of India’s market capitalization.

Subsidiaries:
IIFL Securities Limited has five major subsidiaries, namely IIFL Facilities Services Limited, IIFL Insurance Brokers Limited, IIFL Management Services Limited, IIFL Capital Inc., and IIFL Wealth (UK) Limited.

Business Developments:

  • Entered the Alternative Investment Fund (AIF) business through subsidiary, launching two AIFs in listed and unlisted/startup spaces.
  • Achieved the top ranking in raising equity for private sector IPOs during the FY18-FY21 period.

Strategic Movements:

  • Sold a 5% stake in Livlong Protection and Wellness Solutions Ltd, a wholly-owned subsidiary, to Mr. Gaurav Dubey.
  • Acquired 1.1 million accounts of Karvy stock broking through a formal bidding process.
  • Established a tie-up with Karnataka Bank to introduce “KBLSmart Trade,” offering instant paperless account opening and a consolidated Demat and trading account feature.

Financial Highlights:

  • Conducted a buy-back of 1.7 crore equity shares on February 15, 2021, with an outlay of 105.7 Crores.
  • Reported investments totaling 227 crores as of March 2022, demonstrating a substantial increase from the 73 crores recorded in March 2021. These investments comprise various equity and debt instruments.

Invested in small quantity.

Need your help in analysing this stock is the good for long term hold?

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A few of other things -

  1. The company and 5paisa (promoter group company) have a pending scheme of arrangement wherein IIFLSEC will transfer its online retail accounts to 5paisa in exchange for 1 share of 5paisa for every 50 shares held. Management has repeatedly said that they want to focus on high margin traditional brokerage business and not discount broking.
  1. They have real estate properties which they are looking to sell. Management mentions this regularly in concalls.

My thesis is bullish on the entire brokerage industry. Rising tide (derivative volumes) will raise all boats. The sale of Sharekhan (similar in terms of market share) has given a benchmark valuation for an otherwise contracting market share business.

Cons are you don’t know what skeletons are in the closet of these legacy brokers. Recent SEBI action on IIFLSEC for activities in 2013-14 led to a sharp fall. SAT suspended the order though.

https://www.sebi.gov.in/enforcement/orders/jun-2023/final-order-in-the-matter-of-iifl-securities-limited_72785.html

Disclosure - Invested, no buying in the last 6 months.

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The scheme of arrangement with 5paisa has been withdrawn.

Yet another outstanding performance from IIFL Sec. It has grown in all segments: equities, MF, insurance, investment banking etc. Seems to be among the undervalued stocks stocks in the wealth management/broking sector
Anyone has any views on sustainability of these earnings?

Discl: Invested

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