Anand Rathi Share & Stock Brokers Ltd| Q4 FY 26 Earnings Conference Call

NEUTRAL SENTIMENT

⬤20th Apr 26

Summary : Anand Rathi demonstrated resilient growth in FY26, driven by diversified revenue and strong distribution, despite market headwinds and regulatory changes.

Management Perspective positive : "FY '26 has undoubtedly been a memorable year, marked by several significant achievements.""I am pleased to inform that we propose a dividend of INR5 per share.""Our diversified revenue model continues to be key strength of the company.""We continue to maintain zero NPA on our MTF book, reflecting our judicious underwriting practices.""We are focused on building long-term customer relationships."

Concall Report Analysis & Insights

Business Overview

Anand Rathi is a financial services firm specializing in broking and distribution.
The company focuses on a balanced revenue mix between broking and non-broking segments.
It operates on a 'phygital' model, combining relationship-led service with robust digital capabilities.
Successfully completed its IPO in September '25, raising ₹745 crores to strengthen the business.
Obtained a corporate agency license, enabling distribution of life and health insurance products.

Future Growth Prospects

Aims to achieve a 50-50 revenue split between non-broking and broking segments.
Plans to expand its distribution business across a wide range of financial products.
Strengthening its Margin Trading Facility (MTF) franchise with improved capital and risk management.
Investing in technology platforms, processes, and people to enhance productivity and customer engagement.
Expanding its geographical network by strengthening branches in emerging Tier 2 and Tier 3 markets.

Management Insights

FY26 was a memorable year marked by significant achievements, including a successful IPO.
The company proposes a dividend of INR5 per share, pending shareholder approval.
A diversified revenue model, with increasing non-broking income, is a key strength.
Focused on building long-term customer relationships and addressing clients' holistic financial needs.
Maintained zero NPA on the MTF book, reflecting prudent underwriting and asset quality focus.

Signs of Skepticism

MTF book experienced a 10.53% downfall in Q4 FY26 due to RBI policy changes.
Company had to control MTF growth due to reduced working capital avenues from banks.
Broking revenue for the full year FY26 saw a slight dip of 6.8% compared to the previous year.
The targeted 50-50 broking/non-broking revenue split is not yet fully achieved.
Management acknowledges uneven near-term market conditions despite long-term constructive direction.

Risk Factors

Global economies and financial markets faced multiple headwinds and geopolitical tensions in FY26.
Shifting global trade dynamics and fast-paced technological shifts disrupted established business models.
Sustained FII outflow and heightened volatility across markets weighed on investor sentiment.
RBI policy changes for capital market intermediaries reduced avenues for working capital, impacting MTF growth.
Bearish market conditions and a significant Nifty fall impacted investor sentiment and MTF book.

Good To Know

Demat accounts grew from 15.14 crores (March '24) to 22.2 crores (Feb '26), reflecting retail participation.
Mutual fund AUM rose from 65.74 lakh crores (March '25) to 82.02 lakh crores (Feb '26).
SEBI introduced regulatory measures to strengthen risk management and investor protection in capital markets.
The company's debt-equity ratio significantly improved to 0.62 (March '26) from 1.8 (March '25).
Employee base stood at 2,214 as of March '26, a net addition of 132 employees year-on-year.

Key Drivers

Strong growth in distribution income.
Diversified revenue model shows resilience.
Significantly improved debt-equity ratio provides flexibility.
Expanding client base and AUM.

Key Analyst Discussions

Competitive Environment

Q: How does the company plan to improve investor experience using digital platforms?
A: By strengthening digital platforms for execution ease and relationship manager support.
Q: How does Anand Rathi differentiate itself in a competitive market?
A: Focuses on a relationship-led, research-backed, technology-enabled business model.
Q: Are there competitive pressures on MTF yields?
A: Not facing significant pressure currently due to pent-up demand and prudent management.
Q: How does the company manage its broking revenue mix to reduce market volatility impact?
A: Focuses on investment-based trading, not speculative, with a balanced cash/derivatives mix.
A: Employs conservative risk management, internal controls, and regulatory compliance.

Market Trends & Consumer Behavior

Q: How will the 50-50 broking/non-broking segmentation evolve given market conditions?
A: Non-broking is growing faster, broking slower but steady, targeting 15-20% overall growth.
Q: How does the company address investment needs for various customer segments?
A: Provides a tailored basket of products suitable for specific customer segments.
Q: How does the company encourage an investment-focused approach over speculative trading?
A: Maintains a healthy balance across equity cash, equity derivatives, and other segments.
Q: What is the demographic profile of active clients and their investment behavior?
A: 42% active clients for over five years, 83% over 30 years old with higher investable surplus.
Q: How does the company manage market volatility in its broking business?
A: Aims for stable broking revenue, less impacted by market eventualities.

Financial Highlights

Q: How does Anand Rathi manage risks while maintaining profitability and growth?
A: Through conservative risk management, strict internal controls, and a significantly reduced debt-equity ratio.
Q: What is the growth outlook for broking (15%) and non-broking (40-45%) segments?
A: Non-broking is expected to grow 40-45%, broking around 15%, aiming for 15-20% overall revenue growth.
Q: How are MTF yields expected to trend given competitive pressures?
A: Currently not facing significant pressure, aiming to maintain existing yields despite competition.
Q: How much of the AUM increase is from active clients versus existing clients?
A: AUM increase is primarily from existing clients, with continuous new client additions.
Q: What was the total client base growth for the last financial year?
A: The total client base increased by 12% in the last financial year.

Product Composition

Q: What is the current revenue mix between broking and non-broking segments?
A: Q4 FY26: 47% broking, 53% non-broking; Full year FY26: 51% broking, 49% non-broking.
Q: What is the revenue mix across equity cash, F&O, and other segments?
A: Full year FY26: 51% equity cash, 41% F&O, 8% others; Q4 FY26: 49% equity cash, 41% F&O, 10% others.
Q: How does the company plan to achieve a 50-50 revenue split?
A: By growing non-broking at 40-45% and broking at 15% annually.
Q: What is the company's approach to derivative market broking?
A: Focuses on hedge positions and limited loss, not over-leveraging.
Q: Does the company deal with proprietary trading books?
A: No, the company does not deal with any proprietary book.

Strategic Considerations

Q: How does the company plan to guide its broking and wealth management business?
A: Focuses on broking and product distribution, addressing all investment needs.
Q: What is the company's strategy for new client acquisition and advisory modules?
A: Strengthening digital platforms and relationship manager engagement.
Q: What is the company's philosophy for building long-term customer relationships?
A: Building long-term relationships, increasing wallet share, and balanced revenue mix.
Q: How does the company plan to expand its geographical network?
A: Strengthening branch network and business partner ecosystem in Tier 2/3 markets.
Q: What is the company's approach to talent and team building?
A: Views talent as a strategic asset, investing in high-quality teams.