IIFL Capital Services Ltd Management Discussions

GLOBAL ECONOMY

The global economy maintained steady growth momentum in CY 2025, supported by investment activity in advanced economies and continued expansion across Emerging Market and Developing Economies (EMDEs). Global growth was estimated at 3.4% in CY 2025. Advanced economies expanded by 1.9%, supported by technology-led investment in the United States and fiscal support in Europe, while EMDEs grew by 4.4% despite currency volatility and elevated import costs in several markets.

Global headline inflation was 4.1% in CY 2025, continuing a multi-year moderation. Global trade remained robust in CY 2025, with brisk expansion concentrated in technology-related exports, particularly semiconductors and AI-related equipment, primarily benefiting Asian manufacturing hubs. However, the external environment became increasingly uncertain heading into CY 2026. Trade policy uncertainty remained elevated as major economies recalibrated tariff structures, raising the risk of supply chain disruptions, higher input costs and weaker cross-border trade and investment flows.

OUTLOOK

The International Monetary Fund (IMF) projected global growth at 3.1% in CY 2026 and 3.2% in CY 2027, assuming geopolitical tensions remain contained. However, the outlook remains below the pre-pandemic average of 3.7% (2000-2019), reflecting persistent trade policy uncertainty, geopolitical risks and fiscal pressures. A prolonged conflict could sustain elevated energy prices, delay monetary easing, widen fiscal and current account deficits, and tighten global financial conditions, with commodity-importing EMDEs remaining particularly vulnerable. Increasing protectionist measures and sector-specific tariffs may further disrupt global supply chains, constrain trade and investment flows, and reinforce geoeconomic fragmentation.

At the same time, geopolitical tensions, including the conflict involving the United States and Iran, disrupted oil supply routes and increased volatility in energy markets. Although Brent crude prices rose sharply during the period, the U.S. Energy Information Administration (EIA) expected prices to moderate through CY 2026 as supply conditions gradually normalise.

[Source: International Monetary Funds World Economic Outlook, April 2026 U.S. Energy Information Administrations Short-Term Energy Outlook, June 2026]

Fiscal pressures also persisted across several economies as governments balanced higher defence expenditure, energy-related support measures and fiscal consolidation objectives. Elevated fiscal deficits could increase sovereign borrowing costs and tighten global financial conditions. Energy-related cost pressures were also expected to keep global headline inflation elevated at 4.4% in CY 2026, with the trajectory dependent on geopolitical developments and the pace of normalisation in energy markets.

[Source: International Monetary Fund (IMF) World Economic Outlook, April 2026]

At the same time, the accelerating adoption of artificial intelligence (AI) presents a structural opportunity to improve productivity across industries and support medium-term global growth. India remains well positioned to benefit from this transition, supported by its strong technology ecosystem, competitive services sector and favourable demographic profile. Continued macroeconomic stability, regulatory reforms and infrastructure investments are expected to sustain Indias growth momentum despite an uncertain global environment.

[Source: International Monetary Fund (IMF) World Economic Outlook, April 2026]

INDIAN ECONOMY

Measured against the turbulence that defined global markets in FY 2026, Indias economic performance stood apart. The Indian economy grew 7.7% in FY 2026, compared to 7.1% in FY 2025 as per the new Gross Domestic Product (GDP) series with base year 2022-23. Indias macroeconomic setting in FY 2026 was anchored by two structural pillars. On the demand side, Private Final Consumption Expenditure (PFCE) at constant prices grew by 7.7% in FY 2026, compared to 5.8% in FY 2025, signalling a broad-based recovery in household spending that supported both rural and urban sectors. On the supply side, Gross Value Added (GVA) expanded 7.9% in real terms, with manufacturing and services emerging as the primary growth engines. Gross Fixed Capital Formation (GFCF) growth improved to 8.2% in FY 2026, from 6.4% in FY 2025, reflecting healthy private investment alongside continued government capital expenditure.

[Source: Ministry of Statistics & Programme Implementation (MoSPI) Second Advance Estimates of Annual GDP for FY 2025-26, February 27, 2026]

These outcomes were facilitated by two pivotal policy enablers. Firstly, the Reserve Bank of India (RBI) transitioned to a neutral policy stance after executing a cumulative 125-basis-point cut in the repo rate through the easing cycle, bringing it to 5.25% by

December 2025. The RBI held the rate steady at its June 2026 meeting, citing evolving geopolitical conditions in West Asia, whilst reducing its FY 2027 GDP growth forecast to 6.3% from 6.6% set earlier. Secondly, the successful implementation of Goods and Service Tax (GST) 2.0 rationalised the tax structure into two primary slabs of 5% and 18%, effectively abolishing the 12% and 28% brackets. This reform has significantly simplified compliance and boosted consumption in key sectors such as automobiles, electronics and Fast-Moving Consumer Goods (FMCG).

[Source: RBI Monetary Policy Statement, February 2026 Trading Economics, GDP Forecast, February, 2026]

The Indian Rupee faced significant pressure during FY 2026, depreciating sharply against the US Dollar amid sustained Foreign Portfolio Investor (FPI) outflows and the escalation of conflict in West Asia from February 2026 onwards. The Rupee was trading near 94.7 per US Dollar in late March 2026, a year-on-year depreciation of approximately 10.7%, the steepest since FY 2012. Despite this, inflationary pressures remained well contained. Consumer Price Index (CPI) inflation for FY 2026 averaged 2.1%, well within the RBIs target band of 2-6%, aided by a sharp decline in food prices and GST rationalisation.

[Source: RBI Monetary Policy Statement, February 2026 Trading Economics, GDP Forecast, February, 2026]

Despite these capital account frictions, Indias aggregate external position remained supported by adequate macroeconomic buffers. Indias foreign exchange reserves stood at US$ 697.1 Bn as of April 3, 2026, representing approximately 11 months of import cover. The central banks April 2026 Bulletin affirmed that external sector vulnerability indicators remained well-contained. Gross FDI held firm at US$ 94.5 Bn, though net FDI moderated to US$ 7.7 Bn due to a rise in outbound investment and repatriations. Total exports of goods and services rose to US$ 865.5 Bn from US$ 822.9 Bn, spearheaded by robust services exports, while merchandise shipments grew only marginally against a restrictive global trade backdrop.

[Source: RBI Weekly Statistical Supplement, April 3, 2026 Visaverge Newsletter, April 2026]

The improving macroeconomic environment is reflected in corporate credit quality. Rating upgrades outpaced downgrades for the fifth consecutive year, with ICRA Limited reporting that the Credit Ratio (upgrades to downgrades) strengthened to 3.1x in FY 2026, compared to 2.0x in FY 2025.

[Source: ICRA Limited Credit Ratio Report, FY 2026]

Gross FDI into India remained resilient, reaching US$ 94.5 Bn in FY 2026, despite elevated global interest rates. The sustained inflows reflect global confidence in Indias domestic growth trajectory and its strategic position as a primary beneficiary of global supply chain diversification efforts. However, the net FDI number was weak at US$ 7.7 Bn in FY 2026, as outbound FDI from India and repatriations rose sharply.

[Source: Institute of Chartered Accountants of India (ICAI) Portal]

The banking sector continued its fundamental improvement, with the gross Non-Performing Assets (NPAs) ratio for Scheduled Commercial Banks (SCBs) declining to 2.2% as of September 2025, the lowest in over a decade, compared to 2.3% in March 2025. This consistent improvement in asset quality was further supported by a record low level of Net Non-Performing Assets (NNPA) ratio of 0.5%. The Capital-to-Risk-Weighted Assets Ratio (CRAR) for SCBs stood at a robust 17.2% as of September 2025, well above regulatory minimums, with a Common Equity Tier 1 (CET1) ratio of 14.8%, reflecting an adequately capitalised financial system. Furthermore, the profitability of the sector was bolstered by a healthy Return on Assets (RoA) and Return on Equity (RoE), providing banks with the necessary buffers to absorb potential macroeconomic shocks and support credit expansion into productive sectors like manufacturing and infrastructure.

[Source: Financial Stability Report, December 2025]

Indias exports of goods and services reached US$ 865.5 Bn in FY 2026, up from US$ 822.9 Bn in the previous fiscal year. The increase was mainly led by services exports while goods exports rose marginally, despite multiple headwinds to global trade.

[Source: DGCIS, quick estimates RBI, Data Release]

Indias Goods and Services Tax (GST) collections demonstrated the continued formalisation of the economy. Gross GST collections in FY 2026 stood at 22.276 Lakh Crores, an 8.3% year-on-year increase, while net collections totalled Rs.19.34 Lakh Crores, a 7.1% increase. The government maintained its fiscal consolidation trajectory during FY 2026, supported by stronger tax buoyancy.

[Source: GST Council / Ministry of Finance Monthly GST Revenue Data]

On the supply side, real GVA expanded by 7.9% in FY 2026, with the secondary and tertiary sectors as the primary drivers. Manufacturing activity witnessed a steady expansion at 10.7% in FY 2026, up from 9.3% in FY 2025, sustaining double-digit momentum. Within services, Trade, Hotels, Transport, Communication and related services grew 11%. Construction expanded 7.4%. Agriculture grew 3% in FY 2026, moderating from 4.2% in FY 2025.

[Source: Press Note of GDP Estimates base year 2022-23]

The Nifty 50 and BSE SENSEX indices declined by 5.1% and 7.1%, respectively, during FY 2026, amidst heightened global volatility. Gold rose significantly to a peak of US$ ~5,600 per ounce in January 2026, with major global brokerages aligning their year-end targets to the US$ 5,400 - US$ 5,600 range. In India, this global momentum translated into a ~61% appreciation in domestic gold prices (closing the fiscal year at Rs.147,450 per 10 grams). While this surge underscored a defensive investment climate domestically, the resultant increase in gold import values placed intermittent pressure on Indias trade balance and currency dynamics.

[Source: Historical index data Deccan Chronicle]

FPIs were net sellers in Indian equities throughout most of FY 2026, with total net outflows of approximately US$ 21 Bn from equity markets during the year. This was higher than the US$ 15.7 Bn outflow recorded in FY 2025. Selling was driven by a combination of elevated Indian equity valuations relative to peers, sustained Rupee depreciation, global risk-off sentiment stemming from West Asia tensions, and a perceived absence of direct AI-linked growth catalysts in India. These FPI outflows were substantially absorbed by domestic institutional investors, including mutual funds.

[Source: National Securities Depository Limited (NSDL) FPI Data Investor Guru India website]

FY 2026 marked a significant year for Indias trade architecture, characterised by the successful execution, conclusion, or enforcement of several landmark agreements. The India-UK Comprehensive Economic and Trade Agreement (CETA), signed on July 24, 2025, provides duty-free access for 99% of Indian tariff lines into the UK across sectors such as textiles, leather, gems and jewellery, marine products, and engineering goods. In the Gulf region, India signed the Oman Comprehensive Economic Partnership Agreement (CEPA) on December 18, 2025, liberalising nearly 98% of Indian tariff lines into Oman.

Furthermore, the India-New Zealand Free Trade Agreement (FTA) was concluded in December 2025 and officially signed in April 2026, granting India zero-duty access on all goods exports. Most notably, India and the European Union concluded their FTA on January 27, 2026, securing market access for more than

99% of Indian exports by trade value, with significant gains for textiles, apparel, leather, footwear, marine products, and agricultural commodities. Additionally, the India-EFTA Trade and Economic Partnership Agreement officially came into force on October 1, 2025, opening preferential access to Switzerland, Norway, Iceland, and Liechtenstein.

OUTLOOK

India is projected to remain the fastest-growing major economy in FY 2027. The RBI, in its April-June 2026 Monetary Policy Statement, projected Indias FY 2027 real GDP growth at 6.6%, supported by sustained momentum in the services sector, the persisting impact of GST rationalisation, and healthy balance sheets across financial institutions and corporates, successfully balancing against the risks of global supply chain disruptions. Risks to this baseline projection, however, are tilted to the downside, with the ongoing West Asia conflict posing the most significant near-term threat through elevated energy prices, supply chain disruptions, and potential demand compression.

Elevated crude oil prices, higher energy costs and rising inflation could increase input costs across the economy, exert pressure on corporate earnings, influence interest rate expectations and contribute to heightened volatility in equity and debt markets. These factors may temper investment activity and delay capital deployment in the near term. Nevertheless, Indias resilient macroeconomic fundamentals, expanding investor base, increasing financialisation of savings and continued digital adoption are expected to support the long-term growth of the financial services sector.

However, the outlook remains subject to external risks. Geopolitical tensions, elevated energy prices, trade policy uncertainty and slowing global growth could affect exports, capital flows and inflation. Despite these challenges, Indias strong macroeconomic fundamentals, favourable demographics and reform-led policy framework position it well to sustain growth and reinforce its role as a key driver of the global economy.

[Source: RBI Press Release Display, April 2026]

Union Budget FY 2027

The Union Budget for FY 2027, presented on February 1, 2026, reinforced the governments twin objectives of fiscal prudence and investment-led growth. The fiscal deficit was targeted at 4.3% of GDP for FY 2027, declining from the revised estimate of 4.4% for FY 2026. Capital expenditure was budgeted at Rs.12.22 Lakh Crores, an 11.5% increase over the FY 2026 revised estimate. The government also introduced a new fiscal anchor centred on reducing the central government debt-to-GDP ratio to approximately 55.6% in FY 2027, with a medium-term target of 50% by FY 2031. Infrastructure - roads, railways, and energy - remained the centrepiece of capital allocation, with the government also rolling out targeted schemes for manufacturing in strategic sectors including semiconductors, biopharma, and rare earths.

Private consumption is expected to remain resilient in FY 2027. The RBI projects that urban consumption will strengthen further, aided by GST rationalisation and sustained services-sector activity, while rural demand benefits from healthy agricultural conditions and a stable labour market. The full income-tax rebate for individuals earning up to Rs.12 Lakhs annually, introduced in the previous years budget, continues to provide a structural boost to discretionary spending in FY 2027.

[Source: Ministry of Finance, key features of budget, February 2026]

Tariff-Based Competitiveness

The ongoing realignment of global supply chains, accelerated by the ‘China Plus One strategy and elevated US tariff barriers against Chinese imports, presents India with a structural opportunity to capture displaced manufacturing market share. Indian sectors such as specialty chemicals, textiles and apparel, electronics, and rubber products are well placed to benefit. As China continues to pivot towards high-technology and advanced manufacturing, India can step into the space vacated in labour-intensive categories such as apparel, footwear, and electronic components. The RBI MPC noted in April 2026 that merchandise exports may benefit from recent trade agreements even as global demand moderates, a positive signal for the Companys institutional broking and investment banking clients in export-oriented sectors.

Equity Markets

Indian equities underperformed emerging market peers in FY 2026, with the Nifty 50 correcting 5.1% and the BSE Sensex 7.1%, the Niftys weakest fiscal year since FY 2020. Markets held firm through H1 FY 2026, supported by strong domestic industrial activity, a cumulative 125 bps RBI rate cut, and GST 2.0 efficiency gains. However, the escalation of the West Asia crisis in late February 2026 spiked crude prices, revived inflation anxieties, and triggered aggressive foreign selling. The divergence against global peers was stark. South Korea led EMs with the KOSPI surging 100.4%, followed by Brazil (Bovespa +42.3%), Vietnam (VN-Index +32.9%), Turkey (BIST 100 +32.4%), Mexico (IPC +29.9%), South Africa (Top 40 +28.7%) and China (Shanghai Composite +16.7%, aided by depressed valuations).

[Source: Stock Market Index - Major World Indices Live - Investing. com]

Sectoral Trends and Market Divergence

Within the Nifty 50 universe, sectoral performance diverged sharply. Domestically focused cyclical and value-driven sectors outperformed the broader market, led by Nifty PSU Banks (+25.7%), Nifty Metals (+22.5%), and Nifty Auto (+11.6%), which were robustly insulated by capital-intensive public infrastructure spending and improving credit quality across state-owned banks. Conversely, premium valuations and slowing export pipelines weighed heavily on growth sectors, with the sharpest corrections observed in Nifty Realty (-23.5%), Nifty IT (-21.2%), and Nifty FMCG (-15.0%). At the broader capitalisation level, performance was highly disconnected; the risk-off climate drew a line between size segments, as the Nifty Midcap 100 managed a marginal gain of 1.9% while the high-beta Nifty Smallcap 100 fell 5.5%.

[Source: NSE, Historical Index Data Kotak Factsheet]

Global Equity Hierarchy and Index Realignment

Indias position within the global equity space remained unique but structurally pressured. Persistent Foreign Institutional Investor (FII) capital repatriation served as the primary macro headwind, as cross-border fund managers realigned allocations towards higher-yielding US sovereign fixed-income instruments and undervalued emerging market opportunities. While key peers like China, Brazil, and Indonesia traded at steep discounts to their 10-year historical averages, India maintained its relative valuation resilience. As of March 31, 2026, the MSCI India 1-year forward Price-to-Earnings (P/E) ratio stood at a 61% premium to the MSCI Emerging Markets Index. This premium is widely recognised as Indias ‘scarcity value, reflecting its underlying political stability, strong demographic dividends, and highly predictable regulatory ecosystem. However, these high entry multiples simultaneously compressed the margin of error for corporate earnings execution, keeping foreign institutional buyers selective.

Concurrently, a massive global rotation towards hardware-heavy Artificial Intelligence (AI) infrastructure and semiconductor manufacturing hubs significantly reshaped regional index positioning. Backed by explosive technology rallies, export economies like Taiwan and South Korea saw their relative market weights expand within global composites. Because the Indian equity basket remains structurally dominated by traditional financials, basic materials, and legacy IT delivery services rather than direct AI hardware manufacturing, the country experienced an index re-weighting. Consequently, Indias allocation within the MSCI Emerging Markets Index fell to 12.58% in March 2026, down from its historical peak of nearly 21% in late 2024.

[Source: MSCI, Emerging Markets Index]

The Institutional Tug-of-War

The fiscal year witnessed an unprecedented structural transition defined by a formidable tug-of-war between foreign and domestic capital. FPIs heavily downsized their Indian exposure during FY 2026. FPIs registered a record monthly exit of US$ 14.2 Bn in March alone triggered by the West Asia crisis, driving the final FY 2026 net equity outflow to a staggering ~US$ 21 Bn.

[Source: MSCI, Emerging Markets Index]

Critically, this heavy systemic supply shock was robustly counterbalanced by Indias maturing domestic investment ecosystem. In stark contrast to foreign capitulation, domestic capital acted as the ultimate structural anchor for the market. Leading this domestic charge, net equity mutual fund inflows crossed the ~US$ 60.5 Bn mark for the full year, comfortably surpassing the previous years record of US$ 55.5 Bn. This internal liquidity, anchored by an unprecedented Systematic Investment Plan (SIP) run-rate that averaged 26,500 Crores monthly, was further reinforced by steady equity allocations from state pension systems such as the Employees Provident Fund Organisation (EPFO) and insurance giants like Life Insurance Corporation of India (LIC), successfully absorbing the brunt of the global shockwaves. Price discovery is increasingly driven by domestic institutions, with recurring domestic inflows functioning as the marginal buyer and acting as a vital structural stabiliser during periods of global volatility.

[Source: MSCI, Emerging Markets Index AMFI Monthly Report March 2026 & February 2026 (official PDFs); NSDL (FPI data); AMFI Monthly Note February 2026]

Retail Equity

The financialisation of domestic household savings accelerated throughout FY 2026, pushing the combined registered footprint of Indias two operational securities depositories – Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL), past 22.5 Crores (225 Mn) cumulative demat accounts as of March 31, 2026. This growth represents a net addition of approximately 3.1 Lakhs new accounts within the fiscal year.

CDSL expanded its market leadership to register over 18.04 Crores demat accounts, establishing itself as the first depository in Asia to cross this operational milestone, while NSDLs total Beneficial Owner (BO) accounts reached 4.4 Crores. Although the absolute pace of new client acquisitions moderated from post-pandemic cyclical peaks, domestic brokerages recorded an increase in average ledger balances and higher regular activity rates.

Geographically, retail market participation broadened significantly into the hinterlands; states outside the historical top 10 regions accounted for 27% of the National Stock Exchange (NSE) unique investor base by the close of the fiscal year, driven by the expansion of low-cost digital brokerage interfaces into Tier-II and Tier-III urban corridors.

[Source: CDSL Q4 & FY 2026 Financial Results Disclosures NSE India Corporate Press Registries]

Derivatives Segment De-mediation and Active User Base

The equity derivatives segment underwent a deliberate structural adjustment in FY 2026, following the SEBI Circular of October 1, 2024. Implemented in phases between November 2024 and April 2025, the reforms included: restricting each exchange to a single weekly expiry contract on its benchmark index; raising the minimum derivative contract size from 5-10 Lakhs to Rs.15-20 Lakhs; mandating upfront collection of options premiums from buyers; and introducing intraday monitoring of position limits.

[Source: SEBI Circular SEBI/HO/MRD/TPD-1/P/CIR/2024/132, October 01, 2024]

The full-year impact of these measures was felt in FY 2026. The number of individual investors active in equity derivatives fell to 85 Lakhs in FY 2026 from 1.06 Crores in FY 2025, which is a reduction of approximately 20%. Individual investors trading in the cash market segment also declined, to 3.58 Crores from 3.77 Crores in the prior year. The compression in speculative derivatives volumes placed year-on-year pressure on retail brokerage transaction revenues. The structural intent, however, was achieved: the market shifted away from high-frequency, expiry-day speculation towards its foundational purpose of hedging and institutional risk management.

[Source: Business Today, April 23, 2026 (citing NSE active investor data for FY 2026) IANS Live, April 14, 2026: NSE active investor base declined 7% in FY 2026]

Systematic Wealth Accumulation and the SIP Culture

The most consequential trend in FY 2026 was the continued institutionalisation of systematic investment. Between FY 2021 and FY 2026, the unique registered investor base on the NSE grew at a compound annual rate of 26.4%, crossing the 13 Crores mark on April 27, 2026 just seven months after surpassing 12 Crores in September 2025. Average monthly SIP inflows rose to 29,132 Crores in FY 2026, compared with 3,660 Crores a decade earlier, an eight-fold increase over ten years. SIP contributions averaged 29,132 Crores per month during FY 2026, reaching an all-time high of 32,087 Crores in March 2026.

[Source: AMFI Monthly Note, March 2026, Economic Times, April 2026] During the elevated FPI outflows in H2 FY 2026, driven by the West Asia conflict and rupee depreciation, mutual funds, sustained by SIP inflows, absorbed a significant portion of the selling pressure, mitigating the index impact. Direct individual investor net equity investments, however, fell sharply to 33,537 Crores in FY 2026 (as of February 28, 2026) from Rs.1.59 Lakh Crores in FY 2025, reflecting a more cautious stance on direct equity allocation amid extended market underperformance and geopolitical uncertainty.

[Source: NSE Retail Investor Report (FY 2026 YTD as of February 28, 2026), cited in Asianet Newsable]

Wealth Management

Indias wealth management industry entered a structural inflection point in FY 2026, with the addressable market expanding rapidly even as equity market volatility moderated short-term client activity. The industrys shift from product-led distribution to objective-based advisory where relationship managers function as comprehensive financial planners rather than product salespeople, accelerated significantly during the year, driven by regulatory pressure, a maturing investor base, and growing awareness of the cost of unadvised wealth.

The Expanding Wealth Base

Indias wealth management industry reached a structural inflection point in FY 2026 as the addressable market broadened both geographically and demographically. According to the Knight Frank Wealth Report 2026, Indias Ultra-High-Net-Worth Individual (UHNI) population, defined as those with net assets above US$ 30 Mn, rose by 63% between 2021 and 2026 to 19,877, the sixth-largest pool globally, while the billionaire count reached 207, third behind the United States (914) and China (485), and is projected to expand a further 27% to 25,217 by 2031.

[Source: Knight Frank, The Wealth Report 2026]

Wealth creation is also extending beyond traditional corporate centres, supported by the startup ecosystems of Bengaluru, Hyderabad and Pune, with nearly half of DPIIT-recognised startups now originating from Tier-II and Tier-III cities. Alongside this, nominal GDP has risen by approximately US$ 1 Tn over the past four years and is projected to grow by a further US$ 2 Tn by 2030, steadily widening the High-Net-Worth Individual (HNI) pipeline.

[Source: PIB, DPIIT Startup Ecosystem Release, January 2026 PIB Economic Release]

Total Professional Addressable Market Opportunities

This wealth creation remains substantially unpenetrated by professional platforms. Assets under professional management are projected to nearly double from US$ 1.1 Tn in FY 2024 to US$ 2.3 Tn by FY 2029, a US$ 1.6 Tn structural growth window, while approximately US$ 0.4 Tn of the US$ 1.1 Tn in affluent household financial wealth in early 2026 was still self-managed or informally deployed. Bernstein Research (July 2025) estimated that specialised wealth managers would expand from US$ 300 Bn in Assets Under Management (AUM) to US$ 1.6 Tn over the next decade, implying a compounded annual growth rate of approximately 18%.

[Source: Deloitte India Financial Wealth Management Analytics Economic Times, PwC India AWM Report Bernstein Research, July 2025, cited in Business Standard]

Portfolio Reorientation and Alternative Asset Sizing

Affluent allocations rotated clearly from physical assets such as real estate and cash deposits towards regulated alternatives. As of March 2026, SEBI had registered 1,849 Alternative Investment Funds (AIFs), with cumulative commitments of Rs.15.74 Lakh Crores and net investments of 6.45 Lakh Crores, and domestic HNIs and family offices continue to supply the majority of incremental AIF commitments. Yield-bearing instruments consolidated as core holdings in parallel: the combined AUM of Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (InvITs) crossed 9 Lakh Crores by late 2025, the US$ 73 Bn InvIT market is modelled to surge 3.5 times to US$ 258 Bn by 2030, and the five listed corporate REITs managed gross assets of 2.35 Lakh Crores.

[Source: SEBI AIF Statistics, March 2026 Economic Times, REITs and InvITs AUM Economic Times, Knight Frank InvIT Study NISM Vriddhi, Issue 7, March 2026]

GIFT City as a Structuring Hub and Cross-Border Channel

GIFT City, governed by International Financial Services Centres Authority (IFSCA) under the Fund Management Regulations 2025, has solidified its position as Indias premier onshore gateway for cross-border wealth, with family offices and UHNIs establishing Family Investment Funds to pool offshore assets in US dollars and accessing international markets through Category III AIFs and Portfolio Management Services (PMS). These structures enjoy complete exemptions from Securities Transaction Tax and long-term capital gains on International Financial Services Centre (IFSC) traded products, and while the minimum for privately placed Restricted Schemes remains US$ 150,000, the PMS entry threshold was lowered to US$ 75,000, broadening access for upper-HNI investors and NRIs.

[Source: IFSCA, Fund Management Regulations 2025 Notification]

Generational Realignment and Advisory Transformation

The client base is simultaneously turning generational, with Millennial and Generation Z accounts now comprising 20% of Indias millionaire population under the age of 40 and prioritising digital platforms, unbundled fee structures and ESG-linked portfolios, while female investors capture greater investible surpluses and actively manage multi-generational retirement and corporate estates. These shifts are forcing institutions to pivot from transactional, commission-heavy distribution towards fee-based, objective-led planning in which advisory compensation is aligned with long-term portfolio outcomes.

[Source: Capgemini World Wealth Report Research Series]

Mutual Funds

The Indian Mutual Fund (MF) industry demonstrated exceptional structural strength in FY 2026, with total AUM reaching 73.73 Lakh Crores. This growth was not merely a result of market appreciation but was underpinned by consistent, record-breaking net inflows. The industry has successfully pivoted from being a ‘market-driven entity to a ‘savings-driven one, reflecting a permanent shift in the Indian household balance sheet from physical assets to financial ones.

[Source: Indian Mutual Fund Industry, April 2026, IBEF]

The total number of investor folios reached an all-time peak of 27.39 Crores by the close of the fiscal year. This growth was notably led by active equity-oriented and hybrid schemes. Additionally, the rise of ‘Multi-Asset Allocation funds emerged as a significant trend, as investors increasingly sought diversification across equity, debt, and gold within single, tax-efficient vehicles

[Source: AMFI Monthly Notes, March 2026]

Monthly SIP contributions surged to an SIP run-rate that averaged 29,132 Crores monthly across FY 2026, reaching an all-time peak of 32,087 Crores in March 2026. The sharp rise in the popularity of SIPs has significantly influenced market dynamics: the massive monthly inflows allow DIIs to buy stocks during periods of FII selling, preventing sharp, panic-driven corrections. The maturity of the Indian retail investor is evident in the fact that SIP cancellations remained low despite the heightened volatility of late FY 2026.

[Source: Mutual fund SIP inflows rise 8% to hit all-time high of 32,087 crore in March - The Economic Times AMFI, Annual MF Report, 2025]

Even during periods of sharp market corrections, domestic investors demonstrated a ‘counter-cyclical investment approach. Instead of withdrawing capital, many retail and HNI participants utilised market dips to increase their lump sum allocations. This shift in mindset, from fearing volatility to exploiting it, indicates that the industry has achieved a level of maturity that can withstand significant global macroeconomic shocks. For the financial products distribution ecosystem, this sustained growth in the AUM base carries significant structural implications. A larger AUM pool translates into a growing trail commission pool, which forms the backbone of recurring revenue for distribution-led businesses and provides a steady income stream that is less sensitive to transactional volume fluctuations.

[Source: AMFI, Annual MF Report, 2025]

Alternative Investment Funds

Alternative Investment Funds (AIF) continued their structural expansion through FY 2026, cementing their status as a critical component of Indias private capital and institutional investment ecosystem. As of March 31, 2026, cumulative investment commitments raised by the industry reached an all-time high of Rs.15.74 Lakh Crores. The total number of SEBI-registered operational AIF vehicles crossed 1,849, reflecting the increasing sophistication and appetite for non-correlated alternative assets among domestic asset owners.

This rapid capital pooling was heavily driven by an institutional shift towards alternative asset classes. Domestic insurance companies, large corporate treasuries, and sophisticated family offices consistently expanded their target allocations to AIF structures as part of a broader mandate to diversify away from traditional public equities and fixed-income volatility.

[Source: SEBI Alternative Investment Funds Cumulative Industry Statistics]

Segmental Breakdown and Economic Impact

Beneath the aggregate industry growth, capital allocations remained concentrated within specific regulatory parameters tailored to distinct risk-reward mandates:

• Category II AIFs: Comprising private equity, venture capital, and private debt funds, this remained the dominant market segment, accounting for approximately 75% of total industry commitments. This bucket continues to function as a vital source of patient, long-term capital, supporting startup equity incubation, specialised mid-market corporate credit, and structured real estate developments.

• Category III AIFs: This segment experienced meaningful acceleration, with total assets crossing 3.11 Lakh Crores by the close of the fiscal year. Fund managers increasingly utilised these open-ended setups to deploy complex derivatives, long-short strategies, and quantitative hedging overlays to protect absolute returns against global macroeconomic headwinds.

By matching long-duration institutional capital with unlisted enterprises, infrastructure components, and distressed asset turnarounds, the AIF framework has established itself as an essential bridge for channelling domestic savings into high-impact productive sectors of the real economy.

[Source: Treelife Alternative Investment Fund Performance Monitor]

Investment Banking

Indian corporates tapped equity capital markets at a historic scale in FY 2026, raising an all-time high of Rs.178,963 Crores through 112 mainboard Initial Public Offerings (IPOs) - a 10% increase over the previous record of Rs.162,387 Crores raised via 78 IPOs in FY 2025, marking the first time India has recorded two consecutive years of record IPO fundraising. Financial Services and Consumer Discretionary sectors led issuances, contributing 558 Bn and 439 Bn of total funds raised respectively, with Industrials accounting for a further Rs.183 Bn. Private equity-backed listings rose to 35% of total issuances, compared to 28% in FY 2025, reflecting accelerated exit activity under favourable market conditions.

The largest IPO of the year was Tata Capitals Rs.15,512 Crores issue, followed by HDB Financial Services (Rs.12,500 Crores) and LG Electronics India (Rs.11,605 Crores).

[Source: PRIME Database Group, FY 2026 IPO Review, March 31, 2026 NSE Market Pulse, March 2026 KPMG IPOs in India FY 2026, May 2026 Economic Survey 2026 (SME data through December 2025) SEBI ICDR Amendment Regulations, 2025 ]

Insurance

The Indian insurance sector underwent a significant structural transformation in FY 2026, driven by the enactment of the landmark Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 passed in December 2025. Advancing the central regulatory vision of ‘Insurance for All by 2047, this major reform permitted 100% Foreign Direct Investment (FDI) under the automatic route (up from 74%), unlocking long-term global equity infusions and advanced underwriting technologies. During FY 2026, New Business Premium (NBP) in the life insurance sector and Gross Direct Premium Income (GDPI) in the non-life insurance sector recorded growth of 11% and 9%, respectively, supported by GST exemption, particularly on life and health insurance premiums.

Fiscal Adjustments and Sectoral Shifts

The retail pricing model for safety-net products was optimised by major fiscal interventions implemented midway through the financial year:

Regulatory Developments during FY 2026

Stock Broker Compliance Refinement: SEBI institutionalised strict risk boundaries across domestic stock brokerages, enforcing automated client fund segregation, banning promotional assured-return schemes, and prohibiting cash transactions to prevent unrecorded leverage.

Standardised Unified Payments Interface (UPI) Remittance Mandate: To eliminate unauthorised transaction paths, a SEBI circular required all market intermediaries to utilise strictly validated, standardised UPI IDs for investor fund collections.

Algorithmic Trading Retailing Safeguards: SEBI extended its compliance timeline to allow brokers to build out the technology architecture needed for retail algo-trading safety blocks.

Merchant Banking Capital Reset: SEBI, vide its amendment dated December 3, 2025, introduced two categories of Merchant Bankers (Category I and II), revised net worth requirements, and a defined list of permitted activities with revenue-linked conditions. The amendments also mandate segregation of non-permissible activities, restrict outsourcing of core functions such as due diligence and offer document preparation, and introduce provisions relating to principal officer appointment and data localisation.

Anchor Investor and KPI Standardisation: SEBI unified Key Performance Indicator (KPI) templates inside public draft prospectuses to improve corporate transparency. Additionally, it revised the IPO Anchor Investor allocation rules to diversify long-term institutional bases across pension and insurance funds.

The Securities Markets Code, 2025: Highlighted in the Economic Survey, this landmark code unified decades of fragmented securities laws, the SEBI Act (1992), Securities Contracts (Regulation) Act (1956), and Depositories Act (1996), into a single statutory book. It established Market Infrastructure Institutions (MIIs) as statutory public bodies, introduced an 8-year limitation cap on structural investigations, and limited interim ex parte regulatory orders to a maximum of 180 days.

DII Brokerage Fee Restrictions: SEBI introduced statutory caps on the total transaction-brokerage fees payable by Domestic Institutional Investors (DIIs), including mutual fund houses. This compression was designed to reduce execution costs for retail unitholders, reshaping institutional broking fee pools and shifting the sector towards execution-efficiency models.

COMPANY OVERVIEW

IIFL Capital Services Limited (‘IIFL Capital or ‘The Company) (formerly known as IIFL Securities Limited) is one of Indias leading integrated capital markets platforms with over three decades of experience in the financial services industry. The Company provides a comprehensive range of solutions across Retail Equities, Wealth Management & Financial Products Distribution, Investment Banking, and Institutional Equities, serving a diversified domestic and global client base comprising corporates, institutional investors, sovereign wealth funds, mutual funds, insurance companies, pension funds, and HNI/UHNI clients. Leveraging its integrated platform, research-driven approach, and strong client franchise, the Company delivers end-to-end capital market and wealth management solutions. As of March 31, 2026, Distribution Assets Under Management stood at over 521 Bn.

Core Performance Metrics and Institutional Indicators

Net Worth	Distribution Network	Global Institutional Presence	f	Market Capitalisation Coverage	Governance Structure
30.7 Bn	2,600+ partners and 100 branches across India	Mumbai, Singapore, London, and New York	48 research professionals covering 318+ stocks across 20+ sectors	Over 72% of Indias market capitalisation	>50% independent directors on the Board with separate Chairperson and Managing Director roles

A high-touch, research-led broking franchise catering to Affluent, HNI and UHNI clients, serving as a key engagement platform for cross-selling advisory services, investment products, and long-term wealth solutions.

The platform offers integrated cash and derivatives execution capabilities, complemented by in-depth research, investment ideas, and market intelligence. Relationship-driven client engagement is further strengthened through digital platforms that enable seamless execution, enhanced control, and comprehensive reporting.

The franchise also acts as a strategic cross-sell engine into the Wealth Management business, facilitating access to asset allocation, MFs, PMS, AIFs, fixed income products, structured solutions, and other investments.

A core growth franchise positioned as an emerging wealth manager with an open-architecture distribution platform, focused on driving sticky AUM, increasing share of wallet, and generating recurring fee income across client segments. The business offers open-architecture investment solutions across MFs, fixed income products, PMS, AIFs, and other investments, tailored to clients financial objectives and risk profiles. Its advisory framework is supported by research-driven insights delivered through a relationship manager and investment specialist model.

The platform also operates as a closed-loop cross-sell ecosystem, converting active trading relationships into long-term wealth mandates while deepening client engagement through lending solutions, structured products, and family office-style offerings.

The Company has demonstrated strong leadership in its Investment Banking business, successfully completing 45 transactions in FY 2026, including 31 IPOs, 2 QIPs, 1 rights issue, and several private placement transactions. IIFL Capital topped the FY 2026 IPO league tables, ranking #1 by the number of mainboard IPOs completed during the year. The franchise continues to sustain strong business momentum, with each of the last three years delivering record investment banking performance. While IIFL Capital has established a leading Equity Capital Markets (ECM) franchise, it has also diversified its capabilities beyond capital markets through advisory and allied services. A strong focus on client relationships, unbiased advice, and consistent execution has resulted in a high level of repeat business, reflecting the strength of the Companys business model. To support future growth, IIFL Capital has continued to invest in talent, doubling team strength over the past few years.

The Investment Banking business works closely with the Institutional Equities and Wealth Management franchises to strengthen origination capabilities, enhance cross-selling opportunities, and drive follow-on transactions, block deals, and broader capital market engagements. This integrated approach enables the Company to deliver comprehensive solutions to clients while creating multiple avenues for growth across its financial services platform.

A comprehensive research and execution platform serving institutional investors, strengthening the IIFL Capital Groups market intelligence capabilities.

The business serves ~1,100 domestic and global institutional clients through a broad execution platform spanning Direct Market Access (DMA), algorithmic trading, high-touch execution, and block trades. The franchise is further supported by a strong derivatives and structured trading platform through its Futures & Options (F&O) desk. Its differentiated Alternatives desk provides thematic and event-driven investment opportunities across special situations, index inclusions and exclusions, portfolio rebalancing strategies, and momentum themes. The research platform covers 318+ stocks across sectors, representing approximately 72% of Indias market capitalisation, enabling deep sectoral insights and actionable market intelligence. The Institutional Equities business also maintains active global investor engagement through conferences (UK, Hong Kong, Singapore, US) and roadshows.

OPERATIONAL REVIEW

In FY 2026, the Company delivered a steady performance with consolidated revenue of 26,031.01 Mn compared with 25,674.31 Mn in FY 2025. Profit After Tax stood at 5,636.36 Mn, down 21% year-on-year (y-o-y), impacted by regulatory changes.

The Company continued to expand its Financial Products Distribution and Wealth Management business, with Assets Under Management increasing from 313 Bn to 521 Bn as of March 31, 2026. The Investment Banking division maintained strong momentum, reinforcing its position as a preferred partner for clients through consistent mandate wins and execution capabilities across IPOs, QIPs, advisory mandates and private placements. The division completed 45 transactions during FY 2026, strengthening its market presence.

FINANCIAL PERFORMANCE

Particulars	FY 2026	FY 2025
Retail Equities (Brokerage, Interest & Allied Income)	11,212.03	12,325.42
Institutional Equities and Investment Banking	7,119.46	6,394.65
Financial Product Distribution	5,715.96	5,093.83
Rental Income	152.85	236.30
Total Revenue from Operations	24,200.30	24,050.20
Finance costs	2,097.38	1,800.05
Fees and commission expense	5,341.16	4,962.04
Employee benefits expenses	6,874.75	5,905.17
Depreciation, amortisation and impairment	650.74	548.81
Other expenses	3,504.06	3,212.37
Total Expenses	18,468.09	16,428.44
Operating Profit Before Tax	5,732.21	7,621.76
MTM on Investments & Others	1,830.71	1,624.11
Profit Before Tax	7,562.92	9,245.87
Provision for Tax	1,926.56	2,117.09
Profit After Tax	5,636.36	7,128.78
Other Comprehensive Income	(16.25)	(20.97)
Total Comprehensive Income (TCI)	5,620.11	7,107.81

INCOME

Segment	Key Highlights
Retail Equities (Brokerage, Interest & Allied Income)	Retail Equities comprises brokerage income, interest income from the margin funding book, interest on fixed deposits and other allied activities. Brokerage & allied income declined 16% y-o-y, primarily due to regulatory changes and market volatility. Interest income, grew 4% y-o-y, supported by the increase in margin trading funding book.
Institutional Equities and Investment Banking	Increased by 11% year-on-year (y-o-y) to 7,119.46 Mn, supported by strong mandate wins and execution across IPOs, QIPs, advisory mandates and private placements.
Financial Products Distribution Income	Increased by 12% y-o-y to 5,715.96 Mn, contributing 22% of consolidated income. Growth was supported by expansion in assets under management which grew from 313 Bn to 521 Bn.
Other Income	Included non-core gains from real estate divestment and mark-to-market gains on investments.

EXPENSES

Segment	Key Highlights
Finance Costs	Finance costs, comprising of interest on borrowings, debt securities and other financial expenses like bank guarantee commissions, increased 17% y-o-y to 2,097.38 Mn, driven by higher working capital requirements and growing Margin Trade Funding book.
Fees and Commission Expense	Fees and commission expenses, including sub brokerage fees, referral fees, and related expenses, increased 8% y-o-y, primarily due to increase in cross sell pass outs.
Employee Benefits Expenses	Employee benefit expenses, comprises salaries, wages, provident fund contributions, share-based payments, staff welfare, leave encashment and gratuities, increased 16% y-o-y, mainly due to hiring for new wealth vertical and on account of ESOPs granted, including a one-time labour law impact.
Depreciation, Amortisation and Impairment Other Expenses	Depreciation, amortization, and impairment expenses include depreciation of property, plant, and equipment, as well as amortisation/impairment of intangible assets, increased 19% y-o-y to 650.74 Mn, driven by investments in technology infrastructure and expansion of branch network. Other expenses, comprising of technology, marketing, advertising, commission expenses, communication, legal and professional charges, office expenses, and electricity etc., increased 9% y-o-y.

LIQUIDITY AND CAPITAL RESOURCES

The Company maintained a strong liquidity position through operating cash flows and strategic borrowings. As of March 31, 2026, cash, bank balances and fixed deposits stood at 50,653.91 Mn, supporting capital expenditure and working capital requirements. The consolidated net worth of 30,710.72 Mn provided a strong capital base for business growth and expansion of the client Margin Trade Funding book.

SEGMENT-WISE PERFORMANCE
Particulars	FY 2026	FY 2025
Segment Revenue	26,031.01	25,674.31
Capital Market Activity	22,057.20	22,290.13
Insurance Broking and Ancillary	2,847.04	2,558.35
Facilities and Ancillary	1,354.68	1,064.65
Less: Inter segment revenue	(227.91)	(238.82)
Segment Results (Profit Before Tax)	7,562.92	9,245.87
Capital Market Activity	6,319.06	8,563.56
Insurance Broking and Ancillary	217.36	305.00
Facilities and Ancillary	1,026.50	377.31

Revenue from capital market activity was virtually flat on a y-o-y basis, declining marginally from 22,290.13 Mn in FY 2025 to 22,057.20 Mn in FY 2026. The decline in broking activity was offset by growth in financial products distribution and wealth management business. Revenue from the insurance broking and ancillary segments increased by 11% y-o-y, driven primarily by higher distribution of insurance and health products, from 2,558.35 Mn in FY 2025 to 2,847.04 Mn in FY 2026. Revenue from the facilities and ancillary segments increased by 27% y-o-y, from Rs.1,064.65 Mn in FY 2025 to Rs.1,354.68 Mn in FY 2026 on account of profit booked on sale of property.

KEY FINANCIAL RATIOS

Key Ratios	FY 2026	FY 2025	Variance %
Debt-to-Equity Ratio	0.59	0.37	59%
Return on Average Net Worth	20%	33%	(39%)

Debt-to-Equity Ratio: The debt-to-equity ratio increased to 0.59 in FY 2026 from 0.37 in FY 2025, driven by higher borrowings to support business growth. The Company continues to maintain a prudent leverage profile while retaining flexibility to fund opportunities in the Margin Trade Funding segment.

Return on Average Net Worth: Return on Average Net Worth declined from 33% in FY 2025 to 20% in FY 2026, primarily due to a decline in Total Comprehensive Income.