Detailed Rationale

Crisil Ratings has placed its rating on the long-term bank facilities of IIFL Capital Services limited (IIFLC) on ‘Rating Watch with Positive Implications' and has reaffirmed its ‘Crisil A1+’ rating on the short term bank facilities and commercial paper.

 

The rating action follows the disclosure made by IIFL Capital Services on May 7, 2026 to the stock exchange, announcing that Fairfax India Holdings Corporation (FIHC), through its subsidiary - FIH Mauritius Investments Ltd (FIHMIL), intends to increase its stake in the company to at least 51% through a combination of preferential allotment, open offer, and promoter arrangements. Fairfax Financial Holdings Limited (Fairfax; rated ‘A-’ by S&P Global) is the controlling shareholder of Fairfax India Holdings Corporation.

 

As part of this deal, Fairfax, through its subsidiary FIHMIL, is expected to infuse approximately Rs 2000 crores through a preferential issue. Following approval of the preferential issue, FIHMIL will make a mandatory open offer to public shareholders. Upon implementation of this scheme of arrangement, FIHMIL will become the majority stakeholder and will classify as a promoter alongside Mr Nirmal Jain and Mr R. Venkataraman

 

Upon successful implementation of this scheme, IIFL is expected to receive financial and strategic support from Fairfax and benefit from the business synergies that accrue. The implementation of this scheme remains subject to regulatory approvals, and its progress will be monitored closely.

 

The rating continues to reflect the strong market position of IIFL Capital in the broking and investment banking businesses and its adequate capitalisation. These strengths are partially offset by exposure to uncertainties inherent in capital market-related businesses.

 

The company has served over 30 lakh customers, out of which 4.2 lakh customers were active as on June 2025. Out of total turnover volume (cash and derivatives segments) of the National Stock Exchange , the company has maintained an overall market share at 0.62%, and 2.45% in the cash segment for fiscal 2026. Average daily turnover increased to Rs 3.2 lakh crore in fiscal 2026 as compared to Rs 2.8 lakh crore in fiscal 2025.

Analytical Approach

For arriving at the rating, Crisil Ratings has combined the business and financial risk profiles of IIFL Capital and its subsidiaries. The rating also factors in the business synergies between IIFL Capital Services Ltd (IIFL Capital), IIFL Finance Ltd (IIFL Finance) given their common promoters and shared brand.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Strong market position in the retail broking and investment banking businesses

IIFL Capital is primarily into broking and allied activities such as margin trading facility (MTF), depository, retail brokerage, etc., financial product distribution  and investment banking. It is one of the leading players in the retail broking segment. The company has a pan-India presence with more than 3 lakh active clients as on March 31, 2026. It had a market share of 0.62% of the turnover volume (cash and derivatives segments) of the National Stock Exchange (NSE) for fiscal 2026. It also provides MTF to its clients and the net book was Rs 1,445 crore as on March 31, 2026.

 

The company also has a strong institutional equity desk, and is a leading domestic investment banker, participating in several marquee initial public offerings (IPOs) and qualified institutional placements. In fiscal 2026, owing to decent traction in the institutional broking and investment banking space, revenue from this segment increased to Rs 712 crore in fiscal 2026 from Rs 639 crore in fiscal 2025.

 

The company also distributes third-party financial products such as insurance, mutual funds, bonds, alternative investment funds, portfolio management services, and deposits through its website, mobile app and branch network. Distribution assets under management (AUM) stood at around Rs 52,100 crore as on March 31, 2026, and the corresponding income from distribution was Rs 590 crore. Other businesses, such as currency and commodity broking businesses are modest in scale.

 

Overall, the business profile is fairly diversified which has supported steady revenue flow over the years.

 

Adequate capitalisation supported by healthy internal accruals

Consolidated net worth for the company was Rs 3,066 crore as on March 31, 2026 as compared to  Rs 2,507 crore as on March 31, 2025, (excluding non controlling interest) and was supported by healthy internal accruals.

 

In the past, a large portion of the borrowing was by the wholly owned subsidiary, IIFL Facilities Services, which was secured by the subsidiary's various real estate assets. Now, with the scale up of MTF book, borrowings at the broking entity are expected to increase. The MTF book (net) stood at Rs 1,445 crore as on March 31, 2026 (Rs 931 crore in March 2025 and Rs 916 crore in March 2024). Overall gearing was 0.6 times as on March 31, 2026 (0.4 times as on March 31, 2025, and 0.6 times as on March 31, 2024). Additionally, as part of the deal, FIHMIL is expected to infuse approximately Rs 2,000 crores capital through preferential allotment, which will further strengthen IIFL Capital’s capitalization metric and constrain overall gearing.

 

IIFL Capital, on a consolidated basis, reported a net profit of Rs 564 crore in fiscal 2026 vis-à-vis Rs 713 crore in fiscal 2025. The decline was primarily due to reduced broking turnover which was impacted by increased volatility in capital markets resulting from the introduction of new broking regulations and geopolitical conflicts. Nonetheless, the diversified revenue profile of the company continues to support the bottom line leading to healthy RoE of 23.7%. The 3-year average cost to income ratio was 66% for fiscal 2024 to fiscal 2026. Healthy internal accruals have supported the capital position of the company which is expected to remain adequate over the medium term.

Key Rating Drivers - Weaknesses

Exposure to uncertainties inherent in the capital market businesses and tightening regulatory environment

Over the past couple of years, the broking industry has witnessed a dynamic regulatory environment. With the objective of enhancing transparency, limiting misuse of funds and safeguarding investor interests, SEBI has introduced a slew of measures on derivatives trading, such as hiking futures and options contract sizes, mandating upfront premium collections from option buyers, limiting weekly index derivatives offered by exchanges to one each, removing the margin benefit available on offsetting positions across different expiries on the expiry day and requiring additional margins on short options contracts on the expiry day. Additionally, SEBI has introduced flat transaction charges vis-à-vis the slab-wise charge structure followed earlier.

 

The capital markets industry has recently faced two significant regulatory changes, presenting a challenge to market participants. The introduction of a higher securities transaction tax on February 1, 2026, marks the second increase in two years, and is expected to impact futures volumes. Furthermore, the RBI’s guidelines, issued on February 13, 2026, stipulate that bank guarantees for proprietary trading will require 100% collateral, effective April 1, 2026, up from the previous 50% requirement. This change mainly impacts proprietary traders, who will have to explore alternative funding options, such as equity or market borrowings, to sustain current volumes. However, IIFL Capital’s diversified business profile, across retail and institutional broking and investment banking helps to partly offset the impact of these regulatory changes on its overall earnings profile.

 

Fundamentally, while these revised regulations will benefit the broking industry in the long term by increasing transparency and lowering risks for customers, the changes may reduce the trading opportunities for proprietary trades, impact market volumes as well as increase the compliance costs for brokers and require them to adapt their business models to keep pace. Thus, the company’s ability to realign its trading strategies continue to absorb any long-term regulatory impact on transaction volumes and higher compliance costs will remain monitorable over the medium term

Liquidity Strong

IIFL Capital, at a consolidated level, has strong liquidity. As on March 31, 2026, consolidated liquidity stood at Rs 1,586 crore in the form of cash and equivalent (Rs 1108 crore as cash, liquid investments and unutilized bank lines of Rs 479 crore) while debt repayments over May 2026 – October 2026 stand at Rs 982 crore. The debt repayments of Rs 982 crore are in the form of commercial paper (CP; Rs 746 crore) and working capital demand loan (WCDL; Rs 225 crore). WCDL is secured against receivables, which along with CP, are typically rolled over.

Rating sensitivity factors

Upward factors

• Significant scale-up of operations leading to improvement in the market position across business segments
• Continued improvement in revenue, and cost to income improving to 55%, together resulting in significant improvement in profitability
• Improvement in income diversity on a sustained basis

 

Downward factors

• Impact on business profile as indicated by drop in market share thereby impacting broking income
• Weakening of the earnings profile or sustained increase in cost-to-income ratio to over 80%

About the Company

IIFL Capital Services Limited (formerly IIFL Securities Limited, the erstwhile flagship company of the India Infoline group, was set up as Probity Research and Services in October 1995. The name was changed to India Infoline Ltd in March 2000, then to IIFL Securities in May 2018 and currently as IIFL Capital Services Limited in November 2024) . The company is a member of the BSE and the NSE. IIFL Commodities Ltd (formerly India Infoline Commodities Ltd; a 100% subsidiary of IIFL Capital) sold a major part of its business in a slump sale to IIFL Capital, effective July 1, 2018.

 

In January 2018, IIFL Finance (earlier IIFL Holdings Ltd) reorganised itself into three entities: IIFL Finance (the loans and mortgages business), 360 One (the wealth and asset management business) and IIFL Capital (the capital markets and other businesses). Subsequently in September 2019, IIFL Capital was listed on the stock exchanges.

 

As on March 31, 2026, the promoters owned ~31% stake in IIFL Capital. The Fairfax group owns ~31% and the remaining 38% is held by the public.

 

On a consolidated basis, IIFL Capital reported total income and profit after tax (PAT) of Rs. 2,603 crore and Rs 564 crore, respectively, in fiscal 2026, against Rs 2,567 crore and Rs 713 crore, respectively, in fiscal 2025.

 

On a standalone basis, IIFL Capital reported total income and PAT of Rs 2,220 crore and Rs 531 crore, respectively, in fiscal 2026, against Rs 2,159 crore and Rs 603 crore, respectively, in fiscal 2025.

Any other information: Not applicable