PAT grew 8% QoQ and 64% YoY to INR1.7b (24% beat) in 4QFY22. The beat on profitability was driven by a 16% beat on net revenue, up 12% QoQ and 59% YoY to INR4.2b, owing to Transaction/Brokerage Revenue (TBR, 39% beat) and Annual Recurring Revenue (ARR, a 4% beat). OPEX stood at INR2.4b, up 54% YoY and 6% QoQ and 5% higher than our estimate. The increase was attributable to higher variable employee expenses (+5% QoQ) and administration costs (+11% QoQ). The cost-to-income ratio stood at 55.6% (est. 61.2%), down 310bp QoQ, and 180bp YoY. Sequentially, net inflows improved to INR70.4b in 4Q (excluding custody) from INR63.9b in 3QFY22. Gross closing AUM (excluding custody assets) was flat QoQ, but registered 26% YoY growth, with a continued shift in the mix towards ARR assets. ARR share stood at 55.2% (up 230bp QoQ and 593bp YoY). The share of ARR in overall revenue stood at 60% v/s 65% in 3QFY22 on account of a strong growth in TBR revenue. Within ARR assets, distribution AUM and IIFL-ONE AUM grew 8% and 5% QoQ, respectively.
OutlookThe company continued to see strength in its net inflows in 4QFY22. We maintain our Buy rating with a TP of INR2,200/share (premised on 25x FY24E EPS).
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