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Anand Rathi Q4 FY26: Margin expansion, rising non broking mix, and a more balanced model

Anand Rathi Shares and Stock Brokers Limited closed Q4 FY26 with a sharp step up in profitability, even as the broader market environment remained volatile. Revenue from operations in Q4 FY26 rose to 2,556.5 million rupees, up 28.1 percent year on year. Operating leverage and a richer revenue mix lifted EBITDA to 1,103.3 million rupees, up 51.4 percent, while profit after tax surged to 415.5 million rupees, up 125.7 percent.

For the full year, revenue from operations grew 10.2 percent to 9,321.6 million rupees. EBITDA increased 21.9 percent to 3,795.8 million rupees and PAT rose 24.8 percent to 1,292.7 million rupees. Margins improved meaningfully as well. EBITDA margin expanded to 43.2 percent in Q4 and 40.7 percent for FY26. PAT margin moved up to 16.2 percent in Q4 and 13.8 percent for the year.

Management framed FY26 as a year marked by market consolidation and risk aversion, driven by geopolitical tensions and sustained volatility. Even so, the company positioned its performance as the outcome of a deliberate shift toward steadier fee and interest streams, alongside a disciplined stance on leverage and credit.

A revenue mix that is steadily moving away from pure broking

One of the clearest themes in the investor presentation is the gradual diversification of operating revenue. The company tracks three operating buckets: the broking segment, the non broking segment, and other income from operations, which it notes is primarily interest on fixed deposits.

In FY26, the company reported total revenue from operations of 9,321.6 million rupees, with broking at 4,755.1 million rupees or 51 percent. Non broking revenue, which includes interest on margin trading facility and distribution income, was 2,643.6 million rupees or 28 percent. Other income from operations was 1,922.9 million rupees or 21 percent.

The quarter was even more skewed towards non broking and other income streams. In Q4 FY26, broking revenue was 1,201.4 million rupees or 47 percent, non broking was 784.3 million rupees or 31 percent, and other income from operations was 570.8 million rupees or 22 percent.

Management explicitly tied this mix shift to strategic intent. The chairman reiterated a targeted 50:50 split between broking and non broking over time, describing it as central to improving sustainability and predictability of earnings.

Distribution and MTF: the two growth engines management is leaning on

The non broking story is anchored by two operating levers. The first is distribution. The second is the margin trading facility book.

Distribution momentum stayed visible in both assets and income. Assets under distribution were reported at 77,876.2 million rupees as of March 31, 2026, up 20.6 percent year on year. The presentation also shows the mix between mutual funds and PMS and AIF at roughly 76 percent and 24 percent respectively.

On income, distribution revenue rose to 1,129 million rupees in FY26 from 783 million rupees in FY25. For Q4 FY26, distribution income was 353 million rupees, up 34.3 percent year on year.

A key strategic expansion also sits within this distribution platform. The company noted that in July 2025 it acquired an insurance corporate agency license. On the earnings call, management said it has commenced distribution of life and health insurance products, positioning insurance as an additional fee based line over time.

The second lever, margin trading facility, delivered strong year on year growth but also showed quarter on quarter sensitivity. The MTF book stood at 11,019.3 million rupees as of March 31, 2026, up 60.7 percent year on year. However, it declined from 12,317 million rupees in Q3 FY26.

Management attributed this decline to two factors. First, changes in RBI policy for capital market intermediaries reduced avenues available from banks for working capital needs, leading the company to control MTF growth. Second, markets were bearish during the quarter, and management said investor sentiment turned cautious.

Despite a lower closing book in Q4, interest income from the MTF book continued to rise. Interest on MTF increased to 432 million rupees in Q4 FY26 from 287 million rupees in Q4 FY25. For FY26, MTF interest income was 1,515 million rupees versus 1,143 million rupees in FY25.

The company also highlighted portfolio quality. Management stated that the MTF book had zero NPA as of March 31, 2026. It also described internal risk controls such as restricting the stock universe below what regulators allow and maintaining higher internal margins on certain securities.

Balance sheet strength, client profile, and the operating footprint

Another visible shift in FY26 is leverage. Debt equity ratio improved to 0.62 as of March 31, 2026 from 1.80 a year earlier. Management linked this to improved capital structure and indicated an intent to keep leverage controlled, mentioning that it wants to restrict debt equity up to around 1.5.

Operationally, client metrics stayed supportive. Total clients were reported at 9,99,186, up 12.7 percent year on year. In the broking segment, active clients in Q4 FY26 were 85,640, up 16.2 percent year on year.

The investor presentation underlined a wide physical distribution network. As of March 31, 2026, the company had 98 branches and 1,085 authorized persons across 307 cities. It also stated that more than 70 percent of active clients come from Tier 2 and Tier 3 cities, aligning with management commentary on building presence in emerging markets.

The client profile described by the company is skewed toward mature and longer duration relationships. It stated that 41.5 percent of its clientele has been with the company for more than five years, and around 83 percent of the clientele is over 30 years of age.

What to watch from here

The Q4 performance shows how quickly margins can expand when non broking and other income lines strengthen. It also highlights a core trade off in the model. MTF can be a strong growth engine, but it is sensitive to funding availability and market conditions. Management’s explanation for the Q4 MTF decline was specific, and it also repeated its focus on conservative underwriting and maintaining zero NPA.

At the same time, broking revenue trends were mixed. On the earnings call, management said broking revenue for FY26 declined versus the previous year, even as the company scaled assets under custody and client numbers.

Management’s forward statements were directional and numeric. It reiterated the 50:50 mix target, suggested non broking growth could remain in the 40 to 45 percent range in the first few years, and indicated that broking revenue growth could be around 15 percent, with overall revenue growth targeted at 15 to 20 percent year on year. It also proposed a dividend of 5 rupees per share, subject to shareholder approval.

The central FY26 message is strategic clarity. The company is trying to build a more balanced earnings profile by expanding distribution and MTF alongside a relationship led broking platform, while keeping leverage and credit risk controlled. The next few quarters will likely test how well this model holds up across market cycles and evolving regulatory conditions.