JM Financial delays wealth full-year profit target to FY28

JM Financial said its standalone wealth business broke even in September, but management now expects a full year of profitability only in FY28, roughly three to four quarters later than originally planned. Management attributed the delay partly to volatile transaction income over the previous six to nine months, despite recurring revenue rising 20% year-on-year to Rs 216 crore in Q2 FY27.

Why did JM Financial delay wealth profitability to FY28?

JM Financial delayed its full-year standalone wealth profitability expectation to FY28 because transaction income has been volatile over the last six to nine months. Management said September was a good month for both recurring and transaction revenue, allowing the business to break even for that month, but said the trend would need to continue for the FY28 outcome.

The September result applies to the standalone wealth business, rather than the wider wealth and asset-management segment. The broader segment reported profit after tax of Rs 30 crore in Q2 FY27, up 57% quarter-on-quarter, and Rs 49 crore for the first half of FY27.

Management said the FY28 timing is roughly three or four quarters behind its original plan. It did not provide a new annual profit estimate, but linked the shift to slower revenue growth from transaction-income volatility after a recruitment-led expansion of the wealth platform.

How fast is JM Financial's recurring wealth franchise growing?

JM Financial's recurring wealth revenue rose 20% year-on-year to Rs 216 crore in Q2 FY27, while recurring assets under management, or AUM, increased 16% to Rs 37,000 crore. Recurring AUM including loans was about Rs 40,000 crore, up 17% year-on-year, while the wealth loan book grew 30% to about Rs 2,600 crore.

For the first half of FY27, recurring revenue increased 20% year-on-year to Rs 420 crore. The wealth operation had 948 sales and relationship-management professionals, 71 branches and 898 franchisees, indicating that the distribution footprint remained extensive during the productivity programme.

Reported recurring revenue is broader than fees generated by recurring AUM alone. Management said the Rs 216 crore Q2 FY27 measure also includes lending income, including debtors financing, and income on client fixed deposits and margins, which explains why a recurring-AUM yield calculation would not fully reconcile with the reported revenue.

What is JM Financial doing to improve relationship-manager productivity?

JM Financial is rationalising selected relationship-manager roles as a planned productivity measure, not because employees have left for competitors, management said. The company recruited heavily over the preceding 36 months and is now assessing the output of those cohorts before resuming hiring around the end of FY27 or early FY28.

Management said the existing relationship-manager cohort generates roughly Rs 75 crore of net new money per manager, while the newer cohort generates about half that amount. By March, management expects greater clarity on the employees recruited during the previous three years and said most relationship managers remaining in the system should be profitable.

The approach alternates hiring with consolidation. Management described 18 months to two years of recruitment, followed by about one to one-and-a-half years focused on productivity and selective rationalisation, with the aim of improving operating leverage as the AUM base expands.

Distribution is also supporting manufactured investment products. JM Financial completed the first close of its Pre-IPO Fund with commitments of about Rs 700 crore, while alternative investment fund AUM, including commitments across performing-credit and Pre-IPO strategies, reached Rs 1,063 crore in Q2 FY27.

What are JM Financial's wealth yields and growth targets?

JM Financial reported a gross yield of 51 basis points and a net yield of about 35 basis points on its recurring wealth business, where one basis point equals one-hundredth of a percentage point. Management said newly added recurring assets carry yields above 60 basis points and expects yields to improve as the operation scales.

Management maintained its objective of 20% to 25% AUM growth for wealth management, subject to market-related mark-to-market movements. It said growth may be closer to 20% in less supportive markets and nearer 25% when markets are favourable, while recurring AUM is expected to keep growing at a double-digit rate.

Wealth and asset-management results also include broking, lending and commission income. Management said broking revenue was lower in the first half of FY27 than the preceding half because regulatory changes reduced industry revenue, although JM Financial said it maintained and increased cash-market share.

At the group level, management said about 50% of revenue comes from recurring sources. It classified a further 12% to 15% of total revenue from institutional and non-institutional brokerage as highly sticky, taking the combined recurring bucket to roughly 62% to 65%, while the balance remains transactional and potentially volatile.

Conclusion

JM Financial's September break-even indicates that its standalone wealth platform can cover costs in a month with favourable recurring and transaction revenue. The 20% increase in Q2 FY27 recurring revenue and 16% growth in recurring AUM show continued expansion, but management has moved its full-year profitability expectation to FY28 because transaction income has not been sufficiently consistent after the hiring-led cost build-out.

The next indicators are management's March assessment of relationship-manager cohorts, its planned return to recruitment around the end of FY27 or early FY28, and progress toward the stated 20% to 25% wealth AUM growth objective. Management also plans to announce the Pre-IPO Fund's first investment shortly and is targeting a first close of its second credit fund during the quarter.