Are IIFL Capital Services Ltd latest results good or bad?

IIFL Capital Services Ltd's latest financial results for Q3 FY26 present a mixed operational narrative. The company reported a net profit of ₹186.87 crores, reflecting a substantial sequential growth of 121.38% compared to the previous quarter, where net profit had notably declined. However, on a year-over-year basis, net profit showed a decrease of 5.21%. Revenue for the quarter reached ₹586.28 crores, marking a sequential increase of 2.48% from ₹572.08 crores in the prior quarter, while year-over-year growth was modest at 0.63%. This suggests that while the company has managed to recover from a poor previous quarter, it is struggling to achieve meaningful growth compared to the same period last year. Operating margins have come under pressure, with the operating margin reported at 32.46%, the lowest in eight quarters, indicating a significant decline from the previous year's margin of 42.09%. This decline in margins raises concerns about the company's operational efficiency amid rising costs, particularly as employee expenses surged by 17.46% year-over-year. The results also highlighted a notable reliance on non-operating income, which constituted 52.79% of profit before tax, raising questions about the sustainability of earnings quality. The dramatic swing in other income from a negative ₹24.67 crores in the previous quarter to a positive ₹134.22 crores in the latest quarter underscores the volatility in earnings. From a balance sheet perspective, IIFL Capital Services maintains a healthy financial position, with zero long-term debt and current assets exceeding current liabilities, providing a solid liquidity cushion. However, the return on equity has declined to 20.81%, down from a five-year average of 23.93%, indicating a decrease in capital efficiency. Overall, while IIFL Capital Services has demonstrated a recovery in net profit and revenue on a sequential basis, persistent challenges such as margin erosion, reliance on non-core income, and subdued year-over-year growth highlight underlying operational issues. The company experienced an adjustment in its evaluation, reflecting these complexities in its financial performance.