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Revenue miss; higher other income drives in-line PAT

* Anand Rathi Wealth (ARWM) posted an operating revenue of ~INR2.9b in 3QFY26 (5% miss), up 22% YoY but down 3% QoQ. This was primarily driven by a 25%/20% YoY growth in revenue from the distribution of financial products/MF. For 9MFY26, it grew 20% YoY to INR8.6b.

* Operating expenses rose 22% YoY but were flat QoQ at INR1.6b, fueled by a 21%/24% YoY rise in employee/other expenses. EBITDA was INR1.3b, up 23% YoY but down 4% QoQ (7% miss). EBITDA margin came in at 45.4% vs. 45.2% in 3QFY25. For 9MFY26, EBITDA grew 28% YoY to INR4b.

* For 3QFY26, PAT stood at INR1b, up 30% YoY but flat QoQ (in line due to higher other income). PAT margin expanded 200bp YoY to 34.6% (est. 33.9%). During 9MFY26, PAT grew 30% YoY to INR2.9b.

* The firm currently has 393 RMs and ~450 account managers undergoing training to transition into RM roles; with this existing RM strength, management believes the business can be comfortably supported over the next 3–4 years.

* We cut our estimates by 2% each for FY26/FY27/FY28 to factor in weak quarterly performance. We expect an AUM/Revenue/PAT CAGR of 23%/ 22%/26% during FY25-28, with robust cash generation (INR12.6b of OCF during FY25-28E), an RoE of 36%+, and a healthy balance sheet. We reiterate our Neutral rating with a one-year TP of INR3,100 (premised on 42x FY28E EPS).

AUM growth backed by MF flows; guidance maintained

* Total AUM grew 30% YoY to INR990b, led by healthy inflows and an increase in the ticket size of clients. The share of equity MFs in the AUM mix was stable QoQ at 53%, with equity AUM market share rising to 1.46% in Dec’25 from 1.01% in Mar’19. Private Wealth/Digital Wealth AUM grew 30%/29% YoY to INR967b/INR24b.

* Total quarterly net inflows/equity flows declined 6%/25% YoY to INR32.5b/INR20.4b. On a 9M basis, total/equity flows grew 10%/4% YoY. Equity inflows as a proportion of total stood at 63% vs. 79% in 3QFY25. The share of customers with AUM of INR500m+ has increased to 28.6% in 3QFY26 from 24.5% in 3QFY25. It onboarded 481 net new client families in 3Q, taking the total count to 13.3k families.

* Operating expenses grew 22% YoY/flat QoQ, while the cost-to-income ratio (CIR) improved to 54.6% in 3QFY26, compared to 54.8% in 3QFY25.

* Other income increased 128% YoY/66% QoQ to INR161m. Over 9MFY26, other income grew 64% YoY to INR360m.

* The company reported one of the lowest client attrition rates in the industry, with only 0.12% of AUM lost in 3QFY26 vs. 0.14% in 3QFY25. RM attrition remained minimal, with two exits during the quarter. About 84% of the AUM associated with the RM attrition has been retained.

* AUM per RM increased to INR2.5b in Dec’25 from INR2b in Dec’24, driven by the continued association of RMs with the organization. Additionally, clients per RM improved to 34 from 30 in 3QFY25

Highlights from the management commentary

* ARWL has achieved 76% and 78% of its full-year FY26 revenue and PAT guidance, respectively, and management reiterated its guidance for the year. AUM guidance has been largely met at ~99%; however, given global uncertainties, management does not intend to revise guidance upwards.

* The impact of the newly introduced labor code is expected to be limited, as the company already complies with minimum regulatory requirements; consequently, no meaningful impact on operating margins is anticipated.

* RM attrition during 9MFY26 stood at six RMs managing AUM of INR11.2b, of which ARWL retained 88% (INR9.8b). In comparison, during the previous year, three RMs exited with AUM of ~INR4.5b, of which INR3.5b was retained.

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