How it plans to beat I-banking volatility

While commercial banking remains the firm’s primary earnings driver, DAM Capital considers asset-light ancillary services that require minimal capital deployment and limited balance sheet risk to diversify its revenue base.

The Mumbai-based investment bank reported its cash balance as follows: ₹287 crore as of the first half of fiscal year 2025-26. “Some of this is needed as working capital for the institutional equity business, but some of it is also dry powder for potential ventures into businesses like alternative investment funds (AIFs), retail brokerage and asset management,” Mehta said. he said.

“We’ll look at anything that generates wages without major cash burn or high balance sheet risk,” he added. “Today, asset management is a segment focused on valuation, not profit. It requires significant upfront investment for a new entrant. Once we find the right team or the right platform at reasonable valuations, we will build these businesses.”

While the market has witnessed a sharp expansion in the valuation of asset management firms, DAM Capital will not pursue acquisitions based solely on valuation considerations. “Any inorganic growth will depend on our ability to scale and add value to acquired platforms, similar to what we have done on the IDFC Securities platform,” Mehta said.

Mehta, an Enam Securities veteran who later moved to Axis Capital after Axis Bank acquired Enam, acquired IDFC Securities in 2019. ₹86 crore along with a consortium of investors rebranded it as DAM Capital. He currently owns about 40% of the company.

Managing earnings volatility

As a listed investment bank, DAM Capital faces the challenge of reconciling the up-and-down nature of dealmaking with public market expectations for consistent quarterly performance.

DAM Capital’s first six months of revenue as of September quarter ₹138 crore at consolidated level. This was up 28% from the previous year’s high. Operating income also increased by 35% year-on-year ₹82 crore, while its margin at the top line increased to 59.4% compared to 56.2% in the previous year. The company’s profits increased by 20 percent ₹52 crore.

Despite the strong numbers, Mehta asks investors to take a long-term view for his company. “We have always told investors to have a three- to five-year investment outlook,” Mehta said. “Capital markets are cyclical and volatile and it is unrealistic to provide predictable quarterly figures.”

The company’s return on equity (ROE) in the first half of 2025-26 stood at 36.5%, including cash. “When adjusted for cash, equity would be over 300%,” Mehta added.

The firm is now increasingly turning to the institutional equity business to build a more stable earnings base. While this segment remains sensitive to cash market volumes, Mehta described it as a “steady cash cow” that could ultimately cover the firm’s operating costs and much more.

Stock broking revenue fell 18% annually in the first half of 2025-26. ₹35.4 crore, contributing 26% to the top line. Meanwhile, investment banking revenue increased by 61% ₹95.3 crore and accounted for more than two-thirds of the company’s revenue during the same period.

DAM Capital shares, which saw a 39% rise at its launch in December 2024, have seen investor interest wane since then. The stock price has fallen 50% since listing and is currently trading at that level. ₹207.35 per share.

Despite open market pressure, DAM Capital is not trying to position itself as a firm that does only major deals; this strategy has been adopted by many of its larger, unlisted peers.

Industry-independent positioning

Unlike many of its peers that specialize in specific sectors, DAM Capital chooses to position itself as a universal investment bank. “We don’t choose assignments based on big, small or industry,” Mehta said. “Our aim is to bring good companies to the capital market, where investors get good returns and companies receive funding from the right investor group for their long-term growth plans.”

DAM Capital took over the banking of JSW Cement between 2025-26. ₹3,600 crore public listings and Jain Resources ₹1,250-crore initial public offering along with several smaller subsidiaries ₹1,000 crore transactions. Despite being a relatively young platform, the firm has banked big deals like Afcons Infrastructure’s over the last few years. ₹IRFC’s 8,400 crore bid ₹4,600 crore IPO and ₹2,800 crore IPO for JSW Infrastructure.

Beyond IPOs, DAM was also the banker for Reliance Industries. ₹53,000 crore worth of rights issue and qualified institutional placement (QIP) ₹3,000 crore in companies like CG Power and SpiceJet.

Industry loss and barriers to entry

India’s capital markets currently consist of around 15 major domestic platforms and a similar number of foreign banks, all competing for significant transactions. Barriers to entry remain structurally high, with issuers typically appointing only three to four bankers per deal.

Against this backdrop, senior attrition at the investment bank made headlines last year. The Street is wary of this kind of volatility, especially in a publicly traded company, because the flight of established dealmakers could impact the number of deals coming into the firm. This could potentially impact the bank’s transaction fees.

“Talent attrition is common in bull markets and affects all investment banks,” Mehta said. “Our strategy is to develop talent rather than acquire it. Faster career progression is the key differentiator that sets us apart from larger organisations.”

But despite this volatility, DAM Capital reported its highest quarterly profit ever last quarter. It retained an 18% share of the overall IPO authorization market.

“Our credentials are driven by our ownership, commitment, integrity and track record of impeccable execution, not aggressive valuation sales,” Mehta said. he said.

golden decade thesis

DAM Capital’s expansion strategy is underpinned by Mehta’s belief that India has entered a “golden decade” for capital markets; This belief is driven by the country’s strong growth story, which will require large capital expenditures, hence large fundraising requirements, and a structural shift in corporate mindset towards IPOs.

DAM Capital’s 2026 plan includes 21 IPOs and multiple QIPs at various stages. Mehta noted that some 2025-26 agreements may overflow due to implementation timelines.

“A typical IPO cycle lasts nine to twelve months, so overlap between years is inevitable,” he said. “The scale of capital markets today is unlike anything we’ve seen before. The fee pool and IPO sizes did not exist before.”

Of course, deals involving India hit a three-year high in 2025, with announced value reaching $154.6 billion; This was an 87% increase over the full year 2024. Mint He reported on January 2, quoting Elaine Tan, senior director of intelligence at LSEG.

“Current activity reflects several themes, including further pure-play spinoffs and continued strong interest in financial services and the energy transition, providing a solid foundation for momentum towards 2026,” Tan said. he said. Mint.

Investment banking firms are also counting on this momentum to lead to an increase in their fee pools.

“Over the last few years, the fee pool has been gradually increasing driven by rising volumes. We expect transaction volume across M&A, ECM and DCM to remain strong in 2026, thereby creating a higher pool for the overall investment banking industry,” said Ramesh Srinivasan, managing director and chief executive officer of Kotak Investment. Mint earlier this month.

Srinivasan also said bonus pools are closely linked to wage income and are expected to broadly reflect the strong wage production seen in 2025.