IL&FS Investment Managers Ltd (IIML) market operates as a private equity and alternative asset management company. Its business model revolves around managing private equity funds and earning fee-based income from these funds. As an asset-light business, IIML does not engage in direct investments from its balance sheet but instead manages third-party capital.

Revenue Streams:
IIML’s primary source of revenue comes from management fees charged on Assets Under Management (AUM). These fees are typically calculated as a percentage of AUM and are consistent throughout the fund’s life cycle. The company also earns performance fees (carry income), which are realized when investments are exited at returns above a pre-agreed hurdle rate. However, performance fees are contingent on successful exits and favorable market conditions.

In addition to management and performance fees, IIML earns advisory fees from providing consulting services to its portfolio companies. The firm also generates income from co-investments and share of profits in some of its managed funds.

Cost Structure:
IIML maintains a lean cost structure, with major expenses including employee salaries, professional fees, legal expenses, and fund administration costs. Given its asset-light model, capital expenditure is minimal.

Challenges to Revenue Generation:
Since the IL&FS Group crisis in 2018, IIML’s ability to raise new funds has been severely impacted. Consequently, management fees from existing funds have declined as assets under management have shrunk due to exits and fund closures. The company faces challenges in securing new mandates due to reputational issues linked to its parent company.

Looking ahead, IIML aims to stabilize its business by focusing on monetizing its remaining portfolio, ensuring investor returns, and possibly raising new funds once confidence is restored.

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