IIFL - IIFL FINANCE LIMITED Share Price

Management Outlook:
IIFL Finance anticipates a cyclical slowdown in the NBFC sector, driven by stress in unsecured loans, microfinance, and small-ticket LAP due to stagnant income growth, high consumer leverage, and tighter liquidity. However, management expects the downturn to reverse soon, supported by accommodative monetary/fiscal policies. Gold loan AUM is projected to near pre-embargo levels (~Rs.22,000"“23,000 crores) by FY25-end, with yields recovering in FY26. Microfinance credit costs are guided at 8"“8.5% for FY25, with asset quality stabilization expected as borrower sentiment improves. Growth in secured lending (home loans, gold, MSME) will dominate, while unsecured exposure aims to remain below 15% of the portfolio. Liquidity remains robust (Rs.5,656 crores cash + credit lines), and capital adequacy (22% for NBFC) is deemed sufficient despite near-term pressures.

Major Points:

1. Macro Challenges: Weak economic momentum (IIP at 3.2%), liquidity constraints for NBFCs, and Karnataka's MFI regulations impacting repayments.
2. Financials (Q3 FY25):
   • Profit after tax: Rs.82 crores (down 85% YoY).
   • Gross NPA: 2.4% (up 70 bps YoY); Net NPA: 1%.
   • Loan AUM: Rs.71,410 crores (up 7% QoQ; 98% retail-focused).
3. Segment Updates:
   • Gold Loans: AUM grew 39% QoQ; yield compression (-200 bps) to normalize in FY26.
   • Microfinance: Stress due to regulatory/economic factors; collections improving post-November.
   • Home Loans: Margins pressured by technical write-offs; recovery expected.
4. Funding/Liquidity: Raised Rs.9,964 crores in Q3; post-Q3 USD bond issuance strengthens liquidity.
5. Capital & Growth Strategy: Focus on secured assets, assignment/co-lending revival, and reduced reliance on unsecured loans. FY26 growth expected to rebound strongly.

Question 1:
Sir, two questions really. First one on your gold loan business. I think we saw some good momentum during this quarter, almost 39%, 40% up Q-o-Q. Just trying to understand somewhere I think we have also guided that by the end of this year, we want to get closer to where we were prior to the bank. So I mean, what progress are you making in that direction? Is the demand strong enough for us to get us there? And then in your press release, you've also spoken about some pressure on gold loan yields since you've been trying to regain customers. So just trying to understand again what is it that you are doing there and what impact it could have on your gold loan deals going forward?

Answer:
Gold loan AUM is recovering, targeting pre-embargo levels (~INR 24,000"“25,000 crores) but may fall slightly short. Yields dropped ~2% due to competitive pricing to regain customers, expected to stabilize by FY26. Lower yields are temporary, with volume growth prioritized.

Question 2:
And the second question I had, again, was on the MFI business. Undoubtedly, the sector is going through its share of pain. We have seen that in other MFIs as well. For us, in our assessment, what is the extent of the pain? And is there any ballpark credit cost guidance you can give out? And for us, by when do we expect things to start improving maybe 1, 2, 3 quarters from here?

Answer:
MFI credit costs guided at 8"“8.5% for FY25. Collections improved post-November 2023, but Karnataka's regulatory changes caused temporary disruptions. Asset quality stress persists due to stagnant income and over-leverage. Stabilization expected in 1"“2 quarters.

Question 3:
Sir, with regards to the construction and real estate finance, I think the AUM has gone down by 58%. Are we supposed to -- are we planning to regrow the AUM or are we going to cut it down more?

Answer:
Construction finance AUM declined 69% YoY as focus shifted to safer, approved projects tied to construction (not land). Growth will be cautious, aligned with affordable housing demand. HFC's standalone portfolio remains stable.

Question 4:
Sir, in the press release, you have mentioned that we believe the worst is behind us. So just hypothetically thinking that we have taken all the pain of the technical provisions in the last 2, 3 quarters. So next quarter, we will not be having more technical provisions coming in and hopefully, the quarter 4 will be better than quarter 3 and progressively.

Answer:
Provisions peaked in Q3 FY25; recovery in gold loan yields, stabilized MFI collections, and improved macroeconomic sentiment suggest gradual recovery. Credit costs may ease as cyclical slowdown reverses.

Question 5:
Could you speak a little bit about the availability of funds for growth? And also if co-lending and asset management partners, is it similar to what you see in terms of pricing and availability of funds? Or has there been any structural decrease in the -- or addition in the premium that we are looking for?

Answer:
Fund availability remains stable, but borrowing costs rose (e.g., dollar bonds at ~10%). Co-lending/assignment pipelines will improve as loan seasoning resumes post-RBI embargo. Margins to recover as yields normalize and funding costs stabilize.

Question 6:
Sir, can you give us some idea about what is happening recently in this company right now? So, this is something"¦? (Referring to income tax raids)

Answer:
Income tax search concluded in Feb 2025; no material findings disclosed. Compliance emphasized; process ongoing. No financial or operational impact anticipated.

Question 7:
How is the next 2 years, 3 years, how do you see the composition of your balance sheet changing? How much will be a gold loan? How much will be unsecured?

Answer:
Gold loan (21% of AUM) and home loan (42%) to dominate. MFI to reduce to 8"“10%, secured MSME loans to grow. Unsecured loans targeted at ≤15% of portfolio. Focus on retail, small-ticket loans.