Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IIFL Finance Ltd (BOM:532636, Financial) reported a significant quarter-on-quarter increase in profit after tax before non-controlling interest, up 188%.
- The company's consolidated loan assets increased by 7% quarter-on-quarter, indicating a recovery in lending activities.
- The retail nature of the portfolio remains strong, with core products like home loans, gold loans, and MSME loans constituting 98% of the overall mix.
- The company maintains a positive asset-liability management (ALM) position across all buckets, ensuring liquidity and stability.
- IIFL Finance Ltd (BOM:532636) has a strong capital adequacy ratio, with the NBFC at 22%, HFC at 46.2%, and microfinance at 32.2%, well above the regulatory minimum.
Negative Points
- The profit after tax before non-controlling interest decreased by 85% year-on-year, indicating a challenging year.
- Pre-provision operating profit fell by 29% quarter-on-quarter and 45% year-on-year, reflecting operational challenges.
- The gross NPA increased to 2.4%, and net NPA rose to 1%, indicating deteriorating asset quality.
- The assigned loan book declined by 33% year-on-year and 11% quarter-on-quarter, affected by regulatory constraints.
- The average cost of borrowing increased, impacting profitability, with a 9 basis points rise year-on-year.
Q & A Highlights
Q: Can you provide an update on the home loan business and the progress towards pre-ban levels?
A: The home loan business has shown good momentum, with a significant quarter-on-quarter increase. However, the portfolio yield is down by 2% due to competitive pricing to onboard customers. We aim to return to pre-ban levels, but it may come with some yield compromise, which we hope to recover in the next financial year. (Respondent: Unidentified_2)
Q: What is the outlook for the Microfinance Institution (MFI) business, and when do you expect improvements?
A: The MFI sector is experiencing significant challenges, impacting borrower sentiment. We anticipate a credit cost of around 8-8.5%. While some states have shown improvement in collections, the overall sentiment remains affected. We expect conditions to improve in the next 1-2 quarters. (Respondent: Unidentified_5)
Q: Why has there been a decline in assigned assets, and what is the outlook for co-lending?
A: The decline in assigned assets is due to regulatory requirements for seasoning periods before assignment. We assign assets like gold loans, home loans, and SME loans. The disruption in the first half means it will take 4-5 months for the assignment book to be ready. (Respondent: Unidentified_2)
Q: Can you explain the recent income tax search and its implications?
A: The income tax department conducted a search on our premises and key employees' residences. We provided all required documents and statements. The process involves the tax department reviewing the data, and if they find discrepancies, they may issue a notice. Currently, there are no further developments. (Respondent: Unidentified_2)
Q: What is the company's strategy for managing capital levels and liquidity?
A: Our capital levels have declined due to loan book growth and lower assignments. We plan to raise more subordinate bonds and increase assignments to restore capital levels. Liquidity is well-covered for the next 6 months, and recent dollar bond issuance has improved our liquidity position. (Respondent: Unidentified_2)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
