This article first appeared on GuruFocus .
Release Date: July 22, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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IIFL Finance Ltd ( BOM:532636 ) reported a strong return on equity of 19.5% and a return on assets of 3.1%, indicating robust profitability.
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The company's assets under management (AUM) grew by 38% year-on-year, reaching 1.15 lakh crores, driven primarily by gold loans.
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The pre-provision operating profit increased by 50% year-on-year, showcasing significant operational efficiency.
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The company has maintained a high provision coverage ratio of 94% on non-performing assets, reflecting a strong risk management approach.
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IIFL Finance Ltd ( BOM:532636 ) successfully raised USD $500 million through social bond issuances, aimed at supporting income-generating loans for women and low-income borrowers.
Negative Points
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The Reserve Bank of India trimmed the FY27 growth outlook to 6.6% and nudged inflation up to 5.1%, which could impact future financial performance.
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Gross non-performing assets (NPA) increased slightly by 9 basis points quarter-on-quarter, indicating some pressure on asset quality.
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The company faces challenges in maintaining capital adequacy, with the parent company's capital adequacy ratio being at the edge.
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There is a cautious stance on unsecured MSME and microfinance segments due to potential risks, impacting growth in these areas.
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The cost of borrowing has seen a slight uptick, influenced by higher costs in international markets, which could pressure margins.
Q & A Highlights
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Warning! GuruFocus has detected 4 Warning Signs with BOM:532636.
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Q: At the current rate of growth, when will you be required to go for equity rise considering CED1 is already at 12.24% in the stand-alone entity? Also, can you give us the disbursement separately for home finance and the expectations for FY27? A: We are conscious of the capital adequacy issue and are taking shareholders' approval to address it. We have multiple options, including raising QIP, selling subsidiary stakes, or raising subordinate and perpetual debt. Regarding home finance, we have seen a strong pickup in disbursement, with a 39% sequential growth. We expect this momentum to continue, with a projected growth of 17-18% for FY27. - Nirmal Jain, MD & CEO
Q: Can you explain the higher credit cost for FY27 and what will lead to a steep decline in the next two years? A: The higher credit cost this year is due to a small portfolio of micro lap in our housing finance, which has higher GNPA than peers. We expect this to be fixed in the next two years. - Nirmal Jain, MD & CEO
Q: What's driving the higher gross NPAs in home and gold loan segments quarter-on-quarter? Is there anything systemic to worry about? A: In gold loans, customers generally don't default due to the emotional value of their jewelry. In housing, we are addressing structural issues, and you will see significant improvements as we pivot towards a secured portfolio. - Nirmal Jain, MD & CEO
Q: What is your long-term strategy to increase ROA by 50 basis points, and what's the outlook for margins in the next few quarters? A: The increase in ROA will come from reduced credit costs and improvements in operating costs and NIM. We expect margins to remain stable, with benefits from operating leverage and AI. Cost of borrowing is expected to decrease as liquidity improves. - Nirmal Jain, MD & CEO
Q: With the new RBI framework for gold loans, what challenges or developments have you seen, and have you made any changes to the product offerings? A: The new framework requires income assessment for loans. We have adapted by offering income-generating gold loan products and have a technology-driven system to assess cash flows. These changes are healthy for long-term business. - Nirmal Jain, MD & CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
