IIFL Finance Ltd

The IIFL Finance group, having consolidated assets under management (AUM) of Rs 42,264 crore as on December 31, 2020 (Rs 37,951 crore as on March 31, 2020; Rs 34,904 crore as on March 31, 2019), is primarily engaged in secured lending across various retail asset classes. IIFL Finance has two lending subsidiaries, IIFL Home and Samasta, which carry out the mortgage finance and microfinance businesses, respectively.
Retail loans accounted for almost 90% of the AUM as on December 31, 2020, with a high level of granularity (loans of less than Rs 1 crore). Also, more than 40% of the portfolio qualifies under priority sector lending. The group had identified four key segments - home loans, business loans (including loan against property {LAP} and lending to micro small and medium enterprises—MSME), gold loans and microfinance, as key growth drivers over the medium term.

The IIFL Finance group is adequately capitalised, with a consolidated networth of around Rs 5,233 crore as on December 31, 2020 (Rs 4,766 crore as on March 31, 2020). Networth coverage for net non-performing assets (NPAs) was comfortable at around 22 times as on December 31, 2020 (17 times as on March 31, 2020).The group has demonstrated its ability to raise capital from long-term marquee investors such as Fairfax and the CDC group (Rs 1000 crore raised from CDC in fiscal 2017). Also, the company has recently raised subordinated bonds to boost capitalization levels. Given the growth plans, capitalisation should remain adequate for the current scale of operations. However, the ability to raise capital and manage leverage levels over the medium term will be an important factor.

IIFL Finance group’s loan portfolio has grown at a CAGR of about 25% (last three years). Given the scale up of the loan book in recent years and entry into newer segments, the portfolio remains unseasoned and hence, overall asset quality is yet to be tested through cycles. While certain products have a shorter tenure, and hence, have seen a complete cycle, home loans and MSME lending have limited seasoning so far. Home loans are long tenure products and MSME lending is a recent addition to the product suite. Reported gross NPAs and net NPAs stood at 1.61% and 0.77%, respectively, as on December 31, 2020 (2.31% and 0.97%, respectively, as on March 31, 2020).Also, while increasing focus on small-ticket retail loans will benefit the inherent asset quality over the medium term, ability to underwrite and maintain strong credit practices across asset classes, amid stiff competition from established players, remains to be seen.