IIFL Finance Ltd (IIFL) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the IIFL Finance
Moderator: Q2 FY '27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing "*" then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference call over to Mr. Vikas Jain, CFO of IIFL Finance Limited. Thank you and over to you, sir.
Vikas Jain (IIFL Finance Limited): Yeah. My name is Vikas Jain, CFO of IIFL Finance. Thank you very much, and a warm welcome to all the ladies and gentlemen who have joined us today for IIFL Finance Q2 FY '27. Joining us on today's call are Mr. Nirmal Jain, our Founder and Managing Director; Mr. R. Venkataraman, our Co-Founder and Non-Executive Director; Mr. Girish Kousgi, CEO of IIFL Home Finance; and Mr. Venkatesh N., CEO of IIFL Samasta Finance. During this call, we will take you through the company's performance for the second quarter and half year ended September 30th, 2026. Before we discuss the detailed financial and operational performance, I would like to hand over the call to Mr. Nirmal Jain, who will share his perspective on the macroeconomic environment, key industry developments, and the company strategy and outlook.
Nirmal Jain (IIFL Finance Limited): Thank you, Vikas. Good evening, everyone, and thank you for joining us. So let's start with macro environment. Macro backdrop remains very supportive of retail credit in India, but it is not without uncertainties. While domestic demand is steady, formal credit penetration in small towns and areas where we operate in is still very low. At the same time, global uncertainty, volatile oil prices or commodity prices, and tight funding conditions mean that balance sheet strength, asset quality, diversified funding, and liquidity matter more than ever before. And in this environment, we have chosen to grow with discipline, keeping adequate liquidity and strict control on asset quality. Now to the quarter. So, our AUM crossed rupees 1.24 lakh crores, which is a growth of 38% YoY and 8% sequentially QoQ. Profit after tax on a consolidated basis was 804 crores, first time crossing the milestone of 800 crores, up 13% quarter-on-quarter and 92% year-on-year. What is important is our gross NPA have improved and they remained at around 1.5%. Our return on equity now on a consolidated basis is above 20%, what has been our target. The book is about 90% secured now. And our liquidity is significantly higher than what normally we keep given the global environment and uncertainty as well as liquidity tightening expected in local market at 13,804 crores on a group basis. Our capital adequacy on a computed basis is 23.5%, but we can discuss individual companies separately. So, our strategy remains resilient, capital-efficient growth and that's based on six pillars: one, secured lending, as we have pivoted to secured lending and that is already now 90% of our total loan book, and we will intend to endeavor to maintain it at these levels. Second is capital light growth, so our off-book AUM is 34% of our total loan assets. There are 18 banks that are active co-lending partners now. Many of these relationships have started recently and will scale up. We have originated you know, in the last 10 years over 1.7 lakh crores loans, which are you know, either assigned to banks or co-lent. Third is our funding and liquidity, Fitch upgraded our rating to BB-. We raised $300 million social bonds. We also did a small issue for the first time of the tokenized bonds. More importantly, liquidity I already talked about that we have over 13,000 crores, which is all-time high. In the month in the previous quarter, we have taken enabling resolution from our shareholders to raise equity, which will further strengthen our balance sheet as we go along. Fourth, AI is part of how we operate, and I think many of projects have moved ahead of pilot, and they have been deployed with reasonable success. Fifth is branch-led distribution. I mean our strategy remains phygital because our gold
Nirmal Jain (IIFL Finance Limited): plus customers across the country. Sixth is our credit and cost discipline. As you've seen our numbers that we are trying to make sure that our credit cost and the operating cost move southwards in relation to our loan assets, and which will help us strengthen our balance sheet further. Looking ahead, we are confident that this momentum will continue through FY '27, and will remain disciplined on the asset quality and capital. Thank you. With this, I hand over to, I hand it back to Vikas to take you through the financial details.
Vikas Jain (IIFL Finance Limited): Yeah. Thank you, Nirmal. Now, I'll take you through the detailed financial and operation performance for the quarter. Overall, sir, quarter two financial year '27 reflects a strong business momentum, improve profitability, continued progress towards our building a secured and capital efficient portfolio. We remain conscious of the significant portion of recent growth has come from the gold loan. Capital adequacy, liquidity, portfolio concentration, and risk controls therefore remain so important area of focus. Coming to the consolidated financial performance, at a consolidated level, our loan AUM increased to 1,24,268 crore, representing the growth 8% quarter-on-quarter and 38% year-on-year basis. Our four businesses: gold loan, home loan, MSME loan, and microfinance now account for around 97% of the overall portfolio, and grew 43% on a year-on-year basis. Our portfolio remains predominantly secured with secured loan accounting for approximately 90% of our AUM. Gold loans represent around 53% of our portfolio and, while home loan account for around approximately 27%. Consolidated net interest income increased to 13% quarter-on-quarter to 1,480 crore. While total income grew by 6% to 2,340 crore and pre-provision operating profit increased to 8% to 1,355 crore. The loan loss provision has declined by 5% sequentially to 281 crore. Consequently, the profit after tax, non-controlling interest has increased 13%, a very healthy quarter-on-quarter, to 805 crore. You know, just mentioned, this is the first time we have crossed on a quarterly basis a 800 crore mark a milestone. And on a half-yearly basis, it stood at around 1,518 crore. Again, if we see on the operating efficiency, we continue to improve. The operating expense to average AUM has now declined to 3.3%. What is heartening to note is that this is compared to the peak level of 4%. The annualized return on assets for H1 stood at 3.1%, while annualized return on equity is 20.1%, which is upwards of our 20% target level. The consolidated portfolio yield has declined by 3 basis point on a quarter-on-quarter to 16.5%, so largely remains stable. The cost of borrowing has increased by 3 basis point to 9.08. Again, largely remains stable, resulting to a 6 basis point narrowing in our interest rate to 7.42%. Asset quality remains broadly stable. Consolidated gross NPA declined by 7 basis point on a quarter-on-quarter to 1.48%, and net NPA stood at 0.87 percent. Overall, the overall provision coverage ratio, again, remains very, very strong, upwards of 90%, currently at 91%. The combined 1 90 DPD portfolio is good at 9%, while the 90+ DPD portfolio remained contained at 1.5%. Nirmal just mentioned about our the key strategic thing. Our liquidity position now has strengthened significantly during the quarter. We had approximately around 13,805 crore of our cash and undrawn credit lines, providing adequate coverage for our near-term liabilities and supporting our future growth. We continue to remain cumulative ALM surplus across all our maturity buckets. Our funding profile remain diversified, table across all Term Loan, Debentures, Refinancing, ECB, Securitization, and other source on the different maturities. This indicates our efficiency to raise further funds across all the maturities. Consolidated capital adequacy stood at 23.5%. Debt gearing is broadly stable at 4.1%, compared to four times in the previous quarter. Shareholders' equity has now crossed increased to 15,432 crore, supported by profitability recorded during the first half. Now, we will look at the IIFL Finance standalone financial performance.
Vikas Jain (IIFL Finance Limited): and secured. Net interest income increased 21% sequentially, very, very healthy growth. Total income grew by 8% and PPOP has increased by 10% to 893 crores. With loan loss provision declining by 11%, the profit after tax has increased by 17% quarter-on-quarter basis to 548.5 crores. The standalone yield has increased by 12 basis points to 18.6, while the spread increased by 11 basis points to 9.2%. Operating expense to average AUM has moderated further to 3.1%. Standalone gross NPA stood at 1.3%, representing a modest increase by 3 basis points. Capital adequacy ratio stood at 17.03%, while net gearing increased to 4.7%. Gold loan now account for almost around 93% of our standalone AUM. On IIFL Home Finance performance, the AUM increased by 4% sequentially, crossing 43,070 crores, while disbursement has grew by 10% on a quarter-on-quarter basis to 3,498 crores. PPOP has increased 6% sequentially to 330 crores, PAT has broadly stable at 188.7 crores, gross NPA has improved by 8 basis points to 1.38%. At Samasta Finance, AUM has remained stable at 10,816 crore and business maintained a calibrated approach to growth. Gross NPA has improved by 46 basis points to 2.82%. Net NPA has improved by 14 basis points to 0.866%, PAT has increased 13% sequentially to 69 crore, supported by lower credit cost. Our strategic funding highlights, Nirmal mentioned, capital-efficient distribution and continuous model to scale off-book AUM, comprising of assignment and co-lending, 42,796 crore. Around 36% of our 34% of our consolidated AUM. We have now 18 banking partners across all IIFL Finance, Home Finance, and Samasta Finance. During the quarter, we have During the first half H1 FY '27, we have raised aggregate USD of $800 million through international bond issuances. This also includes $300 million USD social bond fair issuances during the second quarter, which was approximately 2.3 times subscribed. This strong This reflects strong investor confidence, our diversified access to the global funds. In my closing remarks, in summary, Q2 FY '27 was a stronger quarter in terms of AUM growth, operating profit, profitability. The quarter also demonstrated continuous progress in our operating efficiency, asset quality, liquidity, and funding diversification. With that, now I will now invite for Q&A session for everyone. Thank you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Nirmal Jain (IIFL Finance Limited): You can start like questions are there.
Moderator: The first question is from the line of Gaurav Khandelwal from JP Morgan. Please go ahead.
Gaurav Khandelwal (JP Morgan): Hi, good afternoon, sir. Thanks for taking my questions. I've got a couple of questions. The first one is on gold NPAs. Why have the gold NPAs increased by almost 30 basis points quarter-on-quarter, any color there, please?
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