Business Verticals:
Vertical (FY17 PBT Share)
Fund Based (50%)
Wealth Management (30%)
Capital Market (20%)
IIFL has 2250 locations in 500 cities across 25 states in India. Further, in order to cater to overseas Institutional Investors and NRIs for their India-centric investments, the Company has established subsidiaries in seven countries worldwide (USA, UK, UAE, Switzerland, Singapore, HK, Mauritius).
Promoters:
Mr. Nirmal Jain (Executive Chairman), an MBA (IIM, Ahmedabad) and a rank holder Chartered and Cost Accountant, founded India Infoline Limited. He began his career with Hindustan Lever in 1989. He founded Probity Research and Services Pvt. Ltd. (later re-christened India Infoline) in 1995 - perhaps the first independent equity research Company in India.
Mr. R. Venkataraman (MD), Co-Promoter of India Infoline Ltd., is a B. Tech (Electronics), IIT Kharagpur and an MBA (IIM Bangalore). He joined the India Infoline Board in 1999.
Ownership:
Promoters: 29%;
Fairfax Group: 36%;
Bharat Parajia (MD, IIFL Asia Pte Ltd): 5%;
Satpal Khattar (A renowed Singapore based Investor and member of IIFL Advisory Board): 2%
Hence, Insiders + Fairfax Group own about 70% of the Company. All of them have been increasing their stake over the past few years (except Satpal Khattar, who has reduced his stake a bit).
Fairfax is a passive investor. Hence, their voting rights will be either the shareholding or 25% whichever is less.
Fund Based Activities:
Loan book (including securitized assets) as on 30-Jun-2017 is Rs 23,300 cr and has increased at a CAGR of about 40% over the past 10 years. The loan book is predominantly retail and secured with adequate collaterals. Retail loans below Rs. 1 crore constitute nearly 85% of the loan book. Further, over 25% of the loans comply with priority sector lending (PSL) norms of the Reserve Bank of India. The Company sells down these loans to commercial banks, which remain very keen to buy these loans to meet their PSL targets. Selling down such loans positively impacts the profitability and CAR. The share of securitised book increased from 5% of AuM in end FY13 to 13.5% in end FY17.
Long-term credit rating by CRISIL AA, ICRA AA, CARE AA, and short-term rating by ICRA A1+.
During 201609, India Infoline Finance Ltd issued 4.33 cr Compulsorily Convertible Preference Shares to CDC Group plc (the UK Govt owned Development Finance Institution) for Rs 1005 cr. The NBFC is now well capitalised for the next 3 years to capture the growth opportunities.
Following is the breakup of the loan book:
Category (Share)
Home Loans (26%);
Loan Against Property (24%);
Construction & Real Estate (15%);
Commercial Vehicles (13%);
Gold LB (12%);
Capital Market (5%);
Other Categories (5%)
Home Loans: The share has been steadily increasing over the past few years; Avg Ticket Size: Rs 22 lakh; Yield: 9.7%; NNPA: 0.3%. The self-employed section contributes 60% of the home loan portfolio. IIFL is among the top six HFCs in government’s Credit Linked Subsidy Scheme (CLSS).
Loan Against Property: The share has been stable over the past few years; Avg Ticket Size: Rs 92 lakh; Yield: 12.9%; NNPA: 1.1%.
Construction & Real Estate: Avg Ticket Size: Rs 8.3 cr; Yield: 16.6%; NNPA: 0.2%.
Gold Loans: The share has been steadily declining over the past few years, probably due to the specialized nature of gold loans; Avg Ticket Size: Rs 50,000; Yield: 22.3%; NNPA: 0.2%.
Other important information pertaining to the Fund Based Activities:
The Company has diversified its sources of funds and augmented long-term sources of funds. As on 30.6.2017: Term Loans: 37%; NCDs: 30%; CP: 20%; Securitization: 13%.
GNPA (NNPA): 2.0% (0.9%) - Movement from 180 DPD (FY15) to 90 DPD (Q1FY18) NPA recognition norm has created a temporary rise in NPA ratios.
CAR (Tier I): 18%;
NIM: 6.5%;
FY17 Fund Cost & Yield: 9.4% & 14.5%;
RoA: 2%.
Wealth Management (including Financial Products Distribution and Asset Management):
IIFL Wealth Management offers advisory, wealth structuring solutions, asset management, credit solutions, broking and distribution services. It is the First and largest fund manager of AIFs, offering 15 AIFs across Category II & III.
It has 22 Offices - Presence across 7 countries and major Indian cities.
IIFL Wealth Finance, a WOS of IIFL Wealth is focussed on providing LAS and LAP to HNI Clients. The Loan Book grew to Rs 3600 cr at the end of FY17, it’s maiden year of operations.
IIFL Holdings owns about 58% of IIFL Wealth Management Ltd (and its subsidiaries). General Atlantic holds 23% and the employees hold the remaining 19%.
Demat accounts in India have grown 4-fold during FY05-17 to 28 million (12% CAGR). Total household savings have grown as a CAGR of 12% over FY05-16 to USD 400 billion (about 20% of GDP). About 42% (USD 170 bn) is in Financial Savings. The number of HNIs in India is expected to grow manifold over the next few years. Hence, there is tremendous growth scope in the Wealth Management sector.
Total assets under management by IIFL AMC under Mutual Fund, Alternative Investment Fund, and Portfolio Management Services have grown from Rs 3000 cr in FY15 to Rs 8700 in FY17. AIF comprise about 85% of this AuM.
Capital Market Activities:
Capital market activities comprises mainly income from broking in equity, derivative, commodity, currency segments and related activity. It also includes Investment Banking activities.
IIFL is a key player in both retail and institutional segments having about 2% NSE Mkt Share (Cash+F&O) and 4% NSE Mkt Share (Cash).
IIFL is ranked #1 Investment Banker in Equity Issuances for CY2016 and CY2017 YTD (source: Prime Database).
5paisa has been incubated as a distinct brand catering to the new emerging DIY (Do-ityourself) customer segment that prefers least cost for various financial products. 5paisa is for pure digital financial transactions - with no branches, no RMs, etc. 5Paisa Capital Demerger & Listing underway by issuing 1 share of 5paisa for every 25 shares of IIFL. The listing should be completed by December 2017.
Company Valuation:
The Company is available at a P/E of 26.4 and P/B of 4.3. The Market Capitalization is around Rs 20,000 cr. It has managed to grow it’s book value by a CAGR of 35% over the past 12 years that included bull phases (FY05 -08 & FY14-17) and bear phases (FY08-12), resulting in the Company becoming a big and well known diversified Financial Services entity from a mere capital market entity 12 years back. It’s market cap during this period has increased from less that Rs 300 cr to Rs 20,000 cr.
It has also delinked itself from the cyclicality of capital markets (Capital Market now contributes only 20% to the Consolidated PBT) and made its business significantly less cyclical in the process. This business is, however, still a leveraged play on the economy and sentiment.
Disclosure: Invested for the past 2 years. No recent transactions.
