IIFL Finance Q3-FY23 Concall:
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Cost of funds for the company went up marginally which has been passed on to the customers.
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Intense competition in gold loan from new NBFC and small banks; for some their rates are below cost of funds to attract customers.
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Oct & Nov were not good for gold loan due to competition; now fintechs are also understanding that low cost lending is not a long term strategy; no knee jerk reaction on it by the company.
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In the Home loan company is focusing on small loans and from spoke locations i.e, small towns and cities.
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Microfinance industry doing very well; we are well diversified geographically
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Strategy is to partner with good corporates for digital loans; tied up with no. of player and testing is going on with big corporates; company will announce more on it soon; these are unsecured loans (personal loans) for employees of the corporates.
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PPOP of 772 cr up by 26% YoY; Loan AUM grown by 24% YoY.
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Core products now comprise of 95% of total loan book which is retail in nature
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Assigned loan up by 37% YoY; colending is now at 5700 cr; added Uco Bank and Punjab & Sind Bank for colending in gold loan.
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Annualised ROE at 17.9%; Avg cost of borrowing is up by 10 bps.
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Raised 4346 cr of term loans, bond and refinance in Q3 for liquidity and liabilities
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Gold loan tonnage growth of 20% YoY
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Out of total investments of 3,683cr in balance sheet; Invested around 1000cr into IIFL real estate funds, no much exposure in IIFL wealth; the amount received from ADIA is not deployed fully yet hence there is an increase in investments
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In MFI there was total provision of 105cr and write off of 123cr due to old loans; newer loans are doing very well;
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Credit cost will be in the range of 1.5 to 2%; slightly higher in the range for full year due to MFI write off of old loans.
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Gold loan competition is largely in bigger cities like top 20 or 30 cities and company is focusing more on the tier 2 or tier 3 cities where competition is not much as company has branches in many small towns and cities.
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Company will be maining the growth of 25% CAGR
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Cost to income at 42%; target is to bring it down to 35% in next 4 to 6 quarters
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At some point of time in future the company will also look for external investors in MFI businesses as well; IIFL infused 200 cr into the subsidiary.
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Once the business becomes large enough Housing and MFI companies will be demerged.
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In home loan under small ticket size i.e, less than 20 lakhs competition is very low
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After aggressive expansion in 2020 and 2021 now it has been slowed down; it will be 10-15% expansion every year in future
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Gold loan is available at 2589 branches and will reach at 3000 branches by FY24; 370 branches for home loan; company has adequate approval of branch expansion for next one year
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Company will be comfortable at leverage of 4x from current levels of 3.2x; won’t cross 4x
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Target is to reach GNPA of 2% and NNPA of 1% at cosol level; currently it is at 2.08% and 1.06%
Disc:- invested.